Clear Channel's Big, Stinking Deregulation Mess

Clear Channel Communications, the radio and concert conglomerate so many people love to hate, has a new batch of disgruntled critics to deal with. But this time it's not the musicians who claim that the entertainment giant plays hardball and locks acts off the airwaves, or the broadcast rivals who allege the company leverages its unmatched size to drive competitors out of business, or even the former employees who insist the company's rampant cost-cutting style has gutted American radio.

Nope -- now the heat is coming from other media company executives and Beltway lobbyists. They are dismayed that Clear Channel is doing what many might have thought impossible. In an era when Republicans control the government and big business generally gets what it wants, Clear Channel is making deregulation look bad.

Executives at television, cable and newspaper companies want the government to lift ownership caps that limit the number of properties their companies can own. They've been envious of radio ever since the 1996 Telecommunications Act singled out radio for sweeping ownership deregulation. Passage of the Telecom Act paved the way for Clear Channel to expand from 40 stations to 1,225, and in the process, exert unprecedented control over the industry.

Today, broadcast, cable and newspaper giants like Viacom, Comcast and Gannett want a chance to expand their empires and enjoy the same large-scale efficiencies that Clear Channel has profited from. But they're frustrated. After years of intensive lobbying and with a Federal Communications Commission chairman, Michael Powell, who is widely considered to be thoroughly pro-deregulation, the havoc wrought upon radio by Clear Channel is unexpectedly offering ample proof of what can go wrong with media deregulation. Radio's current mess is having a significant impact on the debate over media concentration, and may even force Powell to water down his long-awaited ownership recommendations.

This is not how it was supposed to work.

"Media deregulation would appear to be slam dunk," says Mark O'Brien, executive vice president of BIA Financial, an investment firm specializing in broadcasting and telecommunications. "You've got a Republican administration, Powell supports it, and radio's already done it. On the other hand, it's because radio has done it, and particularly what Clear Channel has done, that puts pressure on Powell. Opponents point to Clear Channel and say, 'Here's what we don't want to happen to the rest of the media.'"

As Sen. Ron Wyden, D-Ore., recently put it, "The country ought to be pretty reluctant to repeat the radio [deregulation] experiment."

Capitol Hill Finally Takes Notice

Consumer discontent with broadcast radio appears to have finally gotten the attention of politicians. Appearing before the Commerce Committee in January, Powell received an earful from senators who for years were indifferent to radio. Suddenly, they were pressing him about the industry's runaway consolidation. In a rare move, Powell, an articulate free-market advocate who thinks today's ownership rules don't "reflect the realities of the modern media marketplace," conceded he was "concerned about the concentration, particularly in radio."

"The Commerce Committee," says BIA Financial's O'Brien, "was sending a message to the FCC about media consolidation: We don't want this to happen again."

That point was amplified again in late January when Commerce Committee chairman Sen. John McCain, R-Ariz., held another media consolidation hearing, this one focusing almost exclusively on Clear Channel. At the hearing, the company's billionaire founder and CEO Lowry Mays came face to face with critics from the radio and record world.

Classic rocker Don Henley testified that artists are "shackled by the anti-competitive practices of the conglomerates." Sen. Russ Feingold, D-Wis., took the opportunity to reintroduce his legislation, the Competition in Radio and Concert Industries Act, a bill that takes direct aim at Clear Channel and radio consolidation. Rep. Howard Berman, D-Calif., cataloged a laundry list of allegations his office had received after he wrote the Department of Justice and the FCC urging them to investigate complaints about Clear Channel and its role in the radio and concert business. Joining the pile-on was Sen. Ernest "Fritz" Hollings, D-S.C., the committee's ranking Democrat, who complained, "Radio consolidation has contributed to a 34 percent decline in the number of owners, a 90 percent rise in the cost of advertising rates, [and] a rise in indecent broadcasts. If ever there were a cautionary tale, this is it."