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FCC: Internet doesn’t count for local radio ownership rules (but should it?)

Bean countingDespite heavy lobbying from Clear Channel and its allies, the Federal Communications Commission proposes retaining its current ownership rules for commercial AM and FM radio stations. Here is a quick refresher course on the local radio rules. They allow any entity to buy as many AM/FM signals as its wants, nationally, with these restrictions in local radio markets:

(1) up to eight commercial radio stations in radio markets with 45 or more radio stations, no more than five of which can be in the same service (AM or FM),

(2) up to seven commercial radio stations in radio markets with 30-44 radio stations, no more than four of which can be in the same service (AM or FM),

(3) up to six commercial radio stations in radio markets with 15-29 radio stations, no more than four of which can be in the same service (AM or FM), and

(4) up to five commercial radio stations in radio markets with 14 or fewer radio stations, no more than three of which can be in the same service (AM or FM), provided that an entity may not own more than 50 percent of the stations in such a market, except that an entity may always own a single AM and single FM station combination.

In the FCC’s latest proceeding on whether to loosen these and other restrictions, broadcasters argued that satellite radio and Internet services like Pandora make these limits less necessary. The Commission disagrees:

“Satellite radio still only serves a small portion of all radio listeners and millions of listeners do not have broadband Internet access,” the FCC says. “Moreover, these audio programming alternatives are national platforms that are not likely to respond to conditions in local markets. Therefore, we propose that our local radio ownership rule continue to focus on promoting competition among broadcast radio stations in local radio listening markets.”

Speaking personally, I think that the FCC is right about this. Services like Pandora or have yet to demonstrate any significant local presence anywhere, as opposed to the precious core of broadcast radio stations that really serve cities, towns, and rural areas with live news and information.

But the agency is proposing to eliminate its radio/television cross ownership limits, and everybody’s definitely starting to wonder how Internet only stations and music services compare with AM/FM broadcasters, audience metrics-wise. Folks are getting pretty touchy about the issue, too. Of late, Edison Research did an audience study for Pandora that included some Average Quarter Hour share data. Around the same time, Arbitron issued a statement questioning the wisdom of comparing Internet radio log file data with Arbitron audience estimates.

“There are many areas to be carefully considered when comparing Arbitron audience estimates with those from another source,” the Arbitron commentary noted. “We advise clients to avoid comparing self-reported audience estimates from Internet music services to Arbitron radio audience estimates,” given these differences:

• The difference between “one-to-many” broadcast stations and “one-to-one” Internet music services;

• The differences between Arbitron’s published methodology and calculations for its audience estimates and the estimates used by Internet music services;

• The ability of the provider to determine if a person is completing the survey task and should be counted as “exposed” to the content; and

• The reliability of self-reported demographic data and the steps taken to validate the information.

Meanwhile, Edison hit the ceiling over an Inside Radio piece on the issue that the research group called “grossly inaccurate.” According to the excerpt published by Edison, the Inside Radio story claimed that the Edison study ranked Pandora figures with local radio stations via Arbitron stats.

“Edison has never (as in never ) reported anything other than the AQH figures for Pandora – full stop,” Edison’s statement insisted. “We defy Inside Radio or any interested party to come up with a ‘ranker’ from Edison that compares Pandora ‘alongside’ any terrestrial radio station.”

So is the consensus that broadcast radio and the Internet remain apples and oranges? Tim Westergren of Pandora would appear to disagree. This week he told the Wall Street Journal that Arbitron’s perspective reflected a “concerted effort” to keep his company out of the broadcast radio loop. “The broadcast industry does not want the world to know about us, basically,” Westergren declared.

Actually, big radio does want to know about Pandora, it seems, to the extent they can use the specter of Internet radio to convince the FCC that it should relax its local ownership rules. That tactic clearly isn’t working, so far. But if Internet radio actually develops a serious local presence, things might change.

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