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Stanford law school John m. olin program in law and economics Working Paper 283 May 2004 Confusing Success with Access "Correctly " Measuring Concentration of Ownership and Control in mass media and online services Bruce m. owen Stanford Institute for Economic Policy research(sIEPr) Stanford University This paper can be downloaded without charge from the Social Science Research Network Electronic Paper Collection http://ssrn.com/abstract=545302

Stanford Law School John M. Olin Program in Law and Economics Working Paper 283 May 2004 Confusing Success with Access: “Correctly” Measuring Concentration of Ownership and Control in Mass Media and Online Services Bruce M. Owen Stanford Institute for Economic Policy Research (SIEPR) Stanford University This paper can be downloaded without charge from the Social Science Research Network Electronic Paper Collection: http://ssrn.com/abstract=545302

This work is distributed as a Discussion Paper by the STANFORD INSTITUTE FOR ECONOMIC POLICY RESEARCH SIEPR Discussion Paper No 03 Confusing Success with Access Correctly"Measuring Concentration of Ownership and Control in Mass media and online services PREPARED FOR "MEDIA CONCENTRATION AND THE INTERNET- EMPIRICAL BUSINESS AND POLICY RESEARCH. A SYMPOSIUM AT THE COLUMBIA INSTITUTE FOR TELE-INFORMATION (CITD), COLUMBIA BUSINESS SCHOOL, APRIL 15TH, 2004 Bruce M. Owen May 2004 Discussion Draft-Please do not quote without permission Stanford Institute for Economic Policy Research Stanford University Stanford CA 94305-6015

1 This work is distributed as a Discussion Paper by the STANFORD INSTITUTE FOR ECONOMIC POLICY RESEARCH SIEPR Discussion Paper No. 03- Confusing Success with Access: “Correctly” Measuring Concentration of Ownership and Control in Mass Media and Online Services PREPARED FOR “MEDIA CONCENTRATION AND THE INTERNET – EMPIRICAL, BUSINESS AND POLICY RESEARCH,” A SYMPOSIUM AT THE COLUMBIA INSTITUTE FOR TELE-INFORMATION (CITI), COLUMBIA BUSINESS SCHOOL, APRIL 15TH, 2004 Bruce M. Owen May 2004 Discussion Draft—Please do not quote without permission. Stanford Institute for Economic Policy Research Stanford University Stanford CA 94305-6015

Confusing Success with Access: Correctly" Measuring Concentration of Ownership and Control in mass media and online services Bruce M. Owen PREPARED FOR"MEDIA CONCENTRATION AND THE INTERNET- EMPIRICAL BUSINESS AND POLICY RESEARCH. A SYMPOSIUM AT THE COLUMBIA INSTITUTE FOR TELE-INFORMATION (CITD), COLUMBIA BUSINESS SCHOOL, APRIL 15TH, 2004 Discussion Draft-Please do not quote without permission Abstract In 2003 the Federal Communication Commission(FCC) proposed modest relaxation of its media ownership concentration rules; the proposal aroused heated political opposition and has been partially overturned by Congress and stayed pending appellate review. The purpose of this paper is quite narrow: to explore, from a public policy perspective, meas urement issues associated with media ownership concentration in general, and online content control in particular. Measurement is meaningless in a vacuum. Alternative ap- proaches to measurement derive their relative merits chiefly from their ability to assess the phenomenon under study not from independent or abstract characteristics of the measurement device. In the policy area, the choice of a method of measurement follows from the adoption of a goal, or an understanding of the nature of a problem, rather than the other way around Media ownership concentration raises two broad policy concerns(1)the problem of mar- ket power, which can reduce output and raise prices, reducing both consumer and social economic welfare and(2 )the problem of private restrictions of access by suppliers of content that may be unpopular or politically incorrect to audiences, and the closely re- lated issue of government regulation of content and access. The first issue(economic competition) is indistinguishable from that addressed by antitrust policy, and the sophist cated analytical tools of modern antitrust analysis present the best available approach to measurement. The second problem(competition in the market place of ideas, which I call Miltonian competition ) can also usefully be approach from an antitrust perspective, leading to a different conclusion about sound concentration measurement techniques. In this second context it makes no sense to measure concentration using revenue or audience weights, because any channel that is available to a given consumer is equally valuable a potential source of politically significant material. Popular channels, by definition, have

