Regulating without Regulation—How the FCC Sidesteps the First Amendment

Traditionally, media in the United States — from film and television studios to newspapers to book publishers — require no government license to remain in business. Yet, as the pending AT&T-Time Warner merger reveals, owning assets that are licensed by the Federal Communications Commission can come at a heavy cost. Entertainment and news can now be shaped by regulators, rather than just by writers, journalists or executives. Worse, this influence isn’t exerted through transparent regulation. The FCC is wielding power over Hollywood without regulating at all, and it’s weakening First Amendment protections in the process.

Imagine the FCC telling studio bosses which shows they can greenlight, which to cancel and perhaps even mandating that they produce a certain show. It sounds farfetched, but by using its authority to approve transactions involving licenses, the FCC is doing just that, by creating company-specific programming requirements that bind media outlets.

If the FCC were to pursue the regulation of entertainment and news through the traditional regulatory process, it would be tied up for years in the rulemaking procedure and could be challenged in court. Instead, the agency has taken an easier path: coerce programming requirements before approving the sale of licensed assets.

Most license transfers between companies are perfunctory; a simple registration that ownership of a broadcast tower or telephone line changed hands. In recent years the FCC has been conditioning approval on a series of conditions from media buyers and sellers, including — among other things — mandated programming.

This is a new twist on an old idea. The FCC for years has injected its views of what is newsworthy into American living rooms with broadcast TV requirements. Cable operators don’t have the unfettered ability to choose what programming to distribute — they are required by law to transmit, for instance, local PBS stations and regulated broadcast stations into viewers’ homes.

Increasingly, the agency coerces “public interest” requirements via backroom negotiations with regulated companies during transaction approvals, avoiding the public and judicial scrutiny that formal regulation requires. This is likely why DreamWorks, creator of films like “Shrek” and “Kung Fu Panda,” abruptly abandoned a license for wireless communications before the animation studio was acquired by Comcast a few months ago.

The history of licensed media is as old as the printing press and always chills speech. The first newspaper in the Americas, Publick Occurrences, was published in Boston in September 1690. There was no second issue. Officials and the local clergy considered some of the stories — a local suicide, a kidnapping, a massacre carried out by the Mohawk tribe — too tawdry for public consumption.

The reason it was shut down? Operating without a license. This had a profound effect on United States’ founders a century later, who enshrined the free operation of the press — safe from government intimidation — in the First Amendment.

But censorship takes many forms and doesn’t die easily. Today, the FCC’s coercive power may feature prominently in the pending AT&T-Time Warner merger.

AT&T, a broadband and satellite TV company, plans to acquire Time Warner and distribute its TV and film content in competition with cable providers. It’s a straightforward antitrust case that should be handled by the Department of Justice, but special interests are agitating for FCC involvement because Time Warner owns a handful of licensed assets.

Recent transactions before the FCC give us a pretty good idea of what will be required from media companies. NBC Universal, for example, must air thousands of hours of TV programs as a condition of a recent transaction.

NBC programmers are required to broadcast local news, Spanish programming, children’s shows, LGBT programming and tens of millions of dollars of public service announcements about topics like federal nutritional guidelines and childhood obesity. Much of this programming may indeed be good for society, but that does not excuse the free speech problem of a federal agency coercing TV programming and online content.

Would Los Angeles, a vibrant community pushing the margins of entertainment, look like it does today if Washington had actively decided what was and was not proper programming in the early days of the film industry? Political pressure is nothing new, but the FCC’s newer, largely unnoticed form of censorship is an entirely different animal.

Similarly, it’s impossible to know how Washington might affect the future of television by interfering in media acquisitions. Hollywood can only thrive when the creative class decides for itself which projects to invest in and which to avoid.

Agencies should not be able to interfere with the exercise of free speech and other constitutional rights in secretive and extralegal ways. The incoming administration and Congress should keep the FCC far away from news and entertainment acquisitions and limit the agency’s power over communications and media companies.