How the Telecommunications Act of 1996 Brought Us Donald Trump

Over two years ago I started writing a treatise on the effects of the Internet on music, attempting to debunk the popular theory held among technologists like myself that the Internet is an inherently democratizing force that empowers individuals. I collected charts and graphs, pulled industry data, and created a very compelling storyline.

I even began to compile a global database and build a visualization tool to present all the hundreds (thousands) of “independent” record labels that are actually branches of Sony, Warner, or Universal by tying together the hierarchical structures that are employed to disguise the fact that your favorite cuddly “indie” band is actually just a product squeezed out of a tube or a guy who “sold out to buy in.”

Unfortunately, the deeper down the rabbit hole I fell, the more depressed I became about the situation. I actually became so depressed about it that I abandoned the article, picked it back up a year later, got even more angry and depressed, and put it down again. My research not only caused me to despair and not finish my article, but also made me almost give up on both technology and music as well. It was that bad.

Maybe the truest statement ever made is: “The truth will set you free, but first it will piss you off.”

I’ve tried to get it finished several times, but at this point it’s become the Third Rail of Depression and Futility and I can’t bear to look at it. Also, the data collected in 2014 are starting to age, and I have absolutely no desire to re-mine the data again.

This article, therefore, will perforce need to be written at a sprint, because the longer I steep in this reality, the more I despair. I will attempt to annotate as I can, but I’m not here to prove anything, merely to lay out a line of reasoning that others can follow and bolster (or tear down) with facts, and instead of drilling into source data, spreadsheets, and databases, I’ll probably just quote Wikipedia and leave enough links at the bottom that you know I’m not spinning this yarn out of whole cloth.

Instead of laying out irrefutable proofs, I intend merely to connect some dots with a reasonably thick line. Sorry about that, but I got a life too.

In 1990 I graduated from Texas A&M University, aptly described by one of my dearest friends as “a hotbed of conservatism,” from the Lowry Mays School of Business. After graduating, I attended the Red McCombs School of Business at the University of Texas at Austin where I received an MBA in Information Systems Management. As it turns out, those two individuals – Lowry Mays and Red McCombs – will become instrumental in this story.

I was a big fan of Milton Friedman (still am, generally speaking) and a True Believer in capitalism as the engine of enriching the masses (this view has since become more nuanced). I called myself a small-L libertarian, wanting little to do with the quacky Lyndon Larouche party, but finding value in small-L libertarian principles: fiscally limited government, small defensive military, an absolute defense of civil liberty, generally open borders and free trade, and the use of progressive taxation (Friedman’s “negative income tax”) to provide a minimum guaranteed income instead of highly invasive and inefficient government services like public housing and food stamps.

I bring all of this up to share that I am not by birth a radical anti-capitalist, but actually someone who came into this situation with views far different than I have now been beaten by reality into accepting. I am still no radical anti-capitalist, but my eyes are a lot more open than they once were.

First I must dispel a notion:

“The Internet is inherently decentralizing and democratizing.”

As one of the very earliest Internet developers (I started building complex database back-ended web sites in 1995) and a small-L libertarian, I gulped this Kool-aid the moment it was offered. It fit exactly into my ethos. As a technologist, I could see that the Internet had the potential to decentralize everything. And as a musician, I was sure that a New Era of Music was upon us, one where a musician could simply create and distribute music directly to fans without middlemen, and that this empowerment would destabilize and destroy the record label business which had done such terrible disservices to the artists it supposedly represented.

Without getting into the charts, data, spreadsheets, and suicidal ideations from my abandoned article, let me just cut to the chase: this view was balderdash, at least over a two-plus-decade timeframe. In a nutshell, the top 1% artists now 77% of all music revenue, the top 3 labels control roughly 90% of the music you hear, access to the key new music discovery media (radio, satellite, and curated playlists) has narrowed tremendously, and more money than ever before is required to build and maintain an audience. If you doubt all this, write your own article, because I couldn’t finish mine without wanting to drink Drano.

In 1994 nobody as far as I knew was using the term “disruption,” but what I have learned from my work in tech, and from my research, is that disruption is really mostly analogous to a game of 52-pickup: a change comes along that suddenly seems to throw all the playing cards in the air. For a brief moment in time, the former holder of all the cards is destabilized, and everyone in the room has a narrow window in which to grab a few cards while they’re still in the air. Some individuals get lucky, and grab enough cards to empower themselves before the cards are grabbed back up by their original holders. These lucky individuals can then serve as useful anecdotes to the world about how the “disruption” has “empowered people.” Everyone knows the story of the musician that got famous by building a fanbase on MySpace and never signed to a record label. Sadly, far too many of us thought that was a trend not an anecdote.