- 1 - 1 Confusing Success with Access: “Correctly” Measuring Concentration of Ownership and Control in Mass Media and Online Services Bruce M. Owen PREPARED FOR “MEDIA CONCENTRATION AND THE INTERNET – EMPIRICAL, BUSINESS AND POLICY RESEARCH,” A SYMPOSIUM AT THE COLUMBIA INSTITUTE FOR TELE-INFORMATION (CITI), COLUMBIA BUSINESS SCHOOL, APRIL 15TH, 2004 Discussion Draft—Please do not quote without permission. Abstract In 2003 the Federal Communication Commission (FCC) proposed modest relaxation of its media ownership concentration rules; the proposal aroused heated political opposition and has been partially overturned by Congress and stayed pending appellate review. The purpose of this paper is quite narrow: to explore, from a public policy perspective, meas￾urement issues associated with media ownership concentration in general, and online content control in particular. Measurement is meaningless in a vacuum. Alternative ap￾proaches to measurement derive their relative merits chiefly from their ability to assess the phenomenon under study, not from independent or abstract characteristics of the measurement device. In the policy area, the choice of a method of measurement follows from the adoption of a goal, or an understanding of the nature of a problem, rather than the other way around. Media ownership concentration raises two broad policy concerns (1) the problem of mar￾ket power, which can reduce output and raise prices, reducing both consumer and social economic welfare and (2) the problem of private restrictions of access by suppliers of content that may be unpopular or politically incorrect to audiences, and the closely re￾lated issue of government regulation of content and access. The first issue (economic competition) is indistinguishable from that addressed by antitrust policy, and the sophisti￾cated analytical tools of modern antitrust analysis present the best available approach to measurement. The second problem (competition in the market place of ideas, which I call “Miltonian competition”) can also usefully be approach from an antitrust perspective, leading to a different conclusion about sound concentration measurement techniques. In this second context it makes no sense to measure concentration using revenue or audience weights, because any channel that is available to a given consumer is equally valuable as a potential source of politically significant material. Popular channels, by definition, have

popular content, but if this popularity arises from consumer choice rather than structural barriers to entry it has no significance in measuring the ease with which politically dis- ruptive ideas can be excluded from the audience Online content(such as entertainment, news and advertising that is generally not in video format) may belong in the same relevant economic markets as mass media, or not, de pending on the actual substitution behavior of customers. If consumers or advertisers would substitute online channels for traditional mass media channels in response to price or quality changes, then both media belong in the same market. Ownership attribution and share measurement would follow the usual antitrust rules Measuring concentration of control of online content for purposes of assessing restric tions on access by audiences to politically or otherwise unpopular material, and by sources of such material to audiences, requires attention, first, to the facts concerning control. If identifiable commercial entities can restrict access based on content, they should be attributed with control over the portion of transmission capacity they contr On the other hand, if both end users and content suppliers are free to find each other on the Internet, then barriers to Miltonian competition(and consumption of expression)are nil. There remains an empirical question whether use of online communication provides an alternative that users find a good substitute for traditional media for the purpose of seeking out unpopular ideas and minority-taste content. A related empirical issue in- volves the role played by opinion leaders in facilitating access by mass audiences to un- popular ideas expressed via unpopular channels Measuring media ownership concentration is a meaningless exercise in the abstract. A necessary predicate is an explicit model or models of how concentration affects policy variables such as consumer welfare or competition in the marketplace of ideas. Only then can a measure of concentration be constructed and tested for empirical consistency with the underlying model(s), with which the concentration data may or may not be consistent to consumer welfare in the traditional economic which is positively with vigorous competition, traditional antitrust models and measurement techniques are broadly, as good as it gets; there is no need for a special antitrust approach to media in dustries. The more controversial and often conflicting policy goals of protecting press freedom from government abridgement and of promoting diversity(or Miltonian compe tition)present more difficult challenges. If, however, ensuring that citizens have as much possible to potentially conflicting views is the objective, then concentration is best measured by counting the noses of independent sources, without regard for their cur- rent economic success. Moreover, in general, concentration in the market place of ideas properly measured, will be lower than economic concentration

