Congress may nullify cross-ownership rule

The influential Senate Commerce Committee has taken a big step toward stirring up trouble for Rupert Murdoch, Sam Zell and other moguls whose portfolios include newspapers and TV stations in the same market.

The Senate committee on Thursday passed a “resolution of disapproval” that urges the undoing of the recent Federal Communications Commission ruling that loosened the longstanding newspaper-broadcaster cross-ownership ban.

The vote was largely symbolic, but it’s a sign that Beltway opposition to the controversial move, spearheaded late last year by FCC chief Kevin Martin, has not cooled during the past few months. If this sentiment continues to gain steam, it could hamper News Corp.’s efforts to acquire Newsday, adding a third Gotham newspaper to its portfolio, as well as Tribune chief Zell’s ability to hang on to the L.A. Times and KTLA Los Angeles.

In passing the resolution, the Senate Commerce Committee voted to nullify the rule, which has been in effect since March. The full Senate will likely approve the resolution, and the House is expected to do the same with its own version.

But President Bush has already promised to veto the resolution, effectively undoing the attempt to undo the FCC rule — unless, of course, supporters of the resolution could muster enough votes to override the veto.

Congress is adding a powerful voice of disapproval to a growing chorus of those unhappy with the FCC’s vote last December to allow a newspaper to own a broadcast station in one of the top 20 markets, subject to conditions.

Public interest groups are challenging the rule, arguing it loosened ownership restrictions too much. Media companies are challenging it, arguing it did not loosen them enough. Some two dozen lawsuits have already been filed, including one by Tribune, arguing that the FCC should have tossed out the ban altogether.

Sen. Byron Dorgan (D-N.D.), author of the resolution, said in a statement that the new rule “would open a gaping loophole for more mergers of newspapers and television stations across the country.”

“If we allow the FCC to relax its media cross-ownership rules, we will be doing the people of America a great disservice,” Dorgan continued. “Diverse, independent and local media sources are essential to ensuring that the public has access to a variety of information.”

Commerce Committee chairman Daniel K. Inouye (D-Hawaii) criticized the FCC for having “rushed its process. The agency rolled back its rules preventing media concentration, despite getting a cautionary light from the Congress that more public comment and more attention to localism and minority ownership was needed before barreling ahead.”

In a press conference Thursday afternoon, FCC’s Martin said the commission “is always sensitive to Congress’ concerns, but our actions were taken in the context that Congress requires us to review media ownership rules” periodically.

The Senate’s action comes as News Corp. is negotiating the purchase of Newsday from Tribune Co. for a reported $580 million. Murdoch’s conglom already owns the Wall Street Journal, the New York Post and two VHF television stations in New York, WNYW and WWOR.

The acquisition of Newsday would not involve the FCC since no broadcast licenses would be changing hands. But licenses for both of News Corp.’s Gotham TV stations are currently up for renewal, under FCC review. If News Corp. buys Newsday while the review is still under way, the commission would apply its new rule as to whether the licenses qualify for renewal with or without any divestiture. That could be trouble for News Corp., since the rule stipulates ownership of only one newspaper.

The key is whether News Corp. closes the deal on Newsday before or after the FCC decides on the license renewals. Martin gave no indication on when the agency will do that. If the deal closes after, News Corp. would not have to worry about FCC scrutiny for another eight years, when the licenses come up for renewal again.

If News Corp.’s bid for Newsday is thwarted by the cross-ownership issue, it would only add to Tribune’s headaches on the same issue. In addition to owning the L.A. Times and KTLA in Los Angeles, Tribune has cross-ownership issues (which Zell inherited from Tribune’s previous regime) in Gorham through its ownership of Newsday and WPIX.

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