Even sadder, at least some of these anecdotes were simply propaganda stunts by massive Internet businesses to market their brand. For example a particular Internet giant tried for years to spin the story of how their social network was helping to make a particular “artist” quite famous (3+M social followers!), when really all they did was push this person onto everyone’s social feed and hope for the best while nothing actually happened in that artist’s musical career. Heck, the “artist” never even completed a full album of music. Still, millions of people saw the story and got hope, including me.

Silly, silly me.

I’m not here to bash disruption per se. My view is that disruption, like the technology that enables it, is value-neutral. The point is that it is not inherently value-positive, as so many of us technologists cling to as if it were religion.

So the Internet did not tear down the evil record labels as predicted. In fact the overall market for commercial radio increased 13% in the decade 1998-2008. The Internet also did not destroy radio as predicted. The power of radio has surely diminished somewhat since 1994, but the current and continuing influence of radio on music is almost impossible to overstate. At least as of 2014 (when I collected data for my aborted article), terrestrial radio was still the #1 source of new music discovery.

Let me repeat that: 20+ years after the invention of the modern Internet, FM radio is still the #1 way that people discover music. And the #2 way people discovered music is through word of mouth — in other words from a friend who probably discovered the music where? On radio.

So I will say it again: it is almost impossible to overestimate the influence of terrestrial radio on new music discovery.

Radio is not dead. Not even close.

When researching my previous article, this was where the rabbit hole opened up and swallowed me whole. Because something else had changed in the intervening years since Marc Andressen brought us the Mosaic browser – in fact, this giant change was largely because of that browser.

That change was the Telecommunications Act of 1996.

Before we fall down that rabbit hole together, I want to sidestep for a moment, because something else happened in 1996: my rock band from college got its first single played on a top radio station in a top-ten market by one of the nation’s best-known DJs, a man we all call Redbeard. How this happened wasn’t luck or payola: we made a demo, took a CD to the radio station, met Redbeard (cool guy), he listened to the song, liked it, and agreed to give it some spins.

That song didn’t make us famous. But Redbeard and his peers at the competing station broke a lot of influential North Texas bands during this period of the 1990s: the Nixons, the Toadies, Tripping Daisy, Edie Brickell and New Bohemians, and many others got their start on the radio exactly this way – by taking a demo to a local station and getting spins – in drive-time rotation in a Top 10 music market. That’s a Big Fucking Deal. It’s also a feat that is practically impossible for an unsigned local artist to pull off today, for reasons we shall soon learn.

Spins on radio means fans at shows. More fans at shows means more requests for the song on radio. More requests means more spins, more spins means more fans — then better shows at better venues, etc.. Eventually the effect is spillover onto other stations and into other neighboring markets. It’s an easy to understand, meritocritous, “bottom-up” virtuous cycle that Made Music Great from 1970-1996, the Golden Age of FM Radio for anyone old enough to remember it. It’s a process that played out for years on hundreds of stations across the country, surfacing local talent and exposing it to the wider world.

This Golden Age was made possible only because of the existence of largely independent local radio stations employing independent DJs to curate a playlist for the local demographic and to develop the local market. This was the formula that had served music listeners since the advent of radio, and that, for all intents and purposes, ended after 1996 and has yet to be replaced with anything.

Particularly on the Internet, where “local” goes to die.

As a young technologist in 1996, I was on the front line of Internet hype. A few years prior, the “Internet” was still something for nerds wearing propellor hats like me. Suddenly, the light bulb came on, seemingly for everyone at once. ISPs like UUnet previously thought to serve a tiny potential market of only hackers started doubling in valuation every few months as people realized “everyone’s going to want to get online!” Startups like Amazon and eBay and Google – and Pets.com – achieved insane levels of hype. The Internet, it was thought, would eat everything. And it probably will, eventually.

It became relatively obvious early on that the Internet as well as other recent disruptive technologies of the time like cellular and cable would radically change telecommunications. In the wake of this sudden disruption, the Telecommunications Act of 1996 was passed. This landmark piece of legislation was the most important piece of legislation affecting telecommunication of all kinds since the 1934 Communications Act which created the FCC.

