2nd-McChesney_media_ownership.pdf

The Political Economy
of International Communications
Foundations for the Emerging Global Debate
about Media Ownership and Regulation

Robert W. McChesney and Dan Schiller

Technology, Business and Society
Programme Paper Number 11
October 2003

United Nations
Research Institute

for Social Development

This United Nations Research Institute for Social Development (UNRISD) Programme Paper has been produced with the
support of UNRISD core funds. UNRISD thanks the governments of Denmark, Finland, Mexico, the Netherlands,
Norway, Sweden, Switzerland and the United Kingdom for this funding.

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ISSN 1020-8216

Contents

Acronyms ii

Summary/Résumé/Resumen iii
Summary iii
Résumé iv
Resumen vi

Introduction 1

The Mythology of Freedom of Communications in the United States 1

The Move To Neoliberalism: The US System Goes Global 4

The Global Media System 8

Global Consolidation: A Two-Stage Process 15

Telecommunications 17

Conclusion 24

Bibliography 26

UNRISD Programme Papers on Technology, Business and Society 33

Acronyms

AT&T American Telephone and Telegraph

ABC American Broadcasting Company

AOL America Online, Inc.

CEO Chief Executive Officer

EC European Community

ESPN Entertainment and Sports Programming Network

EU European Union

IMF International Monetary Fund

ITU International Telecommunication Union

KPN Koninklijke PTT Nederland

MAN Metropolitan-Area Network

NAFTA North American Free Trade Agreement

NBC National Broadcasting Company

NTT Nippon Telegraph and Telephone Corporation

NWICO New World Information and Communication Order

TNC transnational corporation

UNCTAD United Nations Conference on Trade and Development

UNESCO United Nations Educational, Scientific and Cultural Organization

USFCC United States Federal Communications Commission

USTR United States Trade Representative

WTO World Trade Organization

ii

Summary/Résumé/Resumen
Summary
In this paper, Robert McChesney and Dan Schiller examine the changing balance of public and
private control over media and telecommunications in the global political economy, patterns of
concentration and investment in the overall communication sector, and possibilities for
improving the contribution of media and telecommunications to development in different parts
of the world. The authors begin by discussing global media and then turn to
telecommunications. They conclude with some general proposals on how media,
telecommunications and new information technologies could be more systematically used to
improve the situation of disadvantaged groups and nations.

Nearly all variants of social and political theory hold that the communication system is a
cornerstone of modern societies. In political terms, the communication system may serve to
enhance democracy, or to deny it, or some combination of the two. Less commented upon,
though no less significant, the communication system has emerged as a central area for profit
making in modern capitalist societies. Much scholarly effort is therefore employed to assess the
relationship between communication as a private activity, and the broader and necessary social
and political duties that those same communication systems must perform. This is a central and
recurring theme in media studies. The dual role of the communication system, at once a pivot of
the emerging global economy and a key foundation of political democracy, constitutes a vital
tension on the world stage. According to McChesney and Schiller, it is imperative that citizens
organize to create new communication policies in to preserve and promote democratic
values.

Few industries, indeed, have been as changed by capitalist globalization as communications.
Prior to the 1980s, national media systems were typified by domestically owned radio,
television and print media. There were considerable import markets for films, television shows,
music and books, and these markets tended to be dominated by firms based in the United
States. But local commercial interests, sometimes combined with a state-affiliated broadcasting
service, were both substantial and significant. Media systems were primarily national, and often
possessed at least limited public-service features. Telecommunication monopolies were
generally under the direct control of state ministries of postal services and telecommunications,
and these unitary national networks co-ordinated international traffic flows using standard
rate-sharing formulae.

All of this began to change rapidly in the 1980s and 1990s as a transnational corporate-
commercial communication system began to be crafted and a new structural logic put in place.
The conventional explanation of globalized communication centres on technology: that radical
improvements in communication technology make global media flows and global business
operations feasible and that, in general, this is all to the good. However, this is a misleading
account. Underlying the new communication technology has been a political force�the shift to
neoliberal orthodoxy�which relaxed or eliminated barriers to commercial exploitation of
media, foreign investment in the communication system and concentrated media ownership.

iii

There is nothing inherent in the technology that required neoliberalism; new digital
communications could have been used, for example, to simply enhance public service provision
had a society elected to do so.

