FCC to Propose Easing Broadcast Ownership Rules

The Federal Communications Commission said Tuesday that it will propose relaxing its rules on the nation’s broadcast industry, allowing for the first time in decades joint ownership of a television station and a newspaper in the same city in some situations.

The changes envisioned by the FCC could also accelerate media consolidation, clearing the way for some further mergers in the television industry.

The FCC proposal represents another step, though a limited one, in the government’s broad relaxation of rules concerning ownership of the nation’s news and information outlets. After Congress deregulated the telecommunications industry in 1996, cable, radio and television corporations underwent a radical consolidation.

Consumer advocates fear that the government is abandoning its decades-old policy of guaranteeing a diversity of voices in the media. The government maintains that diversity is protected because of a proliferation of new technologies--everything from the Internet to satellite television. Now, Americans have more choice in entertainment and news than ever.

FCC regulators could have gone even further Tuesday. FCC Chairman William E. Kennard said in an interview, however, that he wants to move “cautiously” because of the already unprecedented consolidation.

Nonetheless, the FCC’s proposals could have a broad effect on pending multibillion-dollar deals.

Under existing FCC rules, Viacom Inc. would have to sell off the UPN network, following its purchase of CBS Corp. Even with the FCC changes, it will have to divest itself of several television stations.

Fox Television Stations Inc., a division of News Corp. that has been pushing the FCC to ease TV ownership restrictions, said Tuesday that it will file a federal lawsuit against the FCC to challenge limits on broadcast ownership.

The proposal comes as Tribune Co. seeks to acquire Times Mirror Co., the parent of the Los Angeles Times and Newsday.

Tribune, the nation’s fourth-largest television station owner, has outlets in 23 cities, including Los Angeles and New York.

Tribune contends that its cross-ownership of newspapers and stations cannot be challenged until its broadcast licenses come up for renewal. In the case of its station in Los Angeles, KTLA Channel 5, that is not until 2006.

Biennial FCC Review

The proposals are part of a biennial review by the FCC of media ownership limits required since 1996 by Congress. The agency’s announcements marked the long-delayed completion of the 1998 review.

The agency said that it would seek public comment on these and one other proposed changes in the media ownership rules. After the public comment period, the agency would simply vote on the proposed changes. The agency is widely expected to approve its proposed changes. In addition to modifying “dual-network” and “broadcast-newspaper cross-ownership” rules, the FCC said it would consider redefining what constitutes a local market as it applies to radio ownership.

Kennard said that an unprecedented consolidation in the cable, radio and television industries since 1996 had made the FCC leery about easing the rules any further. “We need to move cautiously. . . . I am not prepared to allow categorically for a major daily newspaper to buy a major broadcast outlet.”

As part of the Telecommunications Act of 1996, Congress eased radio ownership limits, allowing companies to own up to eight stations in large markets. Ownership caps for television stations were increased to 35%, from 25%. Cable operators were allowed to enter the telephone business, and vice versa.

As a result, AT&T; is about to become the nation’s largest cable operator, through the purchase of Tele-Communications Inc. and the pending acquisition of MediaOne Group. CBS and Clear Channel Communications have been on a buying frenzy in radio. Both CBS Corp. and Fox have made acquisitions that take them up to the TV station ownership cap.

A further easing of station ownership rules last summer is allowing CBS and Viacom to merge. Since August, broadcasters have been able to own two TV stations in a market.

NBC Could Buy Rest of Paxson

Tuesday’s proposals would permit the four major TV broadcast networks--ABC, CBS, Fox and NBC--to own an emerging TV network like UPN, WB or PAX.

NBC now owns 32% of Paxson Communications--and will have little regulatory trouble now exercising an option to buy the remainder of the nation’s third-largest station owner in a few years.

On May 3, the FCC approved Viacom’s purchase of CBS but said Viacom would have to divest its UPN network within 12 months because of the dual-ownership rule. The two companies merged May 4.

But Viacom will run up against another rule that is forcing it to sell some TV stations, even with the new emerging network rule.

FCC regulations limit any company from reaching more than 35% of the nation’s TV audience. With the merger, Viacom reaches 41%.

Fox said the FCC is inconsistent in applying its standards for easing restrictions. “We’re dumbfounded by the piecemeal relaxation,” said Robert Quicksilver, president of network distribution at Fox.

The broadcast industry has been divided about the ownership restrictions, with smaller station owners wanting them kept intact and larger owners, such as NBC and Fox, wanting them lifted. Fox and NBC withdrew from the National Assn. of Broadcasters because of the trade association’s refusal to fight for a lifting of ownership caps.