Growth of the Television Broadcasting Industry

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Growth of the Television Broadcasting Industry

Television signals, like other forms of wireless electronic communication, are carried by radio waves. Radio waves are a form of electromagnetic energy that travel through the air. The waves exist in a range of frequencies (repeating patterns) called the radio spectrum. Because only a limited number of frequencies can be used to carry communication signals, the U.S. government has regulated, or controlled, the use of radio waves since the early 1900s, when the age of electronic communication began.

From the time it was established in 1934, the Federal Communications Commission (FCC) has been the government agency responsible for regulating the broadcasting industry. One of the FCC's stated goals was to use the airwaves to serve the public interest. Although the term "public interest" was never fully defined by the U.S. government, it was generally taken to mean that the broadcast industry had a responsibility to benefit American society by providing informative and educational programming. The FCC also wanted to prevent any individual or corporation from gaining exclusive control of the public airwaves. Toward this end, the FCC established complicated rules for assigning frequencies to various forms of communication and giving out broadcast licenses to individual television stations. But some critics say that FCC regulations actually had the opposite effect, creating a system in which a small number of powerful networks (business organizations that create programs and distribute them to a group of connected local TV stations) controlled television broadcasting.

Early government regulation of broadcasting

The government's first effort to regulate electronic communication over the airwaves came with the Radio Act of 1912. This act allowed the secretary of commerce to issue licenses to people who wished to broadcast signals over radio waves. Telegraph operators were the only ones using the airwaves at this time, though, so the number of useful frequencies was large enough to provide for everyone who applied for a broadcasting license. (Introduced in 1835, the telegraph allowed people to exchange coded messages by transmitting a series of tapping sounds over electrical wires.)

By the 1920s, however, a new form of mass communication called radio was becoming very popular. Recognizing the trend, thousands of people applied for broadcast licenses in hopes of operating radio stations. The airwaves quickly became overcrowded, causing interference between stations broadcasting in the same geographic area. The U.S. Congress responded to this situation by passing the Radio Act of 1927. This act created the Federal Radio Commission (FRC) to regulate the issuing of broadcast licenses.

The act stated that the FRC should consider the "public interest, convenience, and necessity" when allocating, or giving out, frequencies to broadcasters. In the 1920s, large corporations had established complete control over a number of industries, like steel production and automobile manufacturing. The U.S. government wanted to prevent anyone from gaining similar control over the airwaves. In effect, the act granted ownership of the airwaves to the American people and gave broadcasters the right to use this public property through a system of licenses.

The invention of television prompted Congress to pass the Communications Act of 1934. This act updated the Radio Act of 1927 to include television and any other new communication technologies that might emerge. It created the Federal Communications Commission (FCC; see sidebar) and gave it responsibility for supervising all forms of electronic communication, including telephone, telegraph, radio, and television. Although the new agency did not attract a lot of public attention, it immediately assumed an important social role. "From the standpoint of the functioning of the American democracy, the FCC is probably the most important regulatory body in our government because of its impact on communications—the lifeline of democracy," Clark Mollenhoff declared in his introduction to FCC: The Ups and Downs of Radio—TV Regulation. The FCC took on the role of ensuring that electronic communications technologies were used to benefit the American people.

Growth of television broadcasting

The American television broadcasting industry officially started in 1941 when the FCC first recognized television as a new medium, or form of communication. The FCC established its first set of technical standards for black-and-white television sets at this time, and it also approved the first commercial (profit-seeking) television stations. Television broadcasting was suspended, or stopped temporarily, in December 1941, when the United States entered World War II (1939–45). After the war ended in 1945, however, the television industry entered a period of rapid growth. Over the next three years, the number of commercial television stations on the air increased from 9 to 48, while the number of U.S. cities with TV service increased from 8 to 23.

The Federal Communications Commission

The Federal Communications Commission (FCC) is an independent government regulatory agency. In its original form, it consisted of seven commissioners, or members, but in 1983 the number was reduced to five. FCC commissioners are appointed by the president of the United States and confirmed, or approved, by the Senate. Each commissioner is appointed to a five-year term, with one serving as the chairman of the commission.

