FCC Regulation and Increased Ownership Concentration in the Radio Industry

Abstract

In 1996, Congress increased the limits on how many radio stations one firm can own within a single “radio market.” To enforce these limits, the FCC used an idiosyncratic method of defining radio markets, based on the complex geometry of the signal contour patterns of radio stations’ broadcasts. Using a unique geographic data set, this paper provides the first calculations of the pre- and post-1996 limits on local radio ownership as actually implemented by the FCC. The limits are surprisingly permissive and vary considerably from city to city. While the limits were seldom binding on radio firms, I find a strong correlation between the 1996 increase in the limits and the increase in ownership concentration over the following five years. I use this correlation and the variation in the limits as a natural experiment in increased concentration to study the effects of concentration on various radio-market outcomes. The paper’s estimates can contribute to an assessment of the FCC’s quasi-antitrust regime for radio and suggest that concentration has a positive effect on advertising revenue and the variety of programming formats but no effect on listenership. Finally, the paper lays the groundwork for future research that will use the FCC’s implementation of local radio ownership limits as a case study in the administrative process.

Keywords: telecommunications, radio, FCC, regulation, media ownership, media concentration

JEL Classification: L96, L40, K23