FCC Relaxes Limits on Media Ownership

The federal government’s top media regulators on Monday loosened decades-old restraints on the broadcast industry, boosting the ability of companies to navigate rapidly changing markets but raising fears about their control of information and entertainment.

In a bitter split along party lines, the Republican majority of the Federal Communications Commission -- led by Chairman Michael K. Powell -- voted 3 to 2 to relax rules that prevented TV stations from merging with local newspapers and restricted how many stations one company could own, both nationally and locally.

The broad revision of ownership rules clears the way for further consolidation by the biggest media conglomerates, enhancing the economic prospects of companies such as News Corp., Viacom Inc. and Tribune Co., parent of the Los Angeles Times.

But the vote drew threats of congressional countermeasures and protests from critics as diverse as the conservative National Rifle Assn. and the liberal National Organization for Women. And the FCC’s review of media ownership rules leading up to Monday’s vote generated enough response last week to crash the agency’s telephone network.

“If you listen to the spin, you’d believe there’s going to be a massive buying opportunity,” Powell said, in a Monday interview, about the fear of new mega-mergers. “I don’t think it’s going to be nearly the level that some people are expecting.”

In the near term, media consumers are likely to experience few changes in the programