A pair of proceedings currently before the Federal Communications Commission (FCC) illustrate a puzzling incongruity. While the agency proposes in one docket to eliminate broadcasters’ ownership restrictions, in another, it explores imposing new regulations on their contractual relationships. This divergence highlights how the FCC’s flexible application of the “public interest” standard may serve the interests of incumbent firms, rather than those of consumers.
Deregulation and Re-Regulation in Parallel
As part of its 2025 Quadrennial Regulatory Review—issued in September as a notice of proposed rulemaking (NPRM)—the commission is examining whether to relax or eliminate three broadcast-ownership rules: the Local Radio Ownership Rule, the Local Television Ownership Rule, and the Dual Network Rule.
The NPRM invokes arguments that broadcasters face intense competition from streaming services, podcasts, and digital platforms. According to the NPRM, streaming services captured 44.8% of viewing time in 2024, while digital-advertising now accounts for 52% of total video-advertising revenue.
Yet nearly simultaneously, the commission issued a Nov. 19 public notice seeking comment on whether national-programming networks exert “undue influence” over their local broadcast affiliates. The notice raises concerns that:
[H]orizontally and vertically integrated companies that now own national programming networks, cable companies, and streaming platforms can overpower affiliated broadcast television stations.
It asks whether new regulations—potentially including mandatory “good faith” bargaining requirements—are warranted to protect local stations.
The Contradictory Market-Power Assessment
These parallel proceedings embody a logical contradiction. The quadrennial review assumes broadcasters lack sufficient market power to justify continued ownership restrictions precisely because they face competition from larger digital platforms. The network-affiliate inquiry, by contrast, suggests that broadcast networks possess enough leverage over their affiliates to require new protective regulations.
It requires some mental gymnastics to grasp how both conclusions can be true simultaneously. If networks and broadcasters genuinely compete in a market where Netflix, YouTube, Spotify, and Instagram command a major share of audience attention and advertising dollars, then broadcast networks would lack the market position necessary to “overpower” their affiliates through contract terms.
Conversely, if networks possess sufficient leverage to impose terms that prevent affiliates from meeting their public-interest obligations, this market power would seem to justify continued ownership restrictions, rather than their elimination.
The Public-Interest Standard as Incumbent Protection
This contradiction exposes how the FCC arbitrarily deploys its “public-interest” standard. Section 307 of the Communications Act of 1934 requires the commission to grant broadcast licenses when “public convenience, interest, or necessity will be served thereby.” This standard has provided the commission with expansive discretion for more than 90 years.
But the standard’s vagueness and breadth create problems. The quadrennial review invokes the public interest to argue for relaxing ownership rules so that broadcasters can achieve economies of scale and compete with unregulated digital competitors. The network-affiliate inquiry invokes the same public-interest standard to consider protecting affiliates from “undue influence” by their network partners.
The public interest becomes whatever the FCC declares it to be in a given proceeding, allowing the agency to respond to whichever incumbent firms make the most persuasive case for regulatory relief. This is an age-old problem, as noted by former U.S. Supreme Court Justice Stephen Breyer:
Judge Henry Friendly, in a well-known [1962] critique of agency procedures, wrote that the FCC uses “an arbitrary set of criteria whose application … is shaped to suit the cases of the moment.”
The structure of these proceedings suggests that they respond primarily to broadcaster complaints, rather than evidence of consumer harm. The network-affiliate inquiry explicitly states it arises from “[s]takeholders representing the interests of affiliated or local television broadcasters” who “have suggested that, in this time, an imbalance has developed in this relationship.” The quadrennial review similarly responds to broadcaster arguments that ownership rules prevent competitive responses to digital platforms.
Neither proceeding centers on empirical evidence that consumers suffer harm. The commission does not point to declining availability of local news, reduced programming quality, or diminished viewpoint diversity as concrete problems requiring intervention. Instead, it asks whether industry participants face contractual terms or ownership limits that they find burdensome.
This pattern reflects what George Stigler identified as regulatory capture—the tendency of regulatory agencies to serve the interests of the regulated industry, rather than the public. Broadcast networks seeking ownership flexibility and local affiliates seeking protection from contract terms both constitute incumbent firms pursuing regulatory arrangements that advantage them relative to competitors or business partners.
The Absence of Consumer-Welfare Analysis
The commission’s proceedings demonstrate a lack of attention to consumer-welfare effects. The quadrennial review asks “whether broadcast television stations are spurred by competing local stations to produce benefits for consumers (e.g., more choice, better quality, innovation, reinvestment in stations, or technology improvements).” The NPRM, however, provides no framework for measuring how much consumers value these “benefits.”
The network-affiliate inquiry focuses almost entirely on bargaining dynamics among industry participants—whether networks can “threaten to punish local broadcast TV stations” and whether affiliation agreements “impede [e] the ability of affiliates to maintain ultimate control.” These questions concern the distribution of control and revenue among networks and affiliates, not whether consumers receive better programming.
The FCC references licensee obligations to “operate in the public interest” but provides no evidence that current arrangements prevent affiliates from serving local needs, or that viewers want different programming than currently available, or that regulatory intervention would produce changes that benefit consumers, rather than simply shifting revenue among industry segments.
Why This Matters
The malleability of the public-interest standard imposes real costs. Regulatory uncertainty discourages investment by making it unclear what business arrangements will remain permissible. More fundamentally, regulation that responds only to incumbent complaints, rather than consumer welfare, is likely to produce worse outcomes for viewers.
If the FCC relaxes ownership rules in response to broadcaster demands while simultaneously restricting network-affiliate contracts in response to affiliate demands, the result would be to benefit the industry participants who successfully lobbied for their preferred rules. Consumers may gain nothing.
The commission’s approach also reinforces asymmetries between regulated broadcasters and unregulated digital platforms. Netflix, YouTube, Spotify, Amazon, and Facebook face no ownership restrictions, no content mandates, and no regulatory oversight of their contracts with content creators. They grew to dominance, while broadcasters remained constrained by decades-old rules.
The Path Forward
The FCC should base its public-interest analysis on specific measurable consumer-welfare effects and apply that standard consistently across all proceedings. Each proceeding should articulate the specific consumer harm it addresses, present evidence that the harm exists and is substantial, and demonstrate that the proposed regulatory approach would provide net benefits to consumers, rather than merely redistributing rents among industry participants.
The commission also should apply consistent market definitions across proceedings. If streaming services and digital platforms constitute relevant alternatives for consumers in the ownership review, those same alternatives should inform analysis of network bargaining power. The agency should distinguish bargaining power between contracting parties from market power over consumers—disparities in contract terms do not necessarily reflect consumer harm.
The FCC should also reconsider how it applies the public-interest standard in markets that have evolved from spectrum scarcity to broadband abundance. Americans can now access thousands of programming sources through multiple technologies. The market failures that justified broadcast regulation—spectrum scarcity limiting entry, high barriers to reaching audiences, and absence of viewer choice—have largely disappeared. The current regulations may harm consumers by preventing efficient consolidation without providing any offsetting benefits, especially if digital platforms already offer ample viewpoint diversity.
Until the FCC grounds its public-interest analysis in consumer welfare and applies that standard consistently, its broadcast regulations will continue to flip and flop with changes in regulated firms’ priorities, and with whomever is in office, rather than the consumers those regulations purport to serve.