The purpose of the 1996 Act was stated as:

to provide for a pro-competitive, de-regulatory national policy framework designed to accelerate rapidly private sector deployment of advanced information technologies and services to all Americans by opening all telecommunications markets to competition

which, in 1996, sounded like a good idea to a young, small-L libertarian. And in fact I’d guess that there are many aspects of the Act that have been good for the country and its inhabitants. Probably. Maybe.

The Act did many things, mostly oriented around de-regulating the boring communications infrastructure maintained at the time by AT&T and the Baby Bells to try to re-orient it around serving the needs of the coming Internet market. That was the part of the bill that everyone was discussing and arguing about at the time. However, unbeknownst to most, it also significantly de-regulated radio, television, and print media for the first time since 1934.

Under the 1934 Communications Act, radio was held to be a (at least quasi) public good – like clean air, street lighting, or libraries. 1934 was a time where most of the print news in the country was controlled by a small number of political machines, like that of William Randolph Hearst, which used sensationalism and “yellow journalism” to promote political agendas. The goal of the 1934 legislation was to prevent such monopolization from taking hold in the nascent radio market with its limited space on the dial for competition. The mechanism was straightforward: limit the number of stations any entity can hold in any market, and the overall number of stations that any entity can hold. It also limited the ability for media channels to “forward integrate” into radio – to prevent a company like RCA from controlling the distribution channels for its competitors’s music, and to prevent a company like Hearst’s from commandeering the airwaves for political purposes. (Hearst, originally a Roosevelt supporter, would turn strongly against FDR after the passage of this bill).

In other words, radio was kept decentralized with the goal of maximizing local and independent access.

It is important to understand that at the time, it was not unusual for most people to have access to a small number of radio stations. The great 20th century urban migration was not complete, and radio was nascent and capital-intensive. It is for this reason that the FCC was created to ensure that the fledgling technology was deployed in a way that prevented monopolization.

It is from this philosophy – radio as a public good – that later notions like the “Fairness Doctrine” and “Payola” sprang. In the 1940s, the FCC held that radio programming must present opposing views on controversial material instead of only presenting one side. This was the so-called “Fairness Doctrine.” Likewise, rigor was applied to keep record labels from buying access to stations (and crowding out competitors) by rigorously enforcing laws regarding Payola – a law still (theoretically) enforced today. Under Payola laws, a radio station can play a song in exchange for money, but must disclose the song as “sponsored content,” and cannot count the spin in the song’s ratings.

The Fairness Doctrine was struck down in 1987, but the anti-monopoly laws stood until the passage of the Telecommunications Act of 1996, which relaxed or removed the restrictions against the number of stations any one entity could own (both in one market and overall), and removed or relaxed restrictions against forward integration, allowing media creators to own networks, and vice versa.

The effect was that the 1996 Act, which was supposed

to provide for a pro-competitive, de-regulatory national policy framework designed to accelerate rapidly private sector deployment of advanced information technologies and services to all Americans by opening all telecommunications markets to competition

actually did no such thing at all, at least not in radio and media. The centralization in media has been dramatic: in 1983, 50 companies controlled 90% of US media – that number is now 5 (Comcast, Walt Disney, News Corp, Time Warner, and National Amusements) with almost all of the consolidation occurring since the passage of the 1996 Act. In 1995, companies were forbidden to hold more than 40 radio stations, total – by 2003, only eight years later, one company owned over 1200 stations, including having outright monopolies in many markets where they own and program every station on the dial. Where once FM radio was a unique place to discover new, unusual, and local music, today 80% of playlists match.

And – even though Payola is purportedly still a crime, these media empires enter into profit sharing agreements with the major record labels (who control 90%+ of the music you will ever hear). Folks, this is Payola writ large. Good luck if you’re actually indie.

The degree of consolidation has been breathtaking. I think this infographic sums it up best.

That the Telecommunications Act of 1996 increased efficiency in radio is undeniable. It is estimated that as many as 10,000 people have lost their jobs in radio broadcasting since the Act was passed – even as the total number of stations broadcasting in the USA has increased. This has happened because there is often absolutely no local “station” at your “local” station, but just a transmitter, broadcasting a program that sounds completely local, but which is programmed by Who Knows from an office in Who Knows Where. This has allowed for massive efficiencies of scale: it now takes approximately 0.5 people to run a “local” radio station.

