Federal Communications Commission (FCC) - Business in United States of America

Identification: Independent federal agency charged with regulating interstate and international communications that use radio, television, wire, satellite, or cable
Date: Established in 1934
Significance: Because the Federal Communications Commission has the power to allocate frequency bands and to grant (or deny) licenses to radio and television stations, it has had a profound effect on these and other communications businesses, which commission officials are legally required to monitor so that they serve the public interest.
Before the formation of the Federal Communications Commission (FCC), American communications businesses evolved mainly through private enterprise, with minimal government regulation. The proliferation of radio stations with increasingly powerful transmitters, however, caused interference from overlapping transmissions and led Congress to pass the Radio Act of 1927, which gave a federal commission power to license stations, assign operating frequencies, and, through a 1928 amendment, establish both high-powered interstate stations and low-powered local stations. Because laws governing radio, telegraph, and telephone communications were inconsistent and out of date, the Congress, at the request of President Franklin D. Roosevelt, passed the Communications Act of 1934, which put all electronic communications businesses under the purview of a single agency, the Federal Communications Commission. The commission, through its power to grant or terminate licenses, had the responsibility of ensuring that communications businesses served the public good.

FCC Objectives

Federal Communications Commission officials were charged with allocating frequency bands for radio stations, approving (or disapproving) rate increases for interstate telephone communications, and monitoring radio broadcasts for unlicensed operations and corrupting content. The Communications Act of 1934 also had a direct effect on businesses through its mandate to preserve healthy competition by facilitating the multiplication of stations throughout the United States, not just in cities, and by encouraging quality and diversity in programming. During the early history of the Federal Communications Commission, and indeed throughout its entire existence, these multifarious objectives have often proved incompatible, and FCC officials often encountered difficulties in implementing them.
Among the Federal Communications Commission’s earliest missions was the improvement of programming. Though forbidden by law from censoring broadcasts, Federal Communications Commission officials could alert stations when their programs and policies harmed the commonweal. For example, in 1935, the FCC criticized an astrology program on a Missouri station, and in 1937, in a highly publicized case, it expressed its displeasure over Mae West’s racy remarks on The Edgar Bergen and Charlie McCarthy Show, which had offended many listeners, but it took no punitive action. Indeed, cases in which stations lost licenses were rare, though the FCC did issue warning lists of practices, such as the use of racially or religiously derogatory language, that could lead to license revocation.
During the late 1930’s and into the 1940’s, the Federal Communications Commission became involved in a number of important issues, from investigations of monopolies in communications businesses to the regulation of new technologies, such as television and frequency modulated (FM) radio. Its investigation into “chain broadcasting,” which was begun in 1938 and resulted in regulations that were upheld by the Supreme Court in 1943, led to rules designed to combat abuses, such as a network’s control over its affiliates. The Federal Communications Commission also forced the National Broadcasting Company (NBC) to sell its Blue Network, which became the American Broadcasting Company (ABC).
FM transmission, which Edwin Armstrong had invented in 1933, provided high-fidelity sound, and in 1939, the Federal Communications Commission studied the problem of allocating parts of the very high frequency (VHF) spectrum for FM broadcasts. By 1941, a small number of FM stations were in operation, but, with the American entry into World War II, the Federal Communications Commission stopped authorizing any new FM stations. Television presented more difficult problems than FM, since several companies had developed incompatible systems for transmitting and receiving television signals. In 1940, the FCC began a study of these systems, and its National Television Standards Committee (NTSC) devised a plan for television broadcasting, but commercial television’s development was also halted by World War II.
Businesses that owed their start to Federal Communications Commission regulations or whose progress had been hampered by monopolistic networks tended to approve FCC actions, whereas other businesses, whose operations were hampered by these regulations, tended to disapprove. For example, when the Federal Communications Commission restricted radio stations from owning newspapers in the same market, some radio stations and newspapers objected, while their competitors applauded the decision. Some members of Congress also felt that the Federal Communications Commission had exceeded its prerogatives, and they began investigations into allegations that FCC officials had assisted friends in obtaining station licenses. The hearings resulted in some changes to the FCC, but they also made the agency overly cautious in regulating businesses.
During World War II, the Federal Communications Commission attacked so-called “black” stations (those that were covertly pro-Nazi). The commission also pressured broadcasters to insert patriotic announcements into popular network programs, insisting that such propaganda was crucial to the war effort. Scholars have questioned the effectiveness of such FCC-stimulated actions, but they did help the networks remain commercially successful during wartime.

The FCC was created to deal with the development of radio. This 1945 photograph shows a broadcast in progress at an NBC studio in New York. (Library of Congress)