- 2 - 2 popular content, but if this popularity arises from consumer choice rather than structural barriers to entry it has no significance in measuring the ease with which politically dis￾ruptive ideas can be excluded from the audience. Online content (such as entertainment, news and advertising that is generally not in video format) may belong in the same relevant economic markets as mass media, or not, de￾pending on the actual substitution behavior of customers. If consumers or advertisers would substitute online channels for traditional mass media channels in response to price or quality changes, then both media belong in the same market. Ownership attribution and share measurement would follow the usual antitrust rules. Measuring concentration of control of online content for purposes of assessing restric￾tions on access by audiences to politically or otherwise unpopular material, and by sources of such material to audiences, requires attention, first, to the facts concerning control. If identifiable commercial entities can restrict access based on content, they should be attributed with control over the portion of transmission capacity they control. On the other hand, if both end users and content suppliers are free to find each other on the Internet, then barriers to Miltonian competition (and consumption of expression) are nil. There remains an empirical question whether use of online communication provides an alternative that users find a good substitute for traditional media for the purpose of seeking out unpopular ideas and minority-taste content. A related empirical issue in￾volves the role played by opinion leaders in facilitating access by mass audiences to un￾popular ideas expressed via unpopular channels. Measuring media ownership concentration is a meaningless exercise in the abstract. A necessary predicate is an explicit model or models of how concentration affects policy variables such as consumer welfare or competition in the marketplace of ideas. Only then can a measure of concentration be constructed and tested for empirical consistency with the underlying model(s), with which the concentration data may or may not be consistent. As to consumer welfare in the traditional economic sense, which is positively associated with vigorous competition, traditional antitrust models and measurement techniques are, broadly, as good as it gets; there is no need for a special antitrust approach to media in￾dustries. The more controversial and often conflicting policy goals of protecting press freedom from government abridgement and of promoting diversity (or Miltonian compe￾tition) present more difficult challenges. If, however, ensuring that citizens have as much access as possible to potentially conflicting views is the objective, then concentration is best measured by counting the noses of independent sources, without regard for their cur￾rent economic success. Moreover, in general, concentration in the market place of ideas, properly measured, will be lower than economic concentration

Confusing Success with Access Correctly" Measuring Media and Online Concentration Bruce m. owen PREPARED FOR"MEDIA CONCENTRATION AND THE INTERNET- EMPIRICAL BUSINESS AND POLICY RESEARCH. A SYMPOSIUM AT THE COLUMBIA INSTITUTE FOR TELE-INFORMATION (CITD, COLUMBIA BUSINESS SCHOOL, APRIL 15TH, 2004 Introduction: Analysis Precedes Measurement The purpose of this paper is narrow: to explore, from a public policy perspective measurement issues associated with media concentration in general, and online content in particular Measurement is meaningless in a vacuum. Alternative approaches to meas- urement derive their relative merits chiefly from their ability to assess the phenomenon under study, not solely from independent or abstract characteristics of the measurement device. In the policy area, the choice of a method of measurement follows from the adop- tion of a goal, or an understanding of the nature of a problem, rather than the other way around. For example, visible smog has various measurable components, such as particu- lates, that may be less hazardous to health than invisible pollutants. Measures of air pollu- tion or progress in its reduction limited to visible components may be very misleading. A eduction in visible pollutants is consistent with a worsening of health dangers. Worse such measures may distort policy by encouraging relatively costly and inefficient control measures, resulting in fewer lives saved than would have possible with wiser use of the same control dollars. Worst, the wrong measurement tools may have unintended conse- Gordon Cain Senior Fellow, Stanford Institute for Economic Policy Research, Stanford University