As a small-L libertarian, the notion of efficiency has a certain nice ring to it, until you ask, “what, really, is the product, and how have we saved and benefitted as a society?” The answer to that question is complex, but in a nutshell, the product is simply advertising: advertising for products, sure, but also advertising for big-time-record-label music through these profit-sharing agreements, and – thanks to the elimination of the Fairness Doctrine – advertising for a specific political point of view. The notion of radio as a public good is long gone.

This was basically where my previous attempt to write a similar article about the music business broke down. Because once you, the small-L libertarian technologist-musician, understand that:

  1. Even though the Internet supposedly “changed everything” you still need good old radio to build local markets but
  2. You’re basically cut out of local radio altogether
  3. By the major record labels we said we “disrupted”

you want to just give up and make that nice big Drano cocktail. It’s hopeless.

I remember some of the discussion when the Telecommunications Act of 1996 was passed. As a technologist caught up in the pre-bubble phase of Major Internet Hype, it was “clear” that the future of radio was dead. “Soon” we would be streaming an infinite number of stations digitally. The use of AM and FM waves would “soon” be a dinosaur. With digital, an infinite number of “channels” would be possible, so the idea that radio was a limited “public good” in need of strong mandated decentralization seemed instantly obsolete. So the idea that we should deregulate radio and allow it to blend with media companies had a certain air of logic to it, since radio itself was going away to be replaced by the Internet. And after all, “less regulation equals more competition,” right?

This all might, in fact, happen one day. But satellite radio and streaming have not displaced terrestrial AM and FM radio. Most people still listen to radio in their car – and 25 years in, the Internet still really hasn’t penetrated the vehicle to eliminate broadcast radio. It is displacing it, somewhat – but the number of radio stations in the USA since the 1996 Act was passed has not shrunk – it’s grown. And, since the Act allows conglomerates to own and operate virtually without limit, they’re chewing up space on you satellite dial, too – and have excellent control over the Spotify playlist you’re probably listening to.

And, I’ll add, in much of what we call “flyover country,” far removed from urban culture, AM radio is still the only thing you can reliably find on the dial due to its superior reach.

In the early 1970s, Lowry Mays and Red McCombs formed Clear Channel Communications when they began to acquire failing radio stations and return them to profitability, typically by changing their formats to less operationally-expensive formats like religious programming or talk radio. By the mid-1990s Clear Channel owned 40 radio stations and over a dozen TV stations.

Conversion to religious and talk-only formats was not profitable because they were products with greater demand – they were profitable because they were products with lower cost. As researcher Jackson R. Witherill writes:

Jeffrey Berry and Sarah Sobieraj of Tufts University interviewed a number of radio executives in 2011 and they found common ground on the sentiment that “the surge in talk radio programming was supply driven, not demand driven” (Berry and Sobieraj 2011). This means that as individual stations within national corporations became unprofitable, switching to talk radio programming was an attempt to stay in business through producing inexpensive and nationally broadcast programs.

The rise in the number of talk radio stations has meant that syndicated programs, which have become increasingly common, have gained a higher level of exposure through the creation of more stations airing the same material in new locations. This increased exposure results in higher ratings for the show.

(emphasis mine)

In short, the conversion of radio to talk formats was less about listeners demanding that material, and more about the low costs of production and economy of scale of delivery. In short, they’re saying what we musicians have known for a long time: generally speaking, people like whatever they’re fed by the radio. Therefore the curator – or program director – or talk show host – has a powerful shaping role.

Enter the Telecommunications Act of 1996, which removed the restrictions on station ownership, and suddenly Clear Channel’s acquisition + talk-format conversion strategy can be done at scale. Along with other hungry conglomerates, Clear Channel started gobbling up independent radio stations en masse. In three years the company had grown 10X – to over 400 stations. In five more years, Clear Channel would triple its radio reach again, growing to over 1200 stations – as well as 41 television stations and over 750,000 outdoor advertising displays. Clear Channel is now known as iHeartMedia, which is still the nation’s largest holder of radio stations and, through it’s subsidiary (Premiere Networks) is the largest producer of syndicated talk radio.

Suddenly, giant radio conglomerates like Clear Channel / iHeartMedia were able to push syndicated talk radio formats completely across the country, coast-to-coast. Gone were the local DJs and commentators, in were the preprogrammed music stations and religious and celebrity radio talk show hosts. Premiere even created “Premiere on Call” – a service that offers fake callers to call in shows that fit the story or agenda of the show.

