NatPost column on media ownership

Here is my June 3rd, National Post column:


Media ownership makes for strange bedfellows. Ted Turner, Consumers Union, columnist William Safire, and Lawrence Lessig of Stanford have all tumbled into bed opposing proposed changes in media regulation that would allow marginally more industry concentration.


Few stories from critics could resist containing comments about how few critics were talking about this important subject. I lost count at twenty articles. While that is neatly self-refuting, it is also ignorant of the facts. I counted on Lexis-Nexis 174 stories about this subject in the last six months, including a paroxysm of broadcast coverage in recent weeks on NPR, PBS, ABC Nightline, and CNN. If this is a story that is somehow being ignored, then I’m happy more stories aren’t ignored like this – it would be hard to find information on anything else.


The proposed changes are mild. Michael Powell, the chairman of the FCC, wants merely to relax antiquated ownership restrictions somewhat. Currently owners of U.S. television outlets are limited to being able to own broadcast television stations cumulatively reaching 35% of U.S. households; the new rules would let that number inch up to 45%. Subject to restrictions, some firms in some markets may be permitted to own as many as three local television stations rather than the current limit of two. “Why does a television need to control three television stations anywhere?” thundered dissenting Democratic FCC commissioner Michael Copps, sounding more than a little like Maude Barlow’s bastard offspring.


The proposed changes, however tentative, don’t stop there. In most markets, but not all, media firms would be permitted to own both a television station and a newspaper outlet. Heaven forfend! The U.S. would turn into Canada!


Something needs to be done. Broadcast policy is, after all, a mess of overlapping jurisdictions. There overlapping media acquisition restrictions, one from the FCC and another one at the Department of Justice. These are smart, well-trained people, and it is very expensive having them all chase around analyzing the same media transactions under two different sets of ownership rules.


For their part critics alternate between anti-business rhetoric – broadcasters make too much money – and the usual empty clichés. In the latter case, the words are always the same: “massive  … radical … diversity … centralization …. uniformity … monopoly.” But no-one attempts to add a factual patina to the litany. What does diversity mean? How has media concentration damaged diversity in the past?


As The Economist magazine recently pointed out, the FCC has data on that question.  The FCC’s own documents show a large increase in the numbers of both media outlets and media owners in these decades of media deregulation. In studying ten local U.S. markets, the FCC discovered that since 1960 the number of media outlets has grown by nearly 200%. At the same time, the number of owners has grown by 139%. With an exploding array of satellite and Internet-based media flavors appearing everywhere you look it is increasing difficult to justify the FCC’s intrusive role in anointing media owners.


And then there is that anti-business angle. Critics of the media ownership rule-changes – including FCC commissioners Mr. Cops and particularly Mr. Adelstein – stagger around demonstrating economic incompetence. For example, Mr. Adelstein argued at one point on Monday prior to the vote that television stations are hardly suffering. After all, he said, consider their large revenues. “When they show up at our offices asking to hand back their licenses”, he said, “then I’ll think they’re hurting.”


Revenues have no consistent relationship with profits, as we were all reminded during the dot-com days. Pretending otherwise is silly. And it is even more specious to suggest that until broadcasters are looking to exit the business that the current regulatory regime is the best one. By that mis-measure all regulations are acceptable until we are up to our ears in bankruptcies.


The preceding said, I still don’t agree with the proposed changes. Of all people, it was FCC commissioner Mr. Adelstein who best captured one of my main reasons in his rambling twenty-minute speech. “Why 45% caps rather than the existing 35% caps?, he asked.


He was right – for all the wrong reasons. A drifting Mr. Adelstein went on to pine for keeping things the way they were, but my beef is that the changes are, as he suggested, baseless. Why 45% indeed? Why not, as Mr. Powell is said to have preferred, doing away with ownership restrictions altogether? I would prefer to have existing anti-trust laws hold sway, and failing that, some combination of anti-trust laws and a diversity of ownership index proposed by Mr. Powell.


The vote on Monday went 3-2 in favor of the ownership changes. As is increasingly de rigeur in such things, two pink-clad protesters in the room then broke into song, singing, “Deregulation of mass communication is the end of democracy.” How do I know? I watched it all on television, something I couldn’t have done in the far more concentrated media business of even a decade ago.

Media ownership madness — live

C-SPAN is currently broadcasting today’s FCC proceedings on media ownership regulations. There are many stories out there on this subject, despite media claims to the contrary. For example, the LA Times has this interview with four of the five FCC commissioners.

Witch hunt for plagiarism

While I have had a long and unpleasant relationship with plagiarizers — business school students do it in epidemic numbers — I’m still balanced enough to recognize that some things that look like plagiarism aren’t.


Case in point, the NY Times has a piece today about a new book, “Pandora’s Keepers“, about the nine men behind the atomic bomb. While the book is apparently a decent one, there are allegations emerging that the author lifted at least 33 passages from other works.