- 3 - 3 Confusing Success with Access: “Correctly” Measuring Media and Online Concentration Bruce M. Owen∗ PREPARED FOR “MEDIA CONCENTRATION AND THE INTERNET – EMPIRICAL, BUSINESS AND POLICY RESEARCH,” A SYMPOSIUM AT THE COLUMBIA INSTITUTE FOR TELE-INFORMATION (CITI), COLUMBIA BUSINESS SCHOOL, APRIL 15TH, 2004 Introduction: Analysis Precedes Measurement The purpose of this paper is narrow: to explore, from a public policy perspective, measurement issues associated with media concentration in general, and online content in particular. Measurement is meaningless in a vacuum. Alternative approaches to meas￾urement derive their relative merits chiefly from their ability to assess the phenomenon under study, not solely from independent or abstract characteristics of the measurement device. In the policy area, the choice of a method of measurement follows from the adop￾tion of a goal, or an understanding of the nature of a problem, rather than the other way around. For example, visible smog has various measurable components, such as particu￾lates, that may be less hazardous to health than invisible pollutants. Measures of air pollu￾tion or progress in its reduction limited to visible components may be very misleading. A reduction in visible pollutants is consistent with a worsening of health dangers. Worse, such measures may distort policy by encouraging relatively costly and inefficient control measures, resulting in fewer lives saved than would have possible with wiser use of the same control dollars. Worst, the wrong measurement tools may have unintended conse- ∗ Gordon Cain Senior Fellow, Stanford Institute for Economic Policy Research, Stanford University. BruceOwen@Stanford.edu

quences, such as increased pollution-related deaths as polluters employ technologies that asing what is not measured In short, choosing a method of measurement of media concentration is not the same as a debate about using the metric system versus the avoirdupois system of weights First, we need to decide what is bad (or good) about such concentration, either in itself, or because of its effects. and then second we must design measurements of concentration or of the effects of concentration that make sense in terms of policy goals or effects Therefore, we cannot jump directly into the measurement debate without consid- ering what it is that we want to measure and why. On the other hand the what and the why are highly contentious issues. There cannot be a single"correct way to measure concentration if people differ about the nature of the problem, its effects, and its proper remedies. Given the limited scope of the assignment here, it seems most effective simply to make, for purposes of this paper, some assertions or assumptions about these matters Then we can turn to the measurement issues without having the ground shifting under foot. Even then there is no single correct way to measure concentration, as will be dem- onstrated below. Different conclusions about measurement may well result, of course, if one accepts assumptions about the nature of the problem that differ from those used here The media Concentration problem Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof, or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of griev ances CONSTITUTION OF THE UNITED STATES OF AMERICA, AMENDMENT I, adopted 1791 (emphasis added) Freedom of speech and of the press from government abridgement is a fundamen tal right conferred on American citizens by the Bill of Rights. Although this right has been much weakened by the Supreme Court's reluctance to accord the same freedom to electronic media as to print, it retains a central position in our constellation of political freedoms. Indeed, many Americans understand this freedom to be broader(or different) than it is. It is common to encounter those who assert or simply assume that freedom of

- 4 - 4 quences, such as increased pollution-related deaths as polluters employ technologies that reduce what is measured by increasing what is not measured. In short, choosing a method of measurement of media concentration is not the same as a debate about using the metric system versus the avoirdupois system of weights. First, we need to decide what is bad (or good) about such concentration, either in itself, or because of its effects, and then, second, we must design measurements of concentration or of the effects of concentration that make sense in terms of policy goals or effects. Therefore, we cannot jump directly into the measurement debate without consid￾ering what it is that we want to measure and why. On the other hand, the what and the why are highly contentious issues. There cannot be a single “correct” way to measure concentration if people differ about the nature of the problem, its effects, and its proper remedies. Given the limited scope of the assignment here, it seems most effective simply to make, for purposes of this paper, some assertions or assumptions about these matters. Then we can turn to the measurement issues without having the ground shifting under￾foot. Even then there is no single correct way to measure concentration, as will be dem￾onstrated below. Different conclusions about measurement may well result, of course, if one accepts assumptions about the nature of the problem that differ from those used here. The Media Concentration Problem Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of griev￾ances. CONSTITUTION OF THE UNITED STATES OF AMERICA, AMENDMENT I, adopted 1791. (emphasis added) Freedom of speech and of the press from government abridgement is a fundamen￾tal right conferred on American citizens by the Bill of Rights. Although this right has been much weakened by the Supreme Court’s reluctance to accord the same freedom to electronic media as to print, it retains a central position in our constellation of political freedoms. Indeed, many Americans understand this freedom to be broader (or different) than it is. It is common to encounter those who assert or simply assume that freedom of