The main functions of the FCC are: making rules to control the broadcasting industry, issuing licenses to individual stations, and settling disputes among broadcasters. "Everyone who transmits any sound or image by radio or television must first obtain a license from the FCC," William B. Ray explained in his book FCC: The Ups and Downs of Radio—TV Regulation. "It is responsible for regulating not only the broadcasting stations but all others as well, including citizens band, amateur, police and fire department, and cellular auto radios, plus many other forms of electronic communication, such as satellites, cable TV systems, and even the garage door opener down the street."

The FCC originally issued broadcast licenses for three-year terms but later extended the terms of radio and television licenses to eight years. Broadcasters who violate, or break, specific FCC regulations can be punished in several ways: they can receive a warning letter; they can be charged with fines; or they may be required to attend official hearings to determine whether their broadcasting licenses should be renewed.

By 1948 the FCC had issued broadcast licenses to more than one hundred TV stations across the country, and the applications continued to pour in. As many American people rushed to purchase TV sets, many entrepreneurs (people who start and run their own businesses) wanted to start TV stations in order to take advantage of the great new business opportunity television presented. Most of the early stations were concentrated in major cities, which provided a larger audience for programs. Since the airwaves had a limited capacity to carry television signals, however, many of these nearby stations overlapped in their coverage, creating interference (conflict between signals that creates static on TV screens).

Recognizing the problems that were developing, the FCC stopped processing applications for new broadcast licenses in September 1948. The commissioners wanted time to study the interference between stations and develop an orderly system for assigning broadcast licenses. The freeze lasted four years, until 1952. This period gave the FCC time to observe how television broadcasting was developing. New York City and Los Angeles each had seven television stations during this time, while most other major cities had one or two. Still, a number of large cities—including Austin, Texas; Portland, Oregon; Denver, Colorado; and Little Rock, Arkansas—did not yet have TV service.

The FCC and other interested parties all studied the cities where television service was available. They hoped to get an early idea about how television might affect American business and culture. The effects of TV began showing up immediately. For instance, a number of companies saw their sales increase dramatically after they began advertising on television. Hazel Bishop, a small lipstick manufacturer, increased its annual sales from $50,000 to $4.5 million through TV ads. Television also produced cultural changes. As the American people turned more of their attention toward the small screens in their living rooms, they went out less often for entertainment and pleasure. Attendance at movie theaters, sporting events, and nightclubs declined significantly in cities where people could watch television, while attendance remained the same or even increased in other parts of the country where television was not yet available. Restaurants emptied out shortly before prime-time programming (generally between the hours of 8 p.m. and 11 p.m.) came on television, while libraries noted a decline in circulation as people shifted from reading to television viewing.

The FCC establishes a framework

In 1952 the FCC established the basic framework for the American television broadcasting industry. It lifted the freeze on TV station licenses and set new regulations for assigning television channels. The rules allowed all of the entrepreneurs who had received licenses before the ban went into effect to keep them. Thus, immediately after the ban ended, there were 107 television stations broadcasting in 63 markets (see sidebar "The Nation's Largest TV Markets"). By this time, more than 15 million American households had television sets.

The Nation's Largest Television Markets

The television broadcasting industry divides the United States into markets, or geographic areas that are served by distinct groups of TV stations. The national television networks are particularly concerned about creating programs that appeal to viewers in the country's largest markets. The size of a certain market is determined by the number of TV households, or homes with TV sets, that can receive broadcasts from the area's principal TV stations. Larger markets provide advertisers with more potential viewers per program than smaller markets.

As of 2000, the top ten television markets in the United States were: New York City (with 6.8 million TV households, or 7 percent of the national total); Los Angeles (with 5 million TV households); Chicago (with 3 million); Philadelphia (2.6 million); and San Francisco (2.6 million). Combined, these five markets account for one-fifth of all TV households in the United States. The next five largest markets, in order of size, are: Boston, Massachusetts; Washington, D.C.; Dallas-Fort Worth, Texas; Detroit, Michigan; and Atlanta, Georgia. Taken together, the top ten U.S. television markets include 29 million households, or one-third of the nation's total TV market.