Two overarching principles are central to any reform platform. First, it is imperative that the
debates on these topics be widespread, open and transparent: they must be democratized. If
there is a lesson to be learned from history it is this: if self-interested parties make decisions in
relative secrecy, the resulting policies will serve the interests primarily of those who made
them. As the old saying goes, �If you�re not at the table, you�re not part of the deal�. Our job, as
scholars, as citizens, as democrats, is to knock down the door and draw some more chairs up to
the table. And when we sit at that table, we have to come educated with the most accurate
understanding of what is taking place, and of what outcomes are possible.

Second, the principle of public as opposed to corporate-commercial control must be
reaccredited, fortified and enlarged. There are several proposals that have been made to re-
enforce and democratize the media and telecommunication sectors. Although there are
significant differences in these proposals as one moves from one nation to another, they all
gravitate around a handful of ideas and principles. While it is necessary to strengthen the
sector�s independence of corporate and commercial control, at the same time it is highly
desirable to have a significant part of the sector insulated from direct control by the state.

Robert W. McChesney and Dan Schiller are Professors at the University of Illinois at Urbana-
Champaign, where they both hold joint appointments in the Institute of Communications
Research and the Graduate School of Library and Information Science.

Résumé
Dans cette étude, Robert McChesney et Dan Schiller examinent l�évolution, dans l�économie
politique mondiale, de la part que se taillent les secteurs public et privé dans le contrôle des
médias et des télécommunications, les modèles de concentration et d�investissement dans le
secteur de la communication en général et les possibilités d�améliorer, dans diverses régions du
monde, la contribution des médias et des télécommunications au développement. Ils
commencent par traiter des médias au niveau mondial pour se pencher ensuite sur les
télécommunications. En conclusion, ils énoncent quelques propositions générales sur les
moyens à employer pour que les médias, les télécommunications et les nouvelles technologies
de l�information soient utilisées de manière plus systématique dans le but d�améliorer le sort
des groupes et des nations défavorisés.

Presque toutes les variantes de la théorie sociale et politique font du système de communication
une des pierres angulaires de la société moderne. Vu sous l�angle politique, les systèmes de
communication peuvent servir à renforcer la démocratie, à la nier ou combiner les deux effets à
la fois. Moins sujets à commentaires, ce qui ne les rendent pas moins importants pour autant,
les systèmes de communication apparaissent comme l�un des secteurs les plus lucratifs des

iv

sociétés capitalistes modernes. De nombreux intellectuels s�emploient donc à évaluer la relation
entre les communications en tant qu�activité privée et les fonctions sociales et politiques plus
larges que doivent remplir les systèmes de communication. C�est là un thème central et
récurrent des études sur les médias. Le double rôle du système de communications, à la fois
pivot de l�économie mondiale naissante et pilier de la démocratie politique, constitue une
tension vitale sur la scène mondiale. Selon Robert McChesney et Dan Schiller, il est impératif
que les citoyens s�organisent pour que voient le jour de nouvelles politiques de communications
qui préservent et renforcent les valeurs démocratiques.

Peu d�industries, en effet, ont été autant transformées par la mondialisation capitaliste que les
communications. Avant les années 1980, les médias nationaux étaient représentés par la radio et
la télévision d�Etat ainsi que la presse. Il y avait des marchés considérables d�importation pour
les films, les émissions de télévision, la musique et les livres, et ces marchés étaient
généralement dominés par des entreprises siégeant aux Etats-Unis. Les intérêts commerciaux
locaux, parfois associés à un service de radio ou de télédiffusion d�Etat, étaient à la fois
substantiels et importants. Les médias étaient essentiellement nationaux et, souvent,
présentaient au moins quelques caractéristiques du service public. Les télécommunications
étaient un monopole, généralement sous contrôle direct des ministères des postes et des
télécommunications, et ces réseaux nationaux unitaires coordonnaient les flux du trafic
international à l�aide de formules standards de partage des taux.

Cette situation a commencé à changer rapidement dans les années 1980 et 1990 lorsqu�un
système de communication commercial aux mains de sociétés transnationales s�est mis en place,
accompagné d�une nouvelle logique structurelle. La technologie se trouve être l�interprétation
classique donnée pour expliquer la mondialisation des centres de communication: les
techniques de communication s�étant radicalement améliorées, elles permettent la circulation
des flux mondiaux et des opérations commerciales mondiales dans le secteur des médias et ce,
en général, pour le meilleur. Cependant, cette interprétation est tendancieuse. Les nouvelles
technologies de la communication ont été sous-tendues par une force politique�le passage à
l�orthodoxie néolibérale�qui a assoupli ou supprimé les obstacles à l�exploitation commerciale
des médias, à l�afflux des investissements étrangers dans le système des communications et a
entraîné une concentration des médias et de leurs propriétaires. La technologie n�a rien en soi
qui appelle le néolibéralisme; les communications numériques auraiten pu servir simplement,
par exemple, à renforcer le service public, si tel pays en avait décidé ainsi.