speech and press means freedom from any source of restriction or constriction, public or private. Similarly, many believe, or assume, that freedom of speech and press encom- passes an affirmative duty on the part of Congress to ensure that media content meets various criteria, such as fairness or diversity, or that it contains certain features, such as educational and cultural merit, or not contain certain other features, such as obscenity Unless we make an effort to think in an unusually disciplined way, most of us are capable of believing in contradictory things without discomfort, and beliefs about freedom of speech and press are examples. But a central lesson of economics is that, if resources are limited and production is efficient, it is not possible to increase the amount of diversity except by suppressing speech and also reducing consumer welfare. This means that common interpretations of First Amendment"goals"that transcend the original ban on abridgement are, generally, doomed to result both in abridgement and widely accepted economic policy criteria Self-indulgent, sloppy or sentimental thinking by the public, like any other accu- rate portrayal of human behavior, must be acknowledged and accounted for in policy analysis, but has no place in the analysis itself. Policies implementing basic political freedoms must be designed to protect citizens from the tyrannical actions of the British crown obnoxious to the Framers--and still widely practiced, today, in many parts of the world. Unfortunately, we are up to our ears in sentiment when it comes to media concen- tration, and sentiment deeply infects both academic and judicial analysis of the problem The most recent example was the spectacle, in 2003, of political outrage triggered by the FCC's meager proposed reforms of its media ownership rules The background of the controversy is as follows. The Congress in 1996 adopted by large margins a Telecommunications Act(Pub. L No. 104-104, 110 Stat. 56(1996)), largely deregulatory and pro-competitive in its language and in many of its provisions The Congress clearly anticipated that increased media competition would lessen the fu ture need for current restrictions on media ownership, which were designed to promote diversity and prevent undue concentration. Accordingly, the new law required the fCc to undertake biennial reviews of its ownership policies and to repeal those no longer neces- sary as a result of competition(1996 Act $202(h)). The FCC understood this to be an in-

- 5 - 5 speech and press means freedom from any source of restriction or constriction, public or private. Similarly, many believe, or assume, that freedom of speech and press encom￾passes an affirmative duty on the part of Congress to ensure that media content meets various criteria, such as fairness or diversity, or that it contains certain features, such as educational and cultural merit, or not contain certain other features, such as obscenity. Unless we make an effort to think in an unusually disciplined way, most of us are capable of believing in contradictory things without discomfort, and beliefs about freedom of speech and press are examples. But a central lesson of economics is that, if resources are limited and production is efficient, it is not possible to increase the amount of diversity except by suppressing speech and also reducing consumer welfare. This means that common interpretations of First Amendment “goals” that transcend the original ban on abridgement are, generally, doomed to result both in abridgement and widely accepted economic policy criteria. Self-indulgent, sloppy or sentimental thinking by the public, like any other accu￾rate portrayal of human behavior, must be acknowledged and accounted for in policy analysis, but has no place in the analysis itself. Policies implementing basic political freedoms must be designed to protect citizens from the tyrannical actions of the British crown obnoxious to the Framers—and still widely practiced, today, in many parts of the world. Unfortunately, we are up to our ears in sentiment when it comes to media concen￾tration, and sentiment deeply infects both academic and judicial analysis of the problem. The most recent example was the spectacle, in 2003, of political outrage triggered by the FCC’s meager proposed reforms of its media ownership rules. The background of the controversy is as follows. The Congress in 1996 adopted by large margins a Telecommunications Act (Pub. L. No. 104-104, 110 Stat. 56 (1996)), largely deregulatory and pro-competitive in its language and in many of its provisions. The Congress clearly anticipated that increased media competition would lessen the fu￾ture need for current restrictions on media ownership, which were designed to promote diversity and prevent undue concentration. Accordingly, the new law required the FCC to undertake biennial reviews of its ownership policies and to repeal those no longer neces￾sary as a result of competition (1996 Act §202(h)). The FCC understood this to be an in-