Here is an example. In the aforementioned book the following passage occurs:



 ”In a moody and rambling talk he confessed that he had failed to control the weapon he had helped create.”


The same passage appears, short one “had”, in another book, “Genius in the Shadows”. Fair enough, the author of Pandora’s Keepers lifted the passage, whether accidentally or not.


But the Times article goes on to point out other passages, implying rampant plagiarism, rather than one accidental lift. But the case is much less clear-cut.


For example, here is one passage cited:



“Oppenheimer and Teller eyed each other warily, while the object of their unstated but unmistakable competition sat silently between them.”


The Times compares this to the following passage from another book that mentions the same encounter:



“Teller and Oppenheimer eyed each other like rival suitors, while the object of their attention sat silent between them.”


Sure, the two passages have some superficial similarities — their use of the same awkward “suitor” metaphor, the same eyeing of one another. But is it really that clear to anyone, other than a post-Jayson Blair New York Times, that this is authorial malfeasance? I just don’t buy it — yet.

Who cares about Help wanted ads

Help-wanted ads hit a 41-year low on Thursday. The market should be down, right? Well, it isn’t. Matter of fact, the Dow and the Nasdaq were up smartly this week. Is the financial market oblivious to the worst employment market in a half-century?


Hardly. While the employment market is no picnic, the help-wanted ads measure is almost entirely defunct. As we all know, an increasing number of advertisements have moved entirely online, whether on company websites, or on sites like Monster or Yahoo.


But the decline in help-wanted ads is an indicator of something lousy alright: the newspaper classifieds industry. With help-wanted ads having historically made up more than a third of newspaper firms’ revenues, look out below.

Defaming the undefamable

Mcdonald’s is suing an Italian food critic, calling his comments defamatory. The critic, Edoardo Raspelli, a critic and commentator for the Italian newspaper La Stampa, last year compared McDonald’s burgers to rubber and its fries to cardboard.


Well, I don’t blame McDonald’s: I hate when people get things backwards like that.

Is the end of Netscape the end of open source?

My weekend National Post
column:


Tick, tick, tick. That is the doomsday clock ticking down on the remaining
days until AOL shutters (or sells) its Netscape unit. It is about time.


face="Verdana, Arial, Helvetica, sans-serif">AOL Time-Warner and Microsoft
settled their lawsuit last week, and the agreement amounts to a death sentence
for Netscape, the former Internet browser kingpin. While that wasn’t the avowed
purpose of the deal, the result will be no different than if it
was.


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face="Verdana, Arial, Helvetica, sans-serif">To much huzzahs from anti-Microsoft
sorts, Netscape, a division of AOL Time-Warner, brought suit against Microsoft
is January 2002. It was more than a little mischievous. The action came shortly
after Microsoft had already reached an agreement on antitrust issues with the
Department of Justice and nine states.


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face="Verdana, Arial, Helvetica, sans-serif">The suit alleged that Microsoft had
competed unfairly in the Internet browser market. The company had, the suit
argued, tied its Internet Explorer browser to the operating system
unnecessarily, prevent other browser makers from competing. It had also, the
suit said, cut deals with software developers, hardware manufacturers, and
Internet service providers (ISPs) that made it almost impossible for those
companies to support other browsers.


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face="Verdana, Arial, Helvetica, sans-serif">If the court found in its favor,
Netscape had some Christmas wishes it wanted fulfilled. It wanted “injunctive
relief” to prevent Microsoft from damaging Netscape further, as well as having
the courts restore competition lost in the market for Web browsers. It also
wanted to have the courts to enable “middleware platforms” to complete with
Microsoft’s Windows.


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face="Verdana, Arial, Helvetica, sans-serif">AOL Time-Warner got none of these
things. There is no browser market, and so nothing is being restored as part of
the agreement. There once might have been a browser market, but Netscape ruined
it more than Microsoft, first by setting a precedent that browsers should be
free, and then by getting delusions of grandeur and effectively driving other
companies to Microsoft in the mid-1990s.


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face="Verdana, Arial, Helvetica, sans-serif">Some, however, are arguing that the
$750-million payment from Microsoft to AOL Time-Warner is a win for Netscape.
Consider, however, what AOL Time-Warner paid for Netscape back in 1999. The
deal, originally announced at $4.2-billion, ballooned to almost $8-billion in
stock by the time it was completed.


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face="Verdana, Arial, Helvetica, sans-serif">If this payment constitutes defeat,
Microsoft would happily be defeated more often in future. After all, fear of
Microsoft made AOL pay billions for a defunct Netscape, partly in hopes it could
resuscitate the doomed company, but more to use the company as a legal stalking
horse. But for its $8-billion investment, AOL received $750-million. That is a
lousy rate of return in any economy.


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face="Verdana, Arial, Helvetica, sans-serif">There were bennies in the deal, of
course. For example, as if the world needs a few more solar masses of AOL disks
floating around, Microsoft has agreed to distribute AOL disks in certain
circumstances. The two companies have also agreed to work toward bridging their
disparate instant message networks. Given, however, that they have agreed to do
that at least once before and very little has happened, there is little reason
to expect that this agreement is much more than an attempt to increase the word
count.


