The Age of Murdoch

Many see him as a power-mad, rapacious right-wing vulgarian. Rupert Murdoch has indeed been relentless in building a one-of-a kind media network that spans the world. What really drives him, though, is not ideology but a cool concern for the bottom line—and the belief that the media should be treated like any other business, not as a semi-sacred public trust. The Bush Administration agrees. Rupert Murdoch has seen the future, and it is him

Powell, who turned forty this year, is Secretary of State Colin Powell's son. He is just under six feet tall and squarely built, with a somewhat high voice. By the time he graduated from William and Mary, in 1985, his father was already famous. Like his father, Michael went into the Army out of college—but two years later, when he was serving with an armored unit in Germany, he was gravely injured in a Jeep accident and hospitalized for a year. He left the Army and eventually enrolled in Georgetown's law school. After graduation, in 1993, he became a clerk for Harry Edwards, then the chief judge of the D.C. Circuit. Later he worked as an antitrust lawyer, and then served as an FCC commissioner; he became the agency's chairman in 2001.

"In some ways this is such a silly debate," Powell said when I asked him about assertions that the D.C. Circuit Court had not actually forced him to dismantle the ownership rules. "Let me put this in perspective. I clerked on that court. For the chief judge of that circuit! I bring, in my opinion, some credibility to the question. But put aside that selfish point—" He then went on to argue that anyone who really understood how courts work would know that the FCC was indeed being told to get rid of its rules. "It's not the fact that we lost that case. It's the basis on which the court relied in saying we lost that matters ... If you really, honestly read those cases, you understand that the status quo [maintaining the ownership rules] becomes extraordinarily vulnerable."

A reader of his transcribed words might not be surprised to learn that people who dislike Powell consider him aloof and conceited. In person he did not strike me that way. He seemed affable and engaging—but eager to explain the rightness of his views, as if disagreement must be rooted in either emotion or illogic. This is an approach I associate with theoretical economists. Like them, Powell punctuates his explanations with "Let's be honest about this" or "Once you move past the subjectivity and emotions ..." With great nuance he laid out his case for relaxing ownership controls on the media. With less nuance the argument boils down to two big ideas:

First, cable TV, satellite TV, Internet news sites and blogs, and countless other data sources give modern Americans more choices about information than any previous society has enjoyed. Therefore, rules to ensure competition among broadcast stations matter much less than they used to.

Second, complaints about overconcentrated media are really complaints about what's on the air—and the content of news or entertainment should not be the government's concern. "Either you don't see enough of something you like, or you see too much of something you don't," Powell said. "But at the end of the day you have to ask whether you want three out of five unelected regulators"—that is, a majority on the FCC—"saying, I want the public to see this but not that." The market for news may not be perfect, but the government should be very reluctant to interfere with what people like to watch.

What's significant about these views? They lead logically to the conclusion that the news business is basically like all other businesses, and should therefore be regulated in the way the rest are—that is, the government protects against price-gouging, fraud, and other run-of-the-mill economic abuses, but ends its oversight there. The idea that press responsibility begins and ends with attracting a market has historical precedents. It was the lesson young Keith Murdoch learned from the tabloid genius Lord Northcliffe: give the public what it wants. But for at least a century newspaper and broadcasting companies were expected to serve interests beyond the purely commercial. That is what made news different from entertainment. Entertainment's only purpose is to be popular. News is supposed to be as popular as it can while also introducing readers or viewers to thoughts, problems, and opportunities that affect them. American news companies have for a number of years been moving toward just-a-business operating principles. The FCC changes give them a governmental mandate.

The circumstances of the FCC's rules changes were noisy, amusing, instructive, and embarrassing, often all at once. Michael Powell thought he had things under control. More than a year ago, after he had read the D.C. Circuit Court rulings, he told Congress that he would launch a new study to see how many ownership rules the FCC could and should relax. He said that new rules should be ready for an FCC vote this past spring. Through most of its history the FCC has operated with little or no attention from the general press, and Powell could well have expected these changes to sail through too.