struction to deregulate gradually, but found itself in difficulty with appellate courts when it was unable to provide a"rational basis for its devolving regulations. Fox Television Stations, Inc. v FCC, 280 F 3d 1027(D. C. Cir, 2002); Sinclair Broadcasting Group, Inc v FCC 284 F 3d 148(D.C. Cir. 2002) In its 2002 biennial review, the FCC undertook a massive effort to develop an analytical record to support what turned out to be relatively minor or incremental relaxa tions of several media ownership rules Report and Order in the matter of 2002 Biennial Regulatory Review, 18 FCC Red 13620(2003), stayed 2003 U.S. App. LEXIS 18390, appeal pending sub nom, Prometheus Radio Project, et al. V. FCC, Nos. 03-3388, et al (3d Cir. 2003). The most controversial decision was a proposed increase, from 35 percent (47 C FR.$733555(e))to 45 percent, in the portion of the U.S. population that could be cached by the tv stations owned by any one of the major broadcast Tv networks(ABC CBS, Fox, or NBC) The FCC decision met with unexpectedly vigorous public and political opposi tion. A series of resolutions introduced by senators and representatives, most of whom had voted for the deregulatory 1996 Telecommunications Act, was introduced beginning July 15, 2003(108 Bill Tracking S J Res. 17)to repeal the FCC's proposed relaxation of media ownership rules. Ultimately, a compromise was reached with the Bush Admini- stration; Consolidated Appropriations Act, 2004, Pub. L. No. 108-199,$ 629, 118 Stat. 3 (2004). The compromise affected only one of the FCC's proposed relaxations, reducing (from the FCCs proposed 45 percent)to 39 percent the maximum reach of network- owned TV stations This paper takes no position on the merits of the FCC's 2003 proposals, confining itself to analysis of measurement issues, and arguing that appropriate measurement of media concentration is a necessary but not sufficient condition for rational media concen- tration rules. Nevertheless, substantive policy analysis and measurement cannot be sepa rated, because only an examination of the proper objectives of regulatory policy can tell us what to measure and how to measure it I The author submitted several analyses in this proceeding on behalf of Fox, Viacom(CBS),and GE (NBC) 6

- 6 - 6 struction to deregulate gradually, but found itself in difficulty with appellate courts when it was unable to provide a “rational basis” for its devolving regulations. Fox Television Stations, Inc. v FCC, 280 F.3d 1027 (D.C. Cir., 2002); Sinclair Broadcasting Group, Inc. v. FCC 284 F.3d 148 (D.C. Cir. 2002). In its 2002 biennial review, the FCC undertook a massive effort to develop an analytical record to support what turned out to be relatively minor or incremental relaxa￾tions of several media ownership rules. Report and Order in the Matter of 2002 Biennial Regulatory Review, 18 FCC Rcd 13620 (2003), stayed 2003 U.S. App. LEXIS 18390, appeal pending sub nom., Prometheus Radio Project, et al. v. FCC, Nos. 03-3388, et al. (3d Cir. 2003). The most controversial decision was a proposed increase, from 35 percent (47 C.F.R. § 73.3555(e)) to 45 percent, in the portion of the U.S. population that could be reached by the TV stations owned by any one of the major broadcast TV networks (ABC, CBS, Fox, or NBC).1 The FCC decision met with unexpectedly vigorous public and political opposi￾tion. A series of resolutions introduced by senators and representatives, most of whom had voted for the deregulatory 1996 Telecommunications Act, was introduced beginning July 15, 2003 (108 Bill Tracking S.J. Res. 17) to repeal the FCC’s proposed relaxation of media ownership rules. Ultimately, a compromise was reached with the Bush Admini￾stration; Consolidated Appropriations Act, 2004, Pub. L. No. 108-199, § 629, 118 Stat. 3 (2004). The compromise affected only one of the FCC’s proposed relaxations, reducing (from the FCC’s proposed 45 percent) to 39 percent the maximum reach of network￾owned TV stations. This paper takes no position on the merits of the FCC’s 2003 proposals, confining itself to analysis of measurement issues, and arguing that appropriate measurement of media concentration is a necessary but not sufficient condition for rational media concen￾tration rules. Nevertheless, substantive policy analysis and measurement cannot be sepa￾rated, because only an examination of the proper objectives of regulatory policy can tell us what to measure and how to measure it. 1 The author submitted several analyses in this proceeding on behalf of Fox, Viacom (CBS), and GE (NBC)

