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October 6, 2004

Howard Stern falls into the FCC's Trap

Ok, not exactly, but with the announcement that Howard Stern is leaving broadcast radio for Sirius satellite radio, the landscape of radio is going to change in a big way. In a sense, I think that this is what Michael Powell and the FCC have been trying to encourage with their policies of encouraging radio consolidation, opposing any calls for commercial low-power FM broadcasting, and levying massive fines against broadcasters that run afoul of decency regulations. I've complained about the depredations of the FCC before, when it came to their efforts to get rid of locally owned radio stations, but I think there is method to their madness.

All of this has the effect of getting "small players" out of the radio business, and I've begun to think that this is on purpose. In most industries, the product cycle eventually shakes out the small players, leaving a few successful industries after a wave of consolidation. Earlier examples of this include the auto industry, now dominated by a few major players, and the entertainment industry, in which a multitude of movie studios were gobbled up by media companies and independent cable channels became part of larger entertainment conglomerates.

Under Michael Powell's leadership, local phone companies such as Verizon were allowed to skirt regulations that required them to share their lines with other DSL providers since those lines were originally built with the aid of public money and legally sanctioned monopolies. What was the underlying reason for Powell's opposition to competition within DSL? He was hoping that giving local phone companies a monopoly over DSL-based broadband would encourage more competition for broadband via wireless, satellite, and cable.

FCC regulations adopted during the dawn of radio were meant to keep radio a local format (given its short broadcast range) and encouraging local indepdnent programming. Many parts of the FM broadcast spectrum were set aside for universities and community programming while commercial broadcasters were prevented from owning a large number of stations that would monopolize programming. As a consequence, a diversity of voices and formats were available, even though a specific broadcaster available on one side of the country might not be available on the other.

What I believe happened is the the FCC, led by Michael Powell, decided that this diversity of radio programming was impeding progress in other formats like satellite radio and internet radio. The solution? Like the push to prevent competition within DSL, the FCC decided to push aside the independent, competing voices on the FM spectrum by allowing a few large players to dominate, forcing those other, smaller voices to find new sources through which they could be heard.

Howard Stern was getting hurt by having his radio affiliates suffer larger and larger fines from the FCC, providing a huge disincentive to having him carried over broadcast radio. By going over to satellite radio, he gives a huge boost to the format, which is ultimately what the FCC wants.

Posted by Dean at October 6, 2004 4:22 PM