Deux principes généraux tiennent une place centrale dans toute plate-forme de réforme.
D�abord, il est impératif que le débat sur ces sujets soit aussi large que possible, marqué par
l�ouverture et la transparence et qu�il se démocratise. S�il est une leçon de l�histoire, c�est bien
que si les parties intéressées prennent des décisions dans un secret relativement bien gardé, les
politiques qui en résultent serviront avant tout les intérêts de ceux qui les ont faites. Comme le
dit un vieil adage, �si tu n�es pas à table, les affaires se font sans toi�. Notre devoir
d�intellectuels, de citoyens et de démocrates est de frapper à la porte et d�élargir le cercle autour

v

de la table et, lorsque nous nous y asseyons, de le faire avec la connaissance la plus exacte
possible de ce qui se passe et des résultats possibles.

Deuxièmement, il faut remettre à l�honneur, revaloriser et étendre le principe du contrôle public
par opposition à celui de sociétés commerciales. Plusieurs propositions ont été faites pour
renforcer et démocratiser les secteurs des médias et des télécommunications. Bien que ces
propositions présentent des variantes notables d�un pays à l�autre, elles tournent toutes autour
de quelques idées et principes. S�il est nécessaire de renforcer l�indépendance du secteur par
rapport aux sociétés et aux intérêts commerciaux, il est également souhaitable aussi qu�une
partie importante de ce secteur soit à l�abri du contrôle direct de l�Etat.

Robert W. McChesney et Dan Schiller sont professeurs à l�Université d�Illinois à Urbana-
Champaign, où ils enseignent tous deux à l�Institute of Communications Research et à la
Graduate School of Library and Information Science.

Resumen
En este documento, Robert McChesney y Dan Schiller analizan las variaciones del control que
ejercen los sectores público y privado sobre los medios de difusión y las telecomunicaciones en
la economía política mundial, las pautas de concentración y de inversión en todo el sector de las
comunicaciones, y las posibilidades de mejorar el aporte de los medios de difusión y las
telecomunicaciones al desarrollo en diferentes partes del mundo. Los autores comienzan
discutiendo los medios de difusión mundiales, para abordar a continuación las
telecomunicaciones. Concluyen con algunas propuestas generales sobre el modo en que los
medios de difusión, las telecomunicaciones y las nuevas tecnologías de la información podrían
utilizarse de manera más sistemática para mejorar la situación de las naciones y grupos
desfavorecidos.

Prácticamente todas las variantes de la teoría social y política sostienen que el sistema de
comunicaciones es el fundamento de las sociedades modernas. En términos políticos, éste
sistema puede servir tanto para potenciar como para socavar la democracia, o una combinación
de ambos. Menos comentado, aunque no por ello menos importante, es el hecho de que el
sistema de comunicaciones haya surgido como un ámbito central para obtener beneficios en las
sociedades capitalistas modernas. Como consecuencia, los especialistas han desplegado grandes
esfuerzos para evaluar la relación que existe entre las comunicaciones, como actividades
privadas, y las obligaciones sociopolíticas más amplias y necesarias con los cuales estos sistemas
deben cumplir. Este es un tema central y recurrente en los estudios sobre los medios de
difusión. El papel doble que desempeña el sistema de comunicaciones, como base de la
economía mundial emergente y como fundamento clave de la democracia política, supone una
tensión de suma importancia en el mundo. Según McChesney y Schiller, es imprescindible que
los ciudadanos se organicen para establecer nuevas políticas de comunicaciones encaminadas a
preservar y promover los valores democráticos.

vi

En efecto, pocas industrias han experimentado tantos cambios a causa de la mundialización
capitalista como la industria de las comunicaciones. Antes del decenio de 1980, los sistemas de
difusión fueron representados por la radio, la televisión y la prensa. Los mercados de
importación de películas, espectáculos televisivos, música y libros eran considerables y solían
estar dominados por empresas con sede en los Estados Unidos de América. Pero los intereses
comerciales locales, a veces combinados con servicios de difusión estatales, eran tan
importantes como esenciales. Los sistemas de difusión eran en primer instancia nacionales y a
menudo tenían por lo menos características limitadas propias del servicio público. Los
monopolios de las telecomunicaciones solían estar bajo el control directo de los ministerios
estatales de correos y de telecomunicaciones, y estas redes únicas coordinaban el flujo de tráfico
internacional usando fórmulas estándares de tarifas compartidas.