When the FCC resumed licensing commercial television stations, it set aside three sections of the airwaves, or bands of frequencies within the radio spectrum, for television channels. The bandwidth from 54 to 88 megahertz (MHZ, a measure of the frequency, or repeating pattern, of radio waves) was reserved for TV channels 2 to 6, and the bandwidth from 174 to 216 MHZ was set aside for TV channels 7 to 13. FM radio was assigned the bandwidth from 88 to 108 MHZ, so it was carried on frequencies located between TV channels 6 and 7. These portions of the radio spectrum are known as very-high-frequency (VHF) channels. In contrast, the third part of the radio spectrum that was originally set aside for TV channels—from 470 to 890 MHZ for channels 14 through 83—is known as ultra-high-frequency (UHF). VHF channels were technically superior to UHF channels. They sent out a stronger signal that reached a wider area and could be received more clearly by early TV sets.

Every television station that received an operating license from the FCC was assigned a specific transmitting frequency and operating power. A typical television signal requires an amount of space on the airwaves equal to about 6 MHZ of frequency bandwidth. This fact, combined with the relatively small portion of the VHF radio spectrum that the FCC gave to television, limited the number of VHF channels that could be assigned to any geographic area without creating interference. To eliminate interference, as well as to provide television coverage to smaller markets, the FCC typically allowed a maximum of three VHF stations to operate in any large city. Each of these three stations received the 6 MHZ of bandwidth needed to broadcast a television signal.

The FCC soon encountered a problem with its process of allocating, or giving out, broadcast licenses. It turned out that many individuals and companies wanted to operate TV stations in large markets, or geographic areas with large populations, so that their programs would reach bigger audiences. This made it difficult for the FCC to choose which three stations would receive the highly desired VHF channels. The FCC rules established only enough VHF outlets to provide two TV channels to 90 percent of the U.S. population. The remaining 10 percent of the population could receive three VHF channels. After factoring in the 107 existing channels, which were located haphazardly throughout the country, this left few VHF outlets available for new stations.

The FCC attempted to make up for having so few available VHF outlets by allowing other stations to broadcast on UHF channels. This plan, however, presented some problems. "UHF television signals have always been technically inferior to VHF," Besen explained. "For this reason, UHF stations compete under a great handicap with their VHF counterparts [and] often cannot survive in intermixed markets [those with both VHF and UHF stations]." In addition, most of the television sets available during the 1950s were only capable of receiving VHF channels. Although UHF converters were available that allowed a TV to receive both UHF and VHF channels, they were expensive and difficult to adjust.

When the licensing freeze was lifted in 1952, the FCC licensed 80 new VHF and 162 UHF stations. The number of VHF channels increased rapidly over the next decade, reaching 458 by 1962. Yet the number of less-desirable UHF channels decreased dramatically during this time, reaching 83 in 1962. Most of the VHF channels were affiliated with powerful national networks, while most of the UHF channels were independent commercial stations (profit-seeking stations that were not related to one of the large networks) or nonprofit educational stations operated by colleges or other organizations.

Hoping to encourage more diversity in TV stations, the U.S. Congress passed the All-Channel Receiver Act in 1962. This act required all TV sets sold in the United States to be able to receive both UHF and VHF channels. It was intended to protect UHF broadcasters and improve their position relative to the networks. Although the three main national networks (ABC, CBS, and NBC) continued to dominate the American television industry for two more decades, the legislation did have a noticeable effect. It helped the number of UHF stations increase to 874 over the next thirty-five years.

Broadcasters form networks

From the beginning of commercial television in the 1950s, the broadcast industry has been dominated by a small number of powerful networks. Television networks are business organizations that create programs and distribute them to a group of affiliated, or connected, local stations. The local stations agree to broadcast the programs according to a uniform schedule designed by the network. Networks arose because radio waves can only carry television signals for a limited distance. Before satellite technology became available, the only way to achieve transmission of a television program across the United States was to turn a large number of local stations into a network.

Another advantage of the network arrangement is that it spreads the cost of creating programs over a large number of affiliated stations. It is significantly cheaper to produce one program and distribute it to many local stations than for every local station to produce its own programs. Networks also help advertisers to reach larger audiences by placing commercials on national broadcasts rather than local programs.

The number of national U.S. television networks that developed was largely determined by FCC regulations. In the early years of television broadcasting, only VHF channels could reach large audiences. Since FCC regulations effectively limited the number of VHF channels in any given market to two or three, that was the number of networks that could establish local affiliate stations in each market. This situation led to the development of three national television networks and made it virtually impossible for a fourth network to be able to compete.