As a by-product of this change to religious and talk radio, this period in history saw the rise of a new kind of syndicated radio personality: the shock jock. As Wikipedia defines it, there are two overlapping species of shock jock:

  1. The radio announcer who deliberately does something outrageous and shocking (to improve ratings).
  2. The political radio announcer who has an emotional outburst in response to a controversial government policy decision.

And who are Premiere’s (iHeartMedia’s) top earning syndicated talk show hosts?

  1. The Rush Limbaugh Show
  2. The Sean Hannity Show
  3. The Glenn Beck Program

Premiere’s top competitor is Westwood One. Who are Westwood One’s top syndicated hosts?

  1. The Mark Levin Show
  2. The Savage Nation

These top 5 syndicated talk shows represent the lion’s share of syndicated commercial talk radio. Of the five, only Limbaugh had a significant following prior to the 1996 Telecommunications Act. The other four are creations of the post-1996 radio consolidation phenomenon.

These sort of political talk shows would have been very difficult if not impossible to justify under the Fairness Doctrine that existed from the late 1940s until 1987. However, it’s important to note that it was not the removal of the Fairness Doctrine that led to the overnight explosion of right-wing shock commentators. The reason for the explosion is clear: these shows are products of vertical integration and economies of scale enabled by the 1996 Telecom Act. The typical pre-1996 local radio station in Average, USA would never be able to afford even one hour of Rush Limbaugh or Glenn Beck, but a giant conglomerate can actually save money by owning both the program and the distribution network and subsequently firing all the local employees of “Average 1310AM.”

And that is exactly what happened, in thousands of stations and communities all around the USA.

In a matter of a few years, this trend pushed high-volume shock-jock national-level syndicated radio right down into Average, USA. Gone were the local farming programs, the state politics talk shows, and Redbeard playing my demo. In came the right-wing talk radio movement, and the rest is history.

And that, my friends, is the direct line from the passage of the Telecommunications Act of 1996 to President Donald Trump.

Epilogue

This article would be remiss without its own version of the Fairness Doctrine. Because I think there’s another radio phenomenon that must be mentioned, and that is National Public Radio.

I’ll state here that NPR is overall a left-leaning organization, and has (had) a number of left / center-left talk shows such as Fresh Air, The Diane Rehm Show, The Takeaway, and Latino USA. However, only Fresh Air makes it onto the Top 20 syndicated talk show list.

NPR’s most successful programs are news programs: All Things Considered, Morning Edition, and Marketplace. These shows are also left /center left in focus, but as a rule do not offer editorial commentary.

In fact, only two progressive talk radio programs makes it to the Top 20 – Fresh Air (NPR), and the Thom Hartmann Program broadcast from the (commercial) Westwood One radio network.

As a result, the counterbalance of progressive, left-wing talk radio is dominated by an 800-lb gorilla called NPR, which crowds out other stations with its high-quality, listener-supported, and at least partially federally-subsidized broadcasting.

Now, while Terry Gross and Diane Rehm are surely left-of-center, there can be no comparison between the political slant of these sober NPR commentators and Michael Savage screaming “liberalism is a mental disorder” at the top of his lungs. There are no hyperpolarizing “shock jocks” on NPR stoking anger among their listeners with outbursts of rage. Nobody on NPR is “connecting the dots” Glenn Beck style to hypothesize various absurd yet certainly entertaining conspiracy theories. You will never hear an NPR personality refer to the Republican Party as a “terrorist network operating within our own borders.” And its most popular programs by far are the news shows – again, with next to zero commentary, and less-than-zero raving and pulling of hair.

So consider the polarizing effect of the top 5 syndicated radio programs:

  1. All Things Considered (NPR) – news
  2. Rush Limbaugh (Premiere) – conservative talk
  3. Morning Edition (NPR) – news
  4. Sean Hannity (Premiere) – conservative talk
  5. Marketplace (APM) – news

So NPR pulls the left towards the center, while commercial right-wing talk radio pulls the right to the right. Meanwhile, NPR’s large budget and high-quality commercial-free program sucks much of the air out of the room for any potential left-wing audience to support a more vitriolic, aggressive left-wing talk format (as though that would somehow help the country find balance).

More Reading:

Understanding the Rise of Talk Radio, Cambridge Core

The year that changed radio forever: 1996, Medialife Magazine

Why All The Talk-Radio Stars Are Conservative, Fortune

War of the Words: Political Talk Radio, the Fairness Doctrine, and Political Polarization in America, University of Maine