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face="Verdana, Arial, Helvetica, sans-serif">Perhaps the only other meaningful
nugget is that the two companies have agreed to worth together to combat digital
piracy. While it is a bigger topic than I have space for today, that is
potentially troubling news. Not because I am somehow a fan of the electronic
black market being perpetrated by so-called file-sharing networks, but more
because having software companies police theft is going to rapidly become
intrusive militia justice.


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face="Verdana, Arial, Helvetica, sans-serif">Nevertheless, this spells the end
for Netscape, whatever it means for our ability to police our own homes and
computers. There is no a longer a reason for Netscape to exist, with its market
share dwindled to nothing, and with it not fitting into AOL Time-Warner’s plans
to refocus on media properties and their distribution.


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face="Verdana, Arial, Helvetica, sans-serif">And while no-one has apparently
noticed, the deal is also a strike against the open source software movement.
AOL Time-Warner no longer needs to bankroll Mozilla, the nonsensical browser
promoted by the evangelical fans of collectivist code. Without its support, that
browser will languish, at best, and more likely quickly founder.


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face="Verdana, Arial, Helvetica, sans-serif">Despite all these points in
Microsoft’s favor, none of this is to say that Microsoft did nothing wrong. It
did. The company used unnecessarily aggressive tactics against Netscape, both
rhetorical – “cut off its air supply” – and practical.


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face="Verdana, Arial, Helvetica, sans-serif">The irony, of course, is that
Microsoft could have just stood and watched the car crash. Like so many
Microsoft competitors, Netscape was so blinded by minor successes that it made
bad decisions. Netscape became arrogant early, and errantly promoted a technical
agenda (“Java uber alles!”) over a business and customer one. Without a major
change in tactics, Netscape would have foundered without Microsoft’s
actions.


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face="Verdana, Arial, Helvetica, sans-serif">So, some are delighting in the news
that Microsoft is paying $750-million to the company whose air supply it once
allegedly threatened to cut off. But they should stop crowing. Someone just cut
off Netscape’s air supply alright, but it wasn’t Microsoft. It was Netscape’s
owners at AOL Time-Warner.

“Average” tax cut is a meaningless notion

It is an old and somewhat silly saying, but it applies: When your head is in the oven and your feet are in the fridge, on average you feel okay. Similarly, the Bush Administration’s uses the word “average” to say that 91 million taxpayers will receive, on average, a tax cut of $1,126. As the CBPP pointed out this week, averages utterly elide the issue:


  • The average tax cut in 2003 for households in the middle of the income spectrum (i.e., the middle fifth of households) will be $217, or less than one-fifth the total advertised by the Administration.


  • 83 percent of households will get less than the average amount cited by the Administration.


  • Some 53 percent of U.S. households — or 74 million households — will receive a tax cut of $100 or less.  This includes 50 million households that will receive no tax cut whatsoever.

Don’t get me wrong. I’m generally in favor of enlightened tax cuts, but the Administration does itself no favors by dodging distributional issues.

Edwards and the FCC ownership caps

The anti-FCC bandwagon grew today, with would-be Democratic Presidential candidate John Edwards hopping on. He released a letter today to Chairman Powell saying that he opposes increasing the national broadcast ownwership cap. His argument seemingly hinges on the point that “many Americans” do not have cable and satellite television, so allowing more concentration in broadcast television would hurt those folks by reducing diversity.


I am sympathetic to those who feel media concentration has gotten out of hand, but critics will have to make better arguments than Edwards’. About 90% of U.S. homes subscribe to multi-channel services, and the remaining 10% are the recipients of this implict subsidy.

Further, if the crux of this debate is the damaging effect of media concentration through reduced competition, then let’s just have it out as an antitrust issue via the DoJ. Blanket prohibitions against cross-ownership, or against arbitrary numbers of companies owned in certain markets, are difficult to justify economically.

Proposed visa changes: Narrow benefits, widespread costs

I am entirely sympathetic to the plight of technology workers losing theirs jobs. Whether because of outsourcing, or because of a lousy economy, the result is no picnic. Nevertheless, I generally think the technology business is facing the same sort of restructuring that manufacturing business faced in the 1970s and 1980s, with jobs and production moving offshore.


Unfortunately, many don’t see it that way. Instead, they see it as some sort of unfair trade, and they waggle their finger disapprovingly at the various labor visas that make it possible for companies to hire foreign workers when so many U.S. workers are losing their jobs.


It is, however, a rational outcome from employers. If foreign workers were unable to do the job, they would not be hired. If they can do the job, and they can do it for a lower price, then they should be hired. There are narrow losses, and widespread benefits from such an action.

Sleepless in seattle

Am away speaking at a Microsoft conference in Seattle, so things will be light here for a spell. Some fascinating anthropological observations so far though.