The rise of the three main networks

Sometimes referred to as the Big Three, the main television networks—ABC, CBS, and NBC—all started out as successful radio networks. In fact, some of the first television programs were simply video broadcasts of popular radio shows. One of the nation's largest radio manufacturers, the Radio Corporation of America (RCA), started the National Broadcasting Corporation (NBC) as a radio network in 1926. NBC eventually grew into two radio networks, called Red and Blue. RCA played a leading role in the development of television technology, which put NBC in a strong position for the start of television broadcasting. Under the leadership of David Sarnoff (1891–1971), NBC made its first experimental TV broadcast in 1931 and its first regularly scheduled broadcasts in 1943.

The Columbia Broadcasting System (CBS) was formed in 1927 through the merger of United Independent Broadcasters (an organization that promoted the work of classical musicians) and the Columbia Phonograph Company. During its first two years on the air, CBS struggled to compete against Sarnoff's larger radio network. CBS executives approached one of the network's largest advertisers, Sam Paley, for help. Paley was the millionaire founder of a Philadelphia cigar company. Although the elder Paley expressed doubts about investing in the network, his son William S. Paley (1901–1990) talked him into buying CBS. At the age of twenty-seven, the younger Paley became the president of the network. Over the next few years, William Paley built CBS into a respected radio network that became nearly as successful as NBC.

In the early years of television, CBS spent a great deal of time and money developing a color TV system that ultimately failed to sell. As a result, the network was much slower to apply for broadcast licenses than NBC. In fact, CBS owned just one TV station until the FCC lifted its licensing freeze in 1952. Paley then began building a strong group of local affiliate stations and luring popular radio performers to CBS programs.

The last of the three major American television networks to form was the American Broadcasting Corporation (ABC). It came into existence in 1943, after the FCC forced RCA to sell one of its two NBC radio networks. Edward J. Noble, who made his fortune by creating Life Savers candy, purchased the Blue network from RCA and renamed it ABC. As the television age began, ABC struggled to catch up to NBC and CBS in the number of local affiliates it could claim. Since FCC rules only ensured that each market would have two VHF stations, ABC found itself shut out of many markets. It finally gained the financial resources it needed to compete in 1953, when the FCC allowed ABC to merge with United Paramount Theaters. The network gradually expanded its reach across the country and used its Hollywood connections to create breakthrough programming. Still, ABC remained in third place for many years. In fact, the network would not earn its first full-season ratings victory over its rivals until the 1970s.

A fourth network actually existed for the first few years of the television age. It was owned by Allen DuMont (1901–1965), an American engineer who developed some of the technology found in early television sets. DuMont formed his own TV manufacturing company in 1931. Although most TV screens were tiny in those days, he began selling a 14-inch model as early as 1938. DuMont eventually launched his own television network, with commercial broadcasts beginning in 1947. The 1952 FCC regulations that limited the number of VHF stations forced the DuMont Network to go out of business. DuMont tried to convince the FCC to assign a minimum of four VHF stations to each of the country's 140 largest TV markets, but his arguments were unsuccessful. Unable to sign up enough local stations to compete against the Big Three, the DuMont Network went out of business in 1955.

Public concerns about commercial television

From the beginning of commercial television broadcasting, the FCC left decisions about the subject matter of TV programs mostly up to the networks. The Radio Act of 1927 had given the American people control over the airwaves and licensed broadcasters to use airwaves in the public interest. But "public interest" was not fully explained in either the Radio Act of 1927 or the Communications Act of 1934. As a result, the FCC generally allowed broadcasters to establish their own rules to guide program content.

The National Association of Broadcasters (NAB), which included representatives from the three national television networks, adopted a set of guidelines called the Code of Practices for Television Broadcasters in 1951. The code established rules for the networks to follow regarding various issues, including the number of commercials aired per hour of programming. Stations that chose to follow the rules earned the right to display the NAB's Seal of Good Practice.

Over time, though, it became increasingly clear that the code was not effective in regulating the networks' behavior. Advertisers spent nearly a billion dollars per year purchasing commercial time on television programs during the 1950s. As a result, they had a lot of influence over the networks. The advertisers were willing to do whatever was necessary to attract large numbers of viewers to the programs they sponsored. In the mid-1950s, this situation resulted in a major television scandal.

