Government Ownership Restrictions and Efficiency: The Case of the FCC's Dupoply Rule

Recently the Federal Communications Commission (FCC) has been considering modifications to its regulations governing local and national media ownership and has indicated more interest in the efficiency consequences of the regulations, including those that might arise from common ownership of multiple radio stations. This paper seeks to determine whether efficiencies would likely be realized if the FCC relaxed its prohibition of multiple ownership of the same kind of media outlet in a single market. The empirical bases for this investigation are the AM-FM radio combinations permitted by the FCC. The primary focus is a comparison of the prices paid for stations sold as combinations with the prices paid for stations sold as independent stations. The results are consistent with the existence of efficiencies in joint ownership of multiple stations in the same local market and provide support for the relaxation or repeal of the current FCC restriction on such joint ownership. AM-FM combinations command a price premium over the sum of the prices that would be realized if the stations were sold and operated separately, suggesting that combinations are more efficient. In addition, the number of AM-FM combinations have increased over time, again supporting the hypothesis of greater efficiency for combinations. (23 references) (GL)