Changes and Controversies

After World War II, the same pent-up consumer demand that led to the rapid growth of American steel and automobile businesses also fueled the communications industries, especially the new fields of FM radio and television. In 1945, the Federal Communications Commission allocated new channels to FM stations, which used them so effectively that, by 1948, about a thousand stations were in operation. The Federal Communications Commission also allocated thirteen VHF channels to commercial television stations, and by 1948, twenty such stations were on the air, with many more applications pending.
Because of the unexpectedly high demand for licenses and because the FCC needed a just and technically efficient way of allocating channels, a freeze on the licensing of new television stations began on September 20, 1948. The freeze lasted from 1948 to 1952, during which time Federal Communications Commission technicians developed scientific standards to assign urban channels so that stations would not interfere with each other. Experts from the Federal Communications Commission and affected companies also studied competing formats for color television, and, after some missteps, the Federal Communications Commission adopted a new NTSC color standard in 1953 that met with wide approval.
Other Federal Communications Commission actions did not generate such approval. For example, in allocating channels, the FCC—strictly interpreting a law that had regulated radio—used a system of priorities that ignored population density and relied on balanced geographical apportionment. In an attempt to foster competition among ultra high frequency (UHF) stations, the Federal Communications Commission actually contributed to conditions that led to three-quarters of them losing money. Although it issued reports highly critical of television networks, the Federal Communications Commission itself was attacked for collusion with the businesses it was supposed to monitor. For instance, in 1958 the FCC commissioner had to resign after it became known that he had accepted a bribe from an applicant for a television station license. On the other hand, a success resulted when, in 1959, the FCC held hearings on the quiz show scandals, revealing how producers had rigged the results of some shows. These hearings led to regulations that prevented a recurrence of the scandals.
Mismanagement of the enforcement of regulations and conflict-of-interest scandals had tarnished the Federal Communications Commission’s reputation when John F. Kennedy assumed the presidency during the early 1960’s. He appointed Newton Minow, an idealistic young lawyer, as Federal Communications Commission chairman. Minow bravely attempted to transform television programming from the “vast wasteland” it had become, but, frustrated by FCC bureaucrats and business opponents, he returned to private life in 1963.

Late Twentieth Century Challenges

Similar problems confronted other Federal Communications Commission commissioners during the rest of the 1960’s and into the 1970’s, and they also encountered several new issues, such as the poor representation of minorities both on television programs and in the management positions of communications firms. These problems emerged alongside the development of new technologies, and Federal Communications Commission officials had to decide on ways to regulate communications satellites and cable television. New Federal Communications Commission regulations restricting alcohol and cigarette advertising on television had a direct effect on the producers and resellers of those products, and the implementation of the “fairness doctrine” caused controversy over such issues as equal time for candidates from various political parties. Groups such as Action for Children’s Television (ACT) alerted the public to the potential dangers of allowing children to watch violence on television, leading to regulations limiting the hours during which certain kinds of adult programming could be aired.
During the 1980’s and 1990’s, the FCC had a profound influence on American communications businesses, largely through their regulation of new technologies. For example, even though American Telephone and Telegraph (AT&T) had introduced the first mobile phone system in 1946, cellular telephone systems did not become commercially viable until 1983, and by 1996, these systems, regulated by the Federal Communications Commission, were serving over 100 million mobile phone customers. During the 1980’s, the Ronald Reagan administration facilitated a shift at the FCC toward more business-friendly practices than in the past. Some of these changes, such as the removal of the fairness doctrine, were controversial.
After the forced breakup of AT&T in an antitrust suit, members of Congress became concerned that the Communications Act of 1934 had become outdated in an era of new technologies and increased national and global competition in communications businesses. Some critics even argued for abolishing the FCC and returning to totally free markets. The Telecommunications Act of 1996 aimed to replace laws that were seen as antibusiness and ant consumer with laws designed to invigorate market competition, but the new laws and policies met with little success and much criticism. Some analysts diagnosed the dilemma as being due to the Federal Communications Commission’s formidable task of balancing its responsibilities toward the business community, the public, and many governmental agencies.
Throughout its history the Federal Communications Commission has been accused of capitulating to improper influence from Congress, businesses, and public-interest groups, and an ideal balance among regulations, regulators, and the regulated has never been achieved. In the twenty-first century, the multiplication of new communications technologies shows no sign of abating, making the Federal Communications Commission’s task of creating a progressive and just environment for mass communications even more challenging.

Further Reading
Barnouw, Erik. The Golden Web: A History of Broadcasting in the United States, 1933-1953. New York: Oxford University Press, 1968. This second volume of the author’s social and business history of American broadcasting focuses on radio, and the FCC’s sometimes controversial relationship with communications businesses is very much a part of the story he tells. Chronology, list of FCC laws, bibliography, and index.
_______. The Image Empire: A History of Broadcasting in the United States from 1953. New York: Oxford University Press, 1970. This third volume of the author’s series emphasizes television and traces the uneasy relationship of the FCC to politicians, businesspersons, and the public during the tumultuous 1960’s. Chronology, list of laws, bibliography, and index.
Furchtgott-Roth, Harold W. A Tough Act to Follow? The Telecommunications Act of 1996 and the Separation of Powers. Washington, D.C.: American Enterprise Institute Press, 2006. The author evaluates the FCC’s successes and failures in deregulating the telecommunications industry, revealing how difficult it is to make regulated businesses responsive to consumer interests. Extensive endnotes and index.
Inglis, Andrew F. Behind the Tube: A History of Broadcasting Technology and Business. Boston: Focal Press, 1990. This book is organized according to different communications technologies, and the author makes excellent use of his experience in various communications businesses. Glossary, bibliography, and index.
Noll, Roger C., Merton J. Peck, and John J. McGowan. Economic Aspects of Television Regulation. Washington, D.C.: Brookings Institution, 1973. According to its authors, this book presents “the first comprehensive economic analysis of the television broadcast industry, its interaction with the Federal Communications Commission, and the prospects for change.” Extensive footnotes and tables, with three appendixes and an index.
Sterling, Christopher, and John M. Kittross. Stay Tuned: A Concise History of American Broadcasting. 3d ed. Mahwah, N.J.: Lawrence Erlbaum Associates, 2002. This narrative history surveys the chief events and themes in the evolution of the American broadcasting industry, including the role of regulation played by the FCC. The third edition contains new material from the 1980’s and 1990’s. Chronology, glossary, broadcasting statistics, selected bibliography, and index.
See also: U.S. Congress; Federal Trade Commission; New Deal programs; Radio broadcasting industry; Securities and Exchange Commission; Television broadcasting industry.

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