Around this time, televised quiz shows (known today as game shows) were very popular. A number of shows—such as The $64,000 Question and Twenty-One—became popular by allowing successful contestants to continue appearing for several weeks in order to earn large cash prizes. By 1957, five of the top ten television programs in the national audience ratings were quiz shows. The following year, however, the news was full of stories about quiz show contestants who claimed that the results of the quiz games were fixed. The charges eventually led to an investigation by the U.S. House of Representatives. In 1959, under questioning by members of Congress, several quiz show winners admitted that the shows' producers had supplied them with answers before they participated in the quiz game. The producers claimed that they did so under pressure from advertisers, who wanted to create drama and reward the contestants who were most popular with viewers.

The 1959 quiz show scandals caused many Americans to lower their opinions of the television networks. Some people openly questioned whether it was a good idea to entrust broadcasting to large corporations that were mainly interested in making money. All three national networks canceled their quiz shows and promised to be honest in the future, but advertisers continued to hold a great deal of influence over TV content. In fact, an FCC study found that 40 percent of all TV stations went over their own set limits on commercials shown per hour of programming. Yet the NAB largely ignored these code violations. It also let stations that were breaking rules continue to display the NAB Seal of Good Practice.

The Fairness Doctrine

Recognizing the growing concerns about commercial television, the U.S. government decided to take steps to ensure that broadcasters truly served the public interest. In 1959 Congress added an amendment to the Communications Act of 1934 that spelled out broadcasters' obligation "to operate in the public interest," and specifically "to afford reasonable opportunity for the discussion of conflicting views on issues of public importance." This law became known as the Fairness Doctrine.

In the case of news and informational programs, the FCC defined "serving the public interest" to mean presenting both sides of controversial issues fairly and accurately. The commissioners wanted to make sure that one point of view did not dominate the airwaves simply because its supporters held more financial or political power than the other side. They saw an important role for the FCC in making sure that less powerful groups, and less popular opinions, were able to gain access to the public airwaves. The Fairness Doctrine required broadcasters to devote a reasonable amount of time to coverage of controversial issues of public importance, and it also required licensees to make an effort to present different, opposing views on those issues. The FCC had the power to revoke the broadcasting license of any radio or television station that did not follow these rules.

The Fairness Doctrine received some criticism. The television networks argued that the government should not intrude into programming decisions. Broadcasters also claimed that they should be allowed to say what they wanted on their stations without the government forcing them to give equal time to opposing viewpoints. In contrast, supporters of the Fairness Doctrine said that the law actually promoted freedom of speech for members of the larger community who held opinions different from those of station owners.

The most famous use of the Fairness Doctrine came in the mid-1960s. A young attorney, John Banzhaf III, sued CBS to force the network to air anti-smoking public service announcements (a type of message that provides viewers with information). Banzhaf argued that since CBS broadcast cigarette commercials, the Fairness Doctrine required it to also show evidence that tobacco use causes lung disease. The FCC agreed with Banzhaf's position and told the networks to begin airing anti-smoking ads. The case went all the way to the U.S. Supreme Court, which ruled in favor of Banzhaf in 1969. In explaining the decision, Justice Warren Burger (1907–1995) agreed that holders of TV station licenses had a responsibility to use their position to benefit the American people: "A broadcaster seeks and is granted the free and exclusive use of a limited and valuable part of the public domain; when he accepts that franchise it is burdened by enforceable public obligations."

The public service announcements proved to be very effective in reducing cigarette smoking. In fact, in 1970 tobacco manufacturers chose not to fight the passage of legislation banning cigarette advertisements from television. The companies decided that they would rather pull their commercials off of television than face an overall decline in cigarette use due to the anti-smoking ads that would have to be aired under the Fairness Doctrine.