Possibly the most troubling aspect of the media concentration debates is the con fusion of access and success, or more accurately the notion that it would be desirable economically or politically to have a public right of access to commercially successful media. In broad perspective, this is one manifestation of the long and often bitter struggle between those who believe that social or economic justice requires equality of access (EOA)and those who believe that it requires equality of result(EOR). The killer argu ment of the EOA group is that, often, equality of outcome(through its adverse effects on incentives) can and, often does, make everyone worse off, especially those unfortunates who might be thought to benefit the most from outcome equality. The response of the EOR group, quite fairly, is that equality of access in principle often ends up providing neither equality nor access in practice In the media concentration debate the eor side takes the position that completely open access to the means of mass communication does not exist unless all channels are equally accessible to everyone(accessible, say, at equal and low cost). The EOa side points to the very large number of channels, existing and potential, that are accessible al ready at very low cost. The EOR side points out that these low-cost channels have small or no audiences. The EOa side responds that the channels with larger audiences must offer attractive, costly content, and that access to them would induce free riding" and distort incentives. The eOR group counters that the channels with large audiences have market power, often the result of connivance in the dim political past with public offi- cials. The EOA-ers respond that whatever the course of history may have been, in today's competitive environment successful channels are not guaranteed continued popularity. because channel scarcity is no longer a barrier to entry eor proponents counter that tv station licenses in large markets still cost hundreds of millions of dollars-hardly evi- dence of low entry barriers or the end of scarcity A dollop of common sense, while it might not suffice to resolve this debate would at least make clearer what is at stake. The application of common sense begins with distinguishing between supply and demand. Media concentration might result from either, with significantly different policy consequences. First, consider a idyllic world in which there is no scarcity of channels. For example, imagine a billion video channels

- 7 - 7 Possibly the most troubling aspect of the media concentration debates is the con￾fusion of access and success, or more accurately, the notion that it would be desirable economically or politically to have a public right of access to commercially successful media. In broad perspective, this is one manifestation of the long and often bitter struggle between those who believe that social or economic justice requires equality of access (EOA) and those who believe that it requires equality of result (EOR). The killer argu￾ment of the EOA group is that, often, equality of outcome (through its adverse effects on incentives) can and, often does, make everyone worse off, especially those unfortunates who might be thought to benefit the most from outcome equality. The response of the EOR group, quite fairly, is that equality of access in principle often ends up providing neither equality nor access in practice. In the media concentration debate the EOR side takes the position that completely open access to the means of mass communication does not exist unless all channels are equally accessible to everyone (accessible, say, at equal and low cost). The EOA side points to the very large number of channels, existing and potential, that are accessible al￾ready at very low cost. The EOR side points out that these low-cost channels have small or no audiences. The EOA side responds that the channels with larger audiences must offer attractive, costly content, and that access to them would induce “free riding” and distort incentives. The EOR group counters that the channels with large audiences have market power, often the result of connivance in the dim political past with public offi￾cials. The EOA-ers respond that whatever the course of history may have been, in today’s competitive environment successful channels are not guaranteed continued popularity, because channel scarcity is no longer a barrier to entry. EOR proponents counter that TV station licenses in large markets still cost hundreds of millions of dollars—hardly evi￾dence of low entry barriers or the end of scarcity. A dollop of common sense, while it might not suffice to resolve this debate, would at least make clearer what is at stake. The application of common sense begins with distinguishing between supply and demand. Media concentration might result from either, with significantly different policy consequences. First, consider a idyllic world in which there is no scarcity of channels. For example, imagine a billion video channels