But complications arose, unusually baroque even for Washington. The FCC normally has a three-two majority in favor of the party that controls the White House, and there are two other Republican commissioners serving with Powell. But all three of the Republicans are young enough to think that other important political jobs may still be ahead of them, and their personal ambitions seemed to explain more than did simple partisanship.

Michael Powell had been considered one of the Republican Party's future stars—at least until early this year, when he ran up against another potential star, a new Republican commissioner named Kevin Martin. Martin is not quite four years younger than Powell, but he looks as if he could be in Powell's freshman seminar. A lawyer from North Carolina who was student-body president at the University of North Carolina at Chapel Hill, Martin is sometimes called Harry Potter at the FCC, because of his glasses and hairdo. The better comparison is to Ralph Reed, formerly of the Christian Coalition, who also seemed too unlined to have survived long political wars. Martin joined the Bush campaign in the summer of 1999 and helped to manage its Florida-recount strategy after the election; his wife succeeded Mary Matalin as Dick Cheney's communications adviser. They are considered a very well connected young Republican couple.

Early this year Martin weakened and embarrassed Powell by voting against him and joining the Democrats to defeat an important part of Powell's program for telephone deregulation. The essential question was whether regulators in each state could continue to apply price limits and other rules to the "Baby Bell" telephone companies. Powell argued that the limits were out of date. Martin, to widespread surprise, lined up with the two Democratic commissioners in saying that the rules were necessary to protect the consumer. His defection was mortifying to Powell—a sign that Powell could not control his troops. It didn't work out that well for Martin, either. Telecom stocks crashed after the surprise defeat of Powell's plan, leading the trade press to call Martin "the sixteen-billion-dollar boy." Powell, statesmanlike, declined to comment on the episode when I spoke with him. Martin's office canceled a long-scheduled interview on all FCC matters at the last minute, and returned no subsequent calls.

As the media-ownership decision neared, Powell and Martin both seemed certain to vote for the changed rules, albeit for different reasons. "Michael will always go with his analysis of the issue, and Kevin will go with the politics," an aide who works with both men says, referring in Martin's case to personal ambition as well as party politics. Powell genuinely believed that the D.C. Circuit rulings made changes inevitable. Martin knew that a majority vote was important to the Bush Administration—and he must have understood politically that the issue, already attracting public debate, would only become more controversial the longer it was left unresolved. The third Republican commissioner, Kathleen Abernathy, who had been faultlessly loyal to Powell and was assumed to want to succeed him, was also going to vote for the rules changes.

But while the two Democratic commissioners—Michael Copps, a former aide to Ernest Hollings, and Jonathan Adelstein, a former aide to Tom Daschle—traveled around the country holding hearings to oppose the changes, or at least to delay the vote, Kevin Martin deftly got out of the way. On interview shows and in congressional testimony Michael Powell became the face of what William Safire, in The New York Times, called the "round-heeled FCC." During and after broad and wounding attacks for a policy Martin favored—attacks that may well have made Powell too controversial to be a viable future candidate—Martin left few tracks.

The politics of the issue took on their strange shape through the late spring. In favor of the changes were a variety of large media organizations, especially regional newspaper powers like the Chicago Tribune and the Belo Corporation, owner of The Dallas Morning News. The big media companies—Viacom, Disney, and so on—were also in favor. When asked, Rupert Murdoch said he supported the liberalization but was mainly pushing for approval of his DirecTV deal. The Bush Administration strongly supported the changes, as did the many Republican senators and congressmen who support most forms of deregulation. One striking quality of the pro crowd was how silent it was. The White House, the Republican Party, and most of the big corporations left the arguing to Powell. Months in advance it was obvious that the rules would be changed, by a 3-2 vote. So there was no reason to waste energy or risk political exposure by arguing in public.

