Zell plan must leap legal hurdles

Sam Zell’s plan to keep Tribune Co. intact faces steep regulatory hurdles.

Federal law prevents a company from owning a television station and a newspaper in the same market. Tribune owns both in five markets: Los Angeles, Chicago, New York, Hartford, Conn., and Fort Lauderdale, Fla.

The federal licenses for some of the TV stations are expiring, meaning the issue is coming to a head just as Tribune is being sold.

For the sale to be completed, the Federal Communications Commission must approve the transfer of Tribune’s TV stations to Zell, who must get waivers or sell some properties to comply with the rules. Zell declined interview requests Monday, but a person familiar with his plan said he would consider selling the stations rather than the newspapers.

Consumer advocates said they would oppose the transfer of station licenses to Zell. Tribune, the owner of 23 TV stations and 11 newspapers, has a history in journalism, but Zell has little media experience.

“Zell needs five waivers and can’t make the same argument as Tribune” about his qualifications, said Andrew Jay Schwartzman, chief executive of Media Access Project, a nonprofit advocacy law firm in Washington that plans to oppose the transfer. “Tribune appears to be making the same bad bet that it made when it bought Times Mirror” -- the Los Angeles Times’ former parent -- “confident that ownership rules would change.”

In 2003, the FCC voted to abolish the so-called cross-ownership rules, but federal judges halted the decision, citing a lack of justification by the agency. The agency is reviewing the rules and could vote as early as 2008 to eliminate them. Schwartzman said the court would need to approve any such vote.

Tribune CEO Dennis J. FitzSimons said Monday that regulatory obstacles were significant but not insurmountable.

Tribune’s ownership of the Chicago Tribune and TV station WGN in Chicago had been grandfathered since the FCC enacted the cross-ownership restrictions in 1975, but that protection doesn’t extend to new owners.

Tribune has applied for a waiver for its cross-ownership in Los Angeles, where its license for KTLA-TV Channel 5 expired Dec. 1, as well as in New York and Connecticut, where licenses expire this spring. Tribune has a temporary waiver allowing it to own the South Florida Sun-Sentinel and a television station, WSFL in Fort Lauderdale.

The waivers should be granted, Tribune has contended, because the FCC is reviewing the cross-ownership restriction as part of a broader assessment of media ownership rules. With FCC Chairman Kevin J. Martin indicating that he supports eliminating the cross-ownership restriction, Tribune and other media companies are hopeful the FCC will abolish the rule.

Because of a possible change, the FCC has been expected to grant temporary waivers pending completion of its media ownership review next year.

“Generally if there is a policy that is going to address a specific question, the commission tends to keep the status quo in effect pending that policy review,” said Blair Levin, an analyst at brokerage Stifel, Nicolaus & Co. and a former FCC chief of staff.

Nevertheless, Zell, not Tribune, would have to apply for the waivers. What’s more, the FCC sent a different signal last month with its approval of the sale of Univision Communications Inc. to a group of private investors.

The new owners were given only six-month waivers to resolve cross-ownership issues in seven markets. One of Univision’s new owners, Providence Equity Partners, holds a 16% stake in Freedom Communications Inc., publisher of the Orange County Register, a conflict with Univision’s ownership of KMEX-TV Channel 34 in Los Angeles.

Levin said the decision showed that some FCC members wanted to be selective about granting waivers.

jim.puzzanghera@latimes.com