available to every viewer for free, aside from payments for content, with zero cost of add- g even more channels if the first billion get used up, and with no one permitted to own or control programming on more than one percent of all channels. What would such a world, one with no transmission supply constraints, look like? In this world of potential plenty, there might well be quite a lot of"concentra tion, attributable to consumer demand. That is, the nature of popular culture is that it popular, which means lots of people pay attention to its components, whatever they may happen to be. Some channels would be quite popular, and people who are good at antici- pating(or creating) popular cultural icons would try to keep them so, and be well re- warded for success Their success of course. has a feedback effect on itself because what is successful is often popular. In the end, a relatively few channels, and owners, would have the lion's share of the audience and the revenues The prediction above is difficult to prove, based as it is on an assumption about the distribution of tastes among the public as well as the existence either of property rights in popular material or a scarcity of talent relevant to production of whatever is popular. The prediction does gain some credence from observation of mass communica- tion media with essentially unlimited physical capacity and very low entry costs, such as magazine and book publishing. If the prediction is correct, it follows that we would ex- perience a degree of media"concentration"even in the absence of anything that might be called a market imperfection or entry barrier. Such media concentration simply would be the result of demand-side forces combined with the likely natural distribution of special ized entrepreneurial skills relevant to any distribution of tastes, rather than supply-side monopolies or government giveaways of our treasured national resource, the spectrum Equality of access to transmission resources would not produce equality of result in audi- ence size and revenue, just as competition among book publishers produces a few best sellers and thousands of failures The economic concentration problem Media concentration has two policy dimensions The first is economic, the second political. The economic problem is not in any significant way different from the problem 8 8

- 8 - 8 available to every viewer for free, aside from payments for content, with zero cost of add￾ing even more channels if the first billion get used up, and with no one permitted to own or control programming on more than one percent of all channels. What would such a world, one with no transmission supply constraints, look like? In this world of potential plenty, there might well be quite a lot of “concentra￾tion,” attributable to consumer demand. That is, the nature of popular culture is that it is popular, which means lots of people pay attention to its components, whatever they may happen to be. Some channels would be quite popular, and people who are good at antici￾pating (or creating) popular cultural icons would try to keep them so, and be well re￾warded for success. Their success, of course, has a feedback effect on itself, because what is successful is often popular. In the end, a relatively few channels, and owners, would have the lion’s share of the audience and the revenues. The prediction above is difficult to prove, based as it is on an assumption about the distribution of tastes among the public as well as the existence either of property rights in popular material or a scarcity of talent relevant to production of whatever is popular. The prediction does gain some credence from observation of mass communica￾tion media with essentially unlimited physical capacity and very low entry costs, such as magazine and book publishing. If the prediction is correct, it follows that we would ex￾perience a degree of media “concentration” even in the absence of anything that might be called a market imperfection or entry barrier. Such media concentration simply would be the result of demand-side forces combined with the likely natural distribution of special￾ized entrepreneurial skills relevant to any distribution of tastes, rather than supply-side monopolies or government giveaways of our treasured national resource, the spectrum. Equality of access to transmission resources would not produce equality of result in audi￾ence size and revenue, just as competition among book publishers produces a few best sellers and thousands of failures. The Economic Concentration Problem Media concentration has two policy dimensions. The first is economic, the second political. The economic problem is not in any significant way different from the problem