Station break at Viacom

Co. will take court action if FCC persists

WASHINGTON — Viacom has filed an emergency petition with the FCC saying it shouldn’t have to sell off valuable TV stations in order to fulfill the terms of its merger with CBS.

The commission had insisted on the divestitures as a condition of approving the merger, which closed last spring. The combined company’s television stations reach more than the maximum 35% of the country allowed by federal regulations and the FCC has given Viacom until May 4 to pare down. But, the company argued in a 33-page filing, the cap may not be applicable for long given a recent appeals court ruling that struck down a similar reg for the cable industry.

Court action threatened

Viacom threatened to use the courts itself if the FCC persists and urged the agency to suspend the deadline until the issue is resolved.

Such a move “would merely preserve the status quo for a limited period of time and avoid forcing Viacom to divest stations which it may have a legal right to own,” the petition stated. “If the commission does not act on this emergency request by March 16, 2001, Viacom intends to seek interim relief from the D.C. Circuit.”

Neither FCC staffers nor Viacom execs could be reached for comment Monday evening regarding the petition, a copy of which was obtained by Daily Variety.

A court ruling several weeks ago struck down a 30% federal cap on national cable ownership, calling it unconstitutional, as well as “capricious” and “arbitrary.”

Likewise, Viacom contends that the broadcast cap infringes on its First Amendment rights by forcing it to abandon lucrative markets and sell off broadcast interests worth millions of dollars.

“It is extremely unlikely that Viacom could re-purchase these facilities, or any other equivalent facilities in the same market, in the future. Each station is highly unique, with differing technical characteristics — as well as differing audiences that are carefully cultivated and represents significant goodwill. Each market is unique as well,” petition stated.

Already challenged

The FCC broadcast cap is already being challenged in court by Viacom and other major TV networks. If the court upholds the 35% cap, Viacom agreed, then the clock can resume ticking for divestitures.

Viacom’s $46 billion merger with CBS would give it a 41% share of the national TV audience, according to FCC calculations, between CBS’ 16 and Viacom’s 19 owned and operated stations.

The petition opens the door for other congloms to seek at least temporary relief from the cap as well. News Corp., for instance, has agreed to buy station group Chris-Craft, which would put it well over the 35% limit. It had been prepared to sell or swap stations (perhaps with Viacom) in order to comply with the existing rule.

Critical test

The filing also marks a critical challenge for the new Republican administration in Washington and for new GOP FCC chair Michael Powell in particular. Powell is an ardent supporter of deregulation, saying the marketplace, not ownership caps, should be left to figure things out

But the ownership cap is a contentious issue even within the broadcast industry. Small and medium-sized station groups say its repeal will allow the major networks and their O&Os to operate as virtual monopolies. Viacom’s petition echoes the argument commonly used by congloms for all types of consolidation — that the media landscape is highly competitive, making it unlikely that any one company could rule the roost.

(Jill Goldsmith in New York contributed to this report.)

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