WASHINGTON — Viacom chairman Sumner Redstone and CBS chairman Mel Karmazin dropped by the FCC on Wednesday acccompanied by a flank of lobbyists and lawyers in an effort to sell their $35 billion merger to regulators.
It is common when a large deal is announced for top execs to stop by the Federal Communications Commission to pay a courtesy call on regulators as a first step toward a formal filling with the agency. During this initial meeting the execs and regulators do little more than exchange pleasantries.
The honchos also met with Hill leaders including House Commerce Committee Chairman Tom Bliley (R-Va.) and the ranking Democrat on the Senate Commerce Committee, Sen. Ernest Hollyings (D-S.C.)
Asked if he was encouraged by his meeting with FCC Chairman Bill Kennard and other commissioners, Redstone replied:
“How can you be encouraged? We said hello and goodbye.”
Commissioner Gloria Tristani offered a little more information about the meeting. She said execs repeated their view that current ownership restrictions should be relaxed but they also made it clear, according to Tristrani, that ultimately they will comply with whatever rules are in place. “They did tell us that they want the deal to go through and that they will comply with all the rules,” Tristani said.
FCC chairman William Kennard issued a simple statement Wednesday that pointed out the deal is not yet on file at the FCC. “Once it is, the essential question will be: How will this merger accelerate delivery of digital age services to all consumers?”
Hurdles to overcome
Before Viacom and CBS can merge they must first overcome two significant regulatory barriers. The first problem is that the combined television stations of the two companies have a national audience coverage of 41% –putting it over the 35% national audience cap. Second, FCC rules prohibit a major network, such as CBS, from owning another network.
The fact that Viacom and CBS both own stations in six markets is not expected to be a problem after last month’s decision by the FCC to allow broadcasters to own up to two TV stations in the same market. However, so-called TV station duopolies are only permitted in markets that have at least eight independently owned TV stations. In two markets, Pittsburgh and Detroit, there are only enough individually owned TV stations to allow one duopoly. At least in those markets, there is the potential that Viacom or CBS would have to spin off a station if another company beats them to the FCC with a request to own two stations.
Unless Karmazin and Redstone can convince the FCC to relax the cap on station ownership or networks, the new Viacom is expected to sell off a few stations and reduce, or eliminate, its stake in UPN. In addition to the FCC, the deal must also be cleared by antitrust regulators at the Federal Trade Commission or the Justice Department. One source close to the deal expects that the Justice Department will be given the job of rewiewing the deal.