Chair calls mass review of rules 'long overdue'

In a move that could redefine the broadcast biz and allow big media congloms to begin gobbling up newspapers, radio stations and TV outlets to their heart’s delight, the Federal Communications Commission voted Thursday to begin easing the country’s most significant ownership rules.

There’s also a chance the FCC could relax a rule blocking one company from owning two major broadcast nets, although of all the regs in the offing, this one is the least likely to be tossed.

Never before has the FCC put up so many rules for review at the same time, in part reflecting the market-friendly stance of FCC chair Michael Powell.

“It is ambitious, but I would submit it is long overdue,” said Powell, chastising previous FCC administrations for failing to refashion the broadcast rules with the advent of cable and satellite.

The Writers Guild of America West and consumer advocates didn’t agree.

“The new ownership rules should enhance free competition and move America toward greater diversity of viewpoints in the media, not toward putting the power to decide what all Americans see on television and read in the newspapers into the boardrooms of a handful of powerful individuals,” WGA West prexy Victoria Riskin said.

In Powell’s defense, the FCC is under enormous pressure from the courts to justify certain ownership regs.

There could be several outcomes when the FCC takes a final vote in the spring or summer, following an exhaustive review, which will include several studies and a public comment period. Certain rules could be scrapped altogether; or they could be recalibrated.

Changing the biz

Whatever the case, the Republican-controlled commission is widely expected to substantially change the way broadcasters do business in expanding their empires.

The broadcast regs now under official rule include:

  • The dual network rule. Enacted in 1946, the reg has kept the four major nets from coming under one roof;

  • A national cap, enacted in 1941, barring one broadcaster from reaching more than 35% of the national aud. Viacom, parent company of CBS, and News Corp., parent of Fox, are especially eager to see the threshold raised. Earlier this year, a federal court of appeals found serious flaws with the cap and ordered the FCC to justify the reg;

  • A duopoly rule blocking a broadcaster from owning multiple stations in a market. This reg, on the books since 1964, has already been somewhat relaxed, per the instructions of a separate court ruling;

  • A TV-radio cross-ownership rule restricting how many outlets a broadcaster can own in one market. Viacom has been at the forefront of the fight to soften this reg, which was adopted in 1970;

  • A 1975 rule blocking broadcasters from owning newspapers in the same major market. The cross-ownership ban already has been the subject of a separate review, and is almost certain to be scrapped entirely.

Most Wall Streeters think that will usher in a wave of consolidation with newspaper groups snapping up stations.

Powell insisted the review will be impartial and fair, and that he, too, values a diversity of voices.

A special task force he appointed will lead the charge, conducting studies and poring over public comments.

New division

Media analysts and investors believe the relaxation of rules could ultimately lead to divvying up local markets by advertising share, not industry. That is, one company might own any combination of stations, newspapers or networks, as long as it doesn’t dominate ad revenue in a given market under parameters set by the FCC and Department of Justice. It would be a media conglom’s dream.

“It’s about ad-based media. You need to put everyone on a level playing field. You can’t regulate them as separate industries,” said Harry DeMott of Gothic Capital.

The rules have been confusing. Radio and outdoor can pair up, newspapers can own radio stations but not TV.

The lone Democratic commish at the FCC, Michael Copps, called on Powell to hold hearings around the country and allow the average TV viewer a chance to participate in the debate. Copps’ former boss, Sen. Ernest Hollings (D-S.C.), will almost certainly hold his own Capitol Hill hearing on the FCC’s review.

Hollings, chair of the influential Senate Commerce Committee, is among a growing number of lawmakers alarmed with Powell’s course.

“The next 12 months may be one of the most critical periods in the history of U.S. communications,” Center for Digital Democracy director Jeffrey Chester said. “The country cannot afford another wave of consolidation designed to bolster the bottom line.”

Media stocks shrugged off news of the landmark review, falling across the board in a weak market. Shares were damped by the threat of war with Iraq and downbeat comments on the economy by Federal Reserve chief Alan Greenspan.

Viacom fell 3.82% to $41.83 and News Corp. eased 2.16% to $21.28.

Walt Disney dipped 4.2% to 0.68% and AOL Time Warner was down 5.66% to $12.50.

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