The FCC ruling was seen as a dire threat inside the imposing seven-story headquarters of the NAB in downtown Washington. The group already was fretting over new satellite TV service that was bypassing over-the-air stations to reach large backyard dishes in rural areas. DirecTV was plotting a debut, as well. "The NAB viewed satellite TV like it was the Death Star. Clearly they didn't want satellite radio to repeat the same pattern," says a former NAB lobbyist.
In waging a crusade to stop satellite radio, the Fritts forces exhorted the nation's radio station managers to contact their congressmen and tell the "truth about satellite radio."
"They got broadcasters across the country to hammer like hell on the Congress and the FCC," says the ex-NABer. The NAB literature's central talking point was straightforward: "There is no need for ‘more' radio service, no need for national radio service and no need for more competition in radio service."
Digital radio promised lower costs, higher quality and more variety. To portray this as a bad thing, the NAB turned the free-market logic of 18th-century economist Adam Smith on its head, stressing the harm satellite radio could do to the listening public.
Satellite's "purported benefits are, in the main, nonexistent, unrealistic or of minimal value," the group assured the FCC in 1995. Left free to compete, the NAB added, satellite radio would offer inferior programming and shove better-quality AM and FM service off the air. Thus competition would leave consumers worse off, the NAB said in an Orwellian conclusion: "Adding a new service would likely decrease the overall service to the public."
"Economists just don't take a lot of those arguments seriously," says Stuart Benjamin, a Duke University professor who studies broadcast regulation. "To be blunt, the NAB has power that is not commensurate with the persuasiveness of its arguments." The power comes in part from connections. Ed Fritts went to the University of Mississippi with former Senate Majority Leader Trent Lott, and they remain close; the NAB's general counsel, deputy counsel and regulatory director who led the antisatellite effort are FCC veterans. Far more power, however, comes from the fact that the NAB represents owners of just about every large and small broadcast outlet in the country--and you can't get elected if you can't get on the air.
"There are no threats," says Senator John McCain (R-Ariz.). "There's no coercion. It's just the people who represent the best way of getting your image and message across to the people in your state." This reality, he says, is why NAB is "one of the most powerful lobbying groups in Washington--and one of the most arrogant."
In 1995 lawmakers slapped down digital newcomers by passing a law backed by the NAB and the Recording Industry Association of America. Traditional radio has never had to pay royalties to performers, on the rationale that the airplay helps those same performers sell records. The Digital Performance Right in Sound Recordings Act of 1995 maintained that exemption but barred almost every form of digital radio from getting the same break. The sole type of digital broadcast that Congress kept royalty free: the NAB's baby, HD radio.
The law helped put some fledgling Internet radio stations out of business. For XM Satellite, it meant having to pay almost $20 million in royalties in two years--17% of its total revenue during that time.
By the time the FCC approved the entry of XM and Sirius in 1995,
was illusory. Regulators burdened them with an array of restraints that
strengthened old radio's grip on advertisers and viewers. The FCC's
forbade free, advertising-supported satellite stations, instead
firms to sign up paying subscribers. It reduced the number of players
four to two and cut the number of channels the satellite industry could
carry in half by shrinking its airspace from 50 to 25 megahertz.