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Regulation of the broadcast industry began in 1934 when Congress created the Federal
Communications Commission (FCC), an independent government agency responsible for
overseeing interstate and international communications, including all forms of television
and radio. The Telecommunications Act of 1996 was the first major overhaul of broadcast
legislation since the FCC’s creation. Passed with little fanfare by a Republican-controlled
Congress during the administration of President Bill Clinton, the law was intended to foster
competition across all of the telecommunications industries, bringing telephone companies,
cable television operators, and terrestrial broadcasters into one another’s markets.

However, instead of competition, the result of the law was a wave of mergers between
existing companies. In January 2000, internet service provider AOL merged with Time
Warner and its Cable News Network (CNN). In September 2003, Vivendi Universal
Entertainment merged its entertainment business with General Electric (GE), which, in
addition to owning the NBC networks, had significant interests in aircraft manufacturing,
medical devices, computers, nuclear reactors, health insurance, home equity, and
commercial real estate loans. By 2003, five large companies with diverse media,
entertainment, and other corporate holdings controlled just under 75 percent of all prime-
time television content: GE, AOL Time Warner, Viacom (which owns CBS), Disney (which
owns ABC), and News Corporation (which owns Fox).62
The Telecommunications Act also abolished a rule that limited the number of radio or
television stations a single company could own. As a direct result, Clear Channel—already
the largest single owner of American radio stations in 1996—acquired more stations
across the country and within a few years came to own over 1,200 stations in 300
regional markets.63
Some argue that the government should impose regulations to limit the influence that any
single corporation can have over different media and individual regional markets. Others
believe that the media market should be permitted to regulate itself and that government
interference works against media diversity. In 1998, Michael Powell—the son of Colin
Powell, a former chairman of the Joint Chiefs of Staff who would later serve as secretary of
state—was appointed as a commissioner of the FCC. Powell, a member of the deregulation
camp, argued that the primary purpose of the FCC was to prevent the government from
interfering unduly in the media industry. He was concerned that excessive regulation might
suffocate the technological innovation which he believed could enable smaller companies
to break into the market.64 In 2001, Powell was made chairman of the FCC.
The FCC is required by law to conduct a biennial assessment of its rules and determine
whether they are still necessary in light of industry changes. As chairman, Powell
undertook this assessment and led the FCC to issue a controversial order in June 2003
that modified many existing rules governing media ownership. Most notably, the order
would have enabled a company to own a full-service broadcast station, a daily newspaper,
and a radio station within the same regional market. The new rules would have also
allowed a media company to hold as much as 45 percent (up from 35 percent) of the
national television market.65
The FCC order received significantly more attention than the 1996 Telecommunications
Act. Supporters of deregulation praised it, arguing that despite the recent trend toward
consolidation at the highest levels of media ownership, there were more television
channels and information sources available to the American public than ever before,
enabling a freer press to flourish. According to James Gattuso of the Heritage Foundation,

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