Meanwhile, interest groups that had nothing else in common launched letter-writing campaigns to oppose the changes. Members of the National Rifle Association mailed tens of thousands of protest postcards to the FCC. Common Cause reported that more of its members were mobilized on this issue than on any other in decades. The National Organization for Women and the Rainbow Coalition sided with Christian fundamentalists and the Conservative Communications Center. The common strand among the protesters, according to Mark Cooper, of the Consumer Federation of America, was that all were "controversial minorities" who felt that the national press was biased against their views. The bigger and more market-minded the media conglomerates become, they argued, the harder it is for anything other than mainstream views to be heard. Even Republican senators such as Trent Lott and Wayne Allard joined most Democratic senators in protesting the changes.

Cooper was one of a group of policy activists who went from hearing to hearing challenging the technical merits of the FCC changes. He talked about the "diversity index" the FCC produced to show that there would still be plenty of competition after newspapers and TV stations combined. The formula measures the number of "media choices" each community would have after the mergers. Cooper pointed out the grotesque flaw: the index assumes that every print or broadcast "outlet" has the same amount of influence. Thus if a community went from having two competitive papers to having one dominant paper and a community newsletter, there would supposedly be no real change.

Cooper also answered an argument made often by the Republican commissioner Kathleen Abernathy: that when technology makes so many choices available, concerns about concentrated media are overblown. What does it mean, she asked rhetorically, that 75 percent of prime-time viewers watch programs produced by just four companies? "I can only presume that this means that Americans are watching these providers because they prefer their content." To social scientists this kind of market result is known as a "revealed preference." When I asked Cooper about this explanation, he said, "We're talking about 'revealed preferences'? Okay, you give me NBC's broadcast frequencies for everything that's on my Web page, and I'll give them my Web page for everything they're broadcasting. You'll see some 'preferences' then."

One of the Democratic commissioners, Jonathan Adelstein, said, "Of the hundreds of citizens I heard from directly at field hearings across the country, not one stood up to call for relaxing the rules." The FCC order changing the rules, he said, "often equates the public interest with the economic interests of media conglomerates." He argued that the "marketplace of ideas" was being turned into a plain old bazaar. The other Democrat, Michael Copps, said that the FCC was "outdriving the headlights," making dramatic changes whose consequences it could not foresee.

"You know, it makes me feel extremely old to say so, but it is astonishing to see how young these guys are," Lawrence Lessig, of Stanford, told me. (He is forty-two.) "Powell and Kevin Martin are just at the beginning of their careers, and these are such enormous decisions. The idea that this naive, simple libertarian ideology gives you any handle on these issues is astonishing. What is essential here is pragmatism that is informed by experience and empirical measure."

On June 2 a line of activists, reporters (including me), and paid placeholders formed early outside the FCC building to watch the long-scheduled vote on the new ownership rules. Copps and Adelstein had asked for the "customary courtesy" of a thirty-day delay in the vote. Powell said no. "Let's be blunt," Powell later told me. "They asked for the thirty days not for more time to consider but to stop the results from being produced. I wasn't born yesterday." In the spring, in an episode I did not learn about from Powell, the White House political strategist Karl Rove had met with Powell to urge him to wrap up these controversial regulatory issues as soon as he could. Powell stood on his independence as a regulator and said he couldn't be rushed. But his principles led in the same direction the Administration sought: toward a vote with no further delay.

At 10:00 A.M. Powell gaveled the meeting to order, and the commissioners heard reports from their staff specialists about the virtues of relaxing ownership controls. Powell gave a ten-minute speech endorsing the changes, and Abernathy did the same. Copps and Adelstein each spoke twice as long in dissent. Kevin Martin briefly congratulated all sides for their hard work, said there was "strong evidence on both sides of this issue," and said he would vote for the changes. Powell called for the "ayes." Three hands went up. He asked for "nos," quickly slapped down the gavel, said "The ayes have it," and got out of his chair to leave the room. Security guards rushed toward a group of female protesters, who were dressed all in pink and had burst into song as Powell was calling the vote, and hustled them away. Out on the sidewalk Jesse Jackson and Dick Gregory were giving interviews, and other protesters were marching with placards showing a scowling Rupert Murdoch, who faute de mieux was the symbol of the evil consequences of the decision.

