The FCC debacle... the erosion of Democracy/chipping away at competition

[chequita guevara]

Originally posted by JohnT
Are you going to be intellectually consistent and blame this on Clinton? That'd be a nice change of pace.

Actually, the oringal law did what has just passed. Clinton fought to keep tv and newspapers out. Radio consolidation was left in because he had used all his political capital on the other two.

[Adam Smith]

Here are some actual data on the issue. (Source: Eli M. Noan, Columbia Business School, December 2002.) I have no way of verifying this data, so it will have to do in a pinch.

When economists think about collusion, they usually think about price collusion. However, there can also be quality collusion, which includes, for example, restricting the flow of information. The likelihood of collusion is usually measured using a concentration index.

The attached graph shows the concentration of mass-media ownership measured by revenue. The measure used is the Herfindahl-Hirshman Index (HHI) which is the standard used by economists to measure market concentration. The HHI is the sum of the squared market shares of each firm in the market. A completely monopolized market would have HHI = 100^2 = 10,000. The two dashed lines represent different thresholds of concentration. An HHI of less than 1000 is considered by economists to be unconcentrated, I.e., likely to be a competitive market. This corresponds, for example, to 10 firms each with 10 percent of the market. HHI between 1000 and 1800 is considered to be moderately concentrated. HHI above 1800 is considered to be highly concentrated, where collusion might reasonably be expected to occur. For example, a market with five firms each with 20 percent of the market would have HHI = 2000.

In this graph “regulated” basically consists of TV, radio and cable stations; “unregulated but materially affected” includes TV syndication and pay TV; “unregulated” includes just about everything else, such as movies, DVD’s., etc.

The take home message from these graphs is that media concentration is not yet at the level where economists would be very concerned about collusion. It would seem perfectly possible to avoid getting our knickers in a twist and simply treat this as any other industry to which the antitrust laws apply.

There are some qualifications.

First, and most important, concentration is not the only factor which determines the ability to collude. Technology, barriers to entry, potential competition, standardization of product, availability of consumer information, and a number of other factors can make it easier or harder to collude. In this case technology is especially important, making lowering barriers to entry and making it easier for smaller firms to survive in the market.

Second, companies which own outlets across categories would increase the concentration ratios somewhat. [If A and B are market shares, (A+B)^2 is greater than A^2 + B^2 }

Third, these data do not include newspapers or internet sources, and therefore overstate mass media concentration.

Fourth, these data only include US media outlets, and therefore overstate mass media concentration. For example, how many people here get some of their news from the BBC?

[Adam Smith]

grrrrr...how do you stick these things in the body of the post without the attachment feature?

The [img] tag looks like it applies to stuff on the web, not on my hard drive.

[JohnT]

For starters, it can't be a .bmp file. Pictures have to be jpegs or gifs, as far as I know.

[gsmoove23]

AS, I can't read a thing on your graph. Are you saying that we shouldn't be worried because concentration hasn't reached a level that some economist thinks should be the benchmark?

[Q Classic]

johnt, that was all before my time.

[Imran Siddiqui]

Are you saying that we shouldn't be worried because concentration hasn't reached a level that some economist thinks should be the benchmark?

Not SOME economist, gsmoove, but a majority of economists (who use the HHI to measure concentration and have set points where they consider it 'high') .

--

Btw, Sava, you should be happy. Your good friend, Senator Trent Lott said today that he thought the FCC was wrong to raise the cap and he'd try to get Congress to not do it .

[JohnT]

Adam's graph:

[Sava]

Originally posted by Imran Siddiqui
Btw, Sava, you should be happy. Your good friend, Senator Trent Lott said today that he thought the FCC was wrong to raise the cap and he'd try to get Congress to not do it .

Yeah, I mentioned a lot of conservatives were opposed to this. Something must be wrong if Trent Lott and I agree on it.

[Victor Galis]

Did anyone think this was a good idea? (Other than the media companies that is?)

[Sava]

Originally posted by Victor Galis
Did anyone think this was a good idea? (Other than the media companies that is?)

The people the media companies bought.

[The Templar]

I pledge allegiance
to the Fox
Of NewsCorp America
And to the Conglomerate
for which it stands
one nation, under Rupert Murdock
with fair and balanced jingoism for all!