Todo esto comenzó a cambiar rápidamente en los años 80 y 90, con la creación de un sistema
comercial-corporativo transnacional de comunicaciones y el establecimiento de una lógica
estructural. La explicación convencional de las comunicaciones globalizadas se centra en la
tecnología, es decir, gracias a las mejoras radicales en la tecnología de las comunicaciones los
flujos mediáticos y las actividades comerciales mundiales se han hecho viables, y, en general,
todo esto es positivo. Sin embargo, esta consideración puede ser engañosa. La nueva tecnología
de las comunicaciones se fundamenta en una fuerza política�el cambio hacia la ortodoxia
neoliberal�que redujo o eliminó obstáculos impuestos a la explotación comercial de los medios
de difusión, la inversión extranjera en el sistema de comunicaciones y la propiedad concentrada
de dichos medios. Ningún aspecto inherente a la tecnología exigía la aplicación de una política
liberal; por ejemplo, podrían haberse utilizado nuevas comunicaciones digitales simplemente
para mejorar los servicios públicos, si la sociedad lo hubiera considerado oportuno.

En toda reforma, hay dos principios generales fundamentales. En primer lugar, es
imprescindible que se difundan ampliamente los debates sobre estos temas, y que sean abiertos
y transparentes, es decir, es precisa su democratización. Si algo nos ha enseñado la historia es
que, si las partes con interés propio toman decisiones de un modo más bien secreto, el resultado
es la creación de políticas fundamentalmente encaminadas a atender los intereses de las partes
que las hayan formulado. Según un viejo dicho, �Quien no se halla entre los comensales, no
participa en el banquete�. Nuestro trabajo como profesores, ciudadanos y demócratas es
derribar la puerta de la sala y acercar más sillas a la mesa. Y al sentarnos a la mesa, ya debemos
tener una idea muy precisa de los hechos y de los resultados que se pueden esperar.

En segundo lugar, el principio del control público, en oposición al control comercial
corporativo, debe acreditarse nuevamente, reforzarse y ampliarse. Se han formulado algunas
propuestas para fortalecer y democratizar los sectores de los medios de difusión y de las
telecomunicaciones. Aunque estas propuestas varían sumamente de un país al otro, todas ellas
giran en torno a ideas y principios concretos. Si bien es necesario que el sector dependa en
menor grado del control comercial corporativo, convendría igualmente que una parte
importante del sector no estuviera bajo el control estatal directo.

vii

Robert W. McChesney y Dan Schiller son profesores en la Universidad de Illionois en Urbana-
Champaign, donde ambos comparten cátedra en el Institute of Communications Research y la
Graduate School of Library and Information Science.

viii

Introduction

This paper addresses the changing balance of public and private control over media and
telecommunications in the global political economy, patterns of concentration and investment
in the overall communication sector, and possibilities for improving the contribution of media
and telecommunications to development in different parts of the world. The paper begins by
discussing global media and then looks at telecommunications. It concludes by making a few
general proposals that would improve the possibility that media, telecommunications and new
information technologies could be more systematically used to improve the situation of
disadvantaged groups and nations.

It is axiomatic in nearly all variants of social and political theory that the communication system
is a cornerstone of modern societies. In political terms, the communication system may serve to
enhance democracy, or to deny it, or some combination of the two. Less commented upon,
although no less significant, the communication system has emerged as a central area for profit
making in modern capitalist societies. A great deal of research is therefore carried out to assess
the relationship of communication as a private activity to the broader and necessary social and
political duties that are also to be performed by the same communication systems. This indeed
is a central and recurring theme in media studies. The dual life of the communication system, at
once a pivot of the emerging global economy and a key foundation of political democracy,
constitutes a vital tension on the world stage. It is imperative that citizens organize to create
new communication policies that will better preserve and promote democratic values.