Two days after the vote all five FCC commissioners were called before John McCain's Senate Commerce Committee to explain why they voted for rules for which there was so little identifiable support and such broad opposition. Two weeks later McCain's committee voted to recommend that the new FCC rules be overturned.

This was symbolically important but isn't likely to mean much. Even if a revocation measure could get through the full Senate, it would be likely to fail in the House. The chairman of the corresponding House committee, Billy Tauzin, of Louisiana, said he would not even schedule a committee hearing for the measure. Various groups promised to file lawsuits challenging the new ownership rules. Such lawsuits go first to the D.C. Circuit Court—where the outcome seems preordained—and then, if accepted for review, to the Supreme Court. The last time the Supreme Court ruled on media ownership, it gave great deference to the FCC's judgments about what limits were (and were not) necessary in the public interest. Whether it would maintain that deference or instead agree with the D.C. Circuit that such limits are largely outdated and should be reviewed is hard to predict—especially given its recent closely divided "liberal" rulings in affirmative-action and sodomy cases.

Immediately after the FCC vote the shares of media companies rose, based on the widespread expectation that most such companies would soon be either buying or getting bought. (As I left the hearing room, I walked a few paces behind the lobbyist for the Chicago Tribune Company, who had worked for months on this issue. On his first cell-phone call he asked, "How's the stock doing?") "Eventually you're going to see more and more of these huge conglomerates," Blair Levin, a former FCC official who is now a media analyst for an investment bank, told me, "because everyone's going to need to do it to survive. I think of it in Pentagon terms. Rupert is the first one to have put together an Army, an Air Force, a Navy, and a Marine Corps. Inside the Pentagon people could argue about which force is more important and which is getting enough money. But if you're the Iraqis, it's a bitch to compete with."

Levin continued with his view of the future. "The next phase after that will be the really big deals," he said. "Who does NBC ally with? If Murdoch's model really demonstrates the synergies of a multi-channel distribution network, with a broadcast network, with a content provider, then you may see Echostar [another satellite company] with Viacom [the parent of CBS]. The other networks will have to ask, Do we do a Comcast deal [referring to the major cable-TV system]? The change in the rules put a lot of wood on the fire. The question is what will light the spark."

To extend the military analogy, a corporate arms race is about to begin. "The FCC ownership stuff is not all that important to Murdoch," Neil Chenoweth told me in an e-mail. "It just helps everybody else catch up with him."

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James Fallows is a national correspondent for The Atlantic. His Atlantic cover story last November, "The Fifty-first State?," about postwar Iraq, won the 2003 National Magazine Award for Public Interest. His books include Free Flight: From Airline Hell to a New Age of Travel (2001), Breaking the News: How the Media Undermine American Democracy (1996), and Looking at the Sun: The Rise of the New East Asian Economic and Political System (1994). More

James Fallows is based in Washington as a national correspondent for The Atlantic. He has worked for the magazine for nearly 30 years and in that time has also lived in Seattle, Berkeley, Austin, Tokyo, Kuala Lumpur, Shanghai, and Beijing. He was raised in Redlands, California, received his undergraduate degree in American history and literature from Harvard, and received a graduate degree in economics from Oxford as a Rhodes scholar. In addition to working for The Atlantic, he has spent two years as chief White House speechwriter for Jimmy Carter, two years as the editor of US News & World Report, and six months as a program designer at Microsoft. He is an instrument-rated private pilot. He is also now the chair in U.S. media at the U.S. Studies Centre at the University of Sydney, in Australia.

Fallows has been a finalist for the National Magazine Award five times and has won once; he has also won the American Book Award for nonfiction and a N.Y. Emmy award for the documentary series Doing Business in China. He was the founding chairman of the New America Foundation. His recent books Blind Into Baghdad (2006) and Postcards From Tomorrow Square (2009) are based on his writings for The Atlantic. His latest book is China Airborne. He is married to Deborah Fallows, author of the recent book Dreaming in Chinese. They have two married sons.

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