Educational television

The effort to make television broadcasters serve the public interest gained strength in 1961, when President John F. Kennedy (1917–1963; served 1961–63) named Newton N. Minow (1926–) as chairman of the FCC. Just a few weeks after his appointment, Minow harshly criticized the poor quality of television programming in a famous speech before the NAB's annual convention. "I invite you to sit down in front of your television set when your station goes on the air and stay without a book, magazine, newspaper, profit-and-loss sheet, or rating book to distract you—and keep your eyes glued to that set until the station signs off," he told the broadcasters, as quoted by Robert L. Hilliard and Michael C. Keith in The Broadcast Century. "I can assure you that you will observe a vast wasteland." Minow also warned the broadcasters that their licenses would no longer be renewed without a review, noting that "There is nothing permanent or sacred about a broadcast license." He threatened to take away the broadcast license of any TV station that did not meet its obligation to serve the public interest.

In addition to enforcing FCC rules such as the Fairness Doctrine, Minow made an important contribution to improving the quality of television through his commitment to educational programming. When the FCC had first begun licensing commercial TV stations, it had kept some space on the airwaves for educational stations that did not accept commercial advertisements. Such stations appeared in most large television markets over the next decade. Yet the noncommercial stations struggled to find financial support until Minow took up the cause in the early 1960s. He encouraged the government to support non-commercial stations as a high-quality alternative to commercial network television.

In 1967 Congress passed the Public Broadcasting Act, which created the Corporation for Public Broadcasting to raise funds for educational television stations and programming. The corporation established the Public Broadcasting Service (PBS) to develop educational programs and distribute them to member stations. In this way, PBS functions like a commercial TV network, but member stations pay dues to help fund program development. PBS first appeared in 1970 with twelve hours of programming per week. Three years later, President Richard M. Nixon reduced government funding for the Corporation for Public Broadcasting because he felt that some PBS news programs were unfriendly toward his administration. Since then, most PBS funding has come from individual subscribers, state and local governments, charities, and businesses.

Deregulation of the broadcast industry

Both FCC regulation and network dominance started to decline during the 1980s. Under President Ronald Reagan (1911–2004; served 1981–89), the broadcast industry saw significant deregulation (a reduction in government rules). Reagan strongly believed in limiting the government's role in business. He felt that free competition between companies would provide consumers with more choices at a lower cost. Reagan appointed Mark Fowler as chairman of the FCC in 1981. Fowler immediately began dismantling the system of regulations that the FCC had long used to guide the television industry. He also tried to get rid of the whole idea that broadcasters had a responsibility to serve the public interest in exchange for being allowed to use the public airwaves.

The deregulation of the broadcast industry in the 1980s took a number of different forms. The Communications Act of 1934 set minimum standards to ensure that people who received broadcast licenses possessed good character qualifications. This rule enabled the FCC to reject applications from people who lied or allowed prejudice to cause them to treat others unfairly. In 1985, however, the FCC announced that it would limit its analysis of broadcasters' character to whether applicants had been convicted of a felony, a type of serious crime. This decision allowed people who had been charged with crimes, including fraud and bribery, to hold broadcast licenses as long as they did not have a felony conviction.

Another way that deregulation affected television broadcasting was to eliminate requirements for children's programming. In 1973, the FCC directed broadcasters to air children's programs with educational value as well as entertainment value. It also issued guidelines regarding the number of commercials that could appear per hour of children's programming. In 1985, however, the FCC eliminated these requirements. Although Congress passed a bill that would have reinstated the rules in 1988, Reagan vetoed the legislation. In 1989, the FCC abolished the Fairness Doctrine, which meant that broadcasters no longer had to present controversial issues in a balanced way.

Deregulation also had a significant effect on the ownership of television stations and networks. Faced with increasing competition, many companies in the television industry combined their operations or purchased other companies. In 1986, for instance, a large station group called Capital Cities purchased the ABC network for $3.5 billion. Later that year, RCA and its NBC network were sold to General Electric for $6.3 billion. Similarly, William S. Paley was forced to give up control of CBS to billionaire businessman Laurence Tisch (1923–2003). Within a year of the takeover, Tisch fired two hundred people from the CBS news division. In 1987 CBS dropped to third place in the full-season network ratings for the first time in its history.

The consolidation (merging or grouping together) of the broadcast industry continued in the 1990s, as Westinghouse acquired CBS and Walt Disney Studios purchased Capital Cities ABC. Critics claimed that these changes would create a situation in which a few large companies controlled most parts of the communications and entertainment industries.

Some people watched the effects of deregulation with disbelief. Critics claimed that the quality of programming decreased as the control of television networks passed from early industry leaders to large media corporations that focused primarily on making money. They argued that, without government rules in place, the networks no longer created TV programs with the goal of informing, educating, or inspiring the American people. Instead, they operated with the main goal of attracting large audiences and advertising dollars.

The decline of network power

From the late 1940s until the late 1970s, Big Three network programming dominated viewership. During the 1980s, however, the portion of the television market held by the networks began to decline. In fact, the share of prime-time audiences held by the Big Three decreased from 91 percent in 1978–79, to 75 percent in 1986–87, to 61 percent in 1993–94.

A number of factors contributed to the decline in network audiences. For instance, the introduction of home video cassette recorders (VCRs) and pay-per-view services allowed people to watch theatrical movies on their television sets. In addition, cable and satellite TV services grew rapidly during this period, reaching more than 50 percent of American homes by 1990. These systems provided viewers with a wide variety of channels that suited their personal interests.

In 1986, the Big Three finally faced competition from a fourth national broadcast network. An Australian publisher named Rupert Murdoch (1931–) purchased a large U.S. station group called Metro Media and combined it with the Twentieth-Century Fox motion picture studio to create the Fox network. Fox started out offering only two nights of programming per week and gradually expanded to a full schedule. Thanks to hit programs such as The Simpsons and The X Files, Fox soon began defeating the Big Three in key ratings periods. The success of Fox encouraged three more Hollywood movie studios to enter television broadcasting in the 1990s. Warner Brothers launched the WB network, while Universal Studios and Paramount joined forces to form the United Paramount Network (UPN). (The WB network and UPN were scheduled to merge in the fall of 2006, forming a new network called The CW.)

Competition promised to grow even more fierce in the television broadcasting industry following the passage of the Telecommunications Act of 1996. This act marked the first successful government effort to update and improve the Communications Act of 1934. It reduced or eliminated many regulations that had separated various parts of the communications industry—including radio and television broadcasters, cable TV providers, and long-distance telephone companies—in order to increase competition and encourage the development of new services. As the FCC explained on its Web site, "The goal of this new law is to let anyone enter any communications business—to let any communications business compete in any market against any other."

The Telecommunications Act of 1996 reduced the limits on ownership of television stations, for instance, so that any individual or company could purchase multiple stations that, when combined, served up to 35 percent of the U.S. population. The act also extended the terms of radio and television broadcast licenses to eight years and made it easier for stations to renew their licenses. Finally, it allowed local stations to affiliate with more than one network, and it allowed networks to offer new program services.

Supporters of deregulation of the broadcast industry praised the legislation, predicting that it would lead to lower-cost telecommunication services for consumers. But critics claimed that the new rules would not decrease prices and instead would only give giant communications companies more power. In any case, many experts believe that the law will create widespread changes in the television broadcasting industry for many years to come.

For More Information


Baker, William F., and George Dessart. Down the Tube: An Inside Account of the Failure of American Television. New York: BasicBooks, 1998.

Barnouw, Erik. Tube of Plenty: The Evolution of American Television. New York: Oxford University Press, 1975.

Besen, Stanley, et al. Misregulating Television: Network Dominance and the FCC. Chicago: University of Chicago Press, 1984.

Bilby, Kenneth. The General: David Sarnoff and the Rise of the Communications Industry. New York: Harper and Row, 1986.

Blumenthal, Howard J., and Oliver R. Goodenough. This Business of Television, 2nd ed. New York: Billboard Books, 1998.

Gitlin, Todd. Inside Prime Time. New York: Pantheon, 1985.

Hilliard, Robert L., and Michael C. Keith. The Broadcast Century: A Biography of American Broadcasting. Boston: Focal Press, 1992.

Paper, Lewis J. Empire: William S. Paley and the Making of CBS. New York: St. Martin's Press, 1987.

Ray, William B. FCC: The Ups and Downs of Radio-TV Regulation. Ames: Iowa State University Press, 1998.


Couzens, Michael. "United States: Networks." Museum of Broadcast Communications. (accessed on June 14, 2006).

"The FCC History Project: Historical Periods in Television Technology." Federal Communications Commission. (accessed on June 14, 2006).

Messere, Fritz J. "U.S. Policy: Telecommunications Policy Act of 1996." Museum of Broadcast Communications. (accessed on June 14, 2006).