Before doing that, it is important to debunk some of the mythology that impedes scholars from
undertaking clear analysis, and prevents citizens from being effective participants in media and
communication policy making. One of these myths is the idea of the �free press�, which
emerged most dynamically in the United States, and now, with the rise of neoliberalism and the
global media system, has increasingly become an international phenomenon. The unhelpful
assumptions about relations between government and private sector in the media underlying
this myth fog the actual power relations at hand, and therefore inhibit the capacity to move
toward establishing a more democratic and humane media system, and a more democratic and
humane society. The assumptions take what is a complex and difficult problem for any
society�how best to organize media and communication to protect core values�and turn it
into a simplistic antagonism between the state and the media. There are several reasons for this
faulty framework, but one stands out at the top of the list: the power of the dominant media
and communication corporations to defend their interests and propagate a mythology to protect
their privileged role in society. To do the mythology justice requires that the first portion of the
paper focus on the United States.

The Mythology of Freedom of Communications in the United States

The conventional view of the proper relationship of the government to the media, as it
developed in the United States, is well known: the focus is on the free press, generated by
private citizens independent of government censorship and control. Early in the history of the

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republic, this meant media organized by religious organizations or political parties, even
dissident parties out of power.1 But over the course of US history, the notion of a non-
governmental sector has come to mean that media and communication are, in effect, a function
to be provided by profit-seeking businesses competing in the marketplace. (A broader notion of
the non-governmental sector�going well beyond the corporate-dominated, profit-driven
private sector�remains in place in parts of Europe and across much of the world. To the extent
the US model is spreading, however, we may expect expanding pressure for the vision of the
non-state sector to be equated with the corporate sector.) According to conventional wisdom,
the First Amendment to the US Constitution guarantees this private freedom and as long as the
government keeps its hands off the media, the flow of information and ideas will be safe.
Without government intervention, a healthy media system will invariably rise from the rich soil
of political freedom. Let the government intervene, no matter how well intended the
intervention may seem, and alarm bells should go off in the minds of all liberal and right-
thinking people. The government and the private media are by nature in conflict. To paraphrase
the immortal words of Thomas Jefferson, if a society could have either media or government
but not both, the sane choice for free people are media.

Even this summary account allows us to isolate some fatal shortcomings. It is not that the
antagonism between the government and private media does not exist. Nor is it the very
legitimate concern about state suppression of the press. To the contrary, what is inadequate and
wrong about this conventional framing is the notion that the state plays little or no role in
establishing the communication system, and that state-media relations naturally tend to be
antagonistic, with the further implication that this antagonism leads invariably to a healthy
democratic political culture.

In fact, however, in the United States as elsewhere, the state has always been a crucial and
necessary player in the formation of successive communication systems. Not only did the
United States Postal Service constitute the young nation�s original�and highly dynamic and
expansive�telecommunication infrastructure, but postal subsidies, which predate the
revolution and are important to this day, likewise stimulated the rise of the newspaper and
magazine industries. Other federal funding flows underwrote development of stage-coach,
railroad, steamship and air transport industries in succession (John 1995). Government printing
contracts subsidized the partisan press until the middle of the nineteenth century (Smith 1977).
Libraries and public schools purchased books and created a readership for them (Gilmore 1989).
Copyright, allowing authors limited right to monopolistic control over their output in exchange
for their contributions to the public domain, was considered such an important policy that it
was written into the Constitution. Without the government-sanctioned and enforced
monopolies provided by copyright, the modern commercial communication system as we know
it would be unthinkable (Vaidhyanathan 2001).

Early on, federal authorities also accorded large grants to the fledgling private telegraph
systems of the United States (DuBoff 1984). Federal support, including funding, also helped

1 Pasley 2001; Martin 2001; Schiller 1981.

2

THE POLITIC AL EC ONOMY OF INTERNATIONAL COMMUNIC ATIONS
RO BER T W. MCCHES NEY A ND DA N SC HILLER

underwrite the extension of a unified telephone network to rural areas. When broadcasting
came along the government allocated monopoly rights to extraordinarily valuable spectrum. It
did the same in granting monopoly rights to cable television franchises a few decades later.
Although the government did not receive a penny in return for these monopoly rights, the
value of this transfer of public property to private hands is placed in the hundreds of billions of
dollars, if not more. Of the eight or nine massive media conglomerates that dominate the US
(and, increasingly, global) media system, the clear majority was built upon the superprofits and
leverage generated by having a radio, television or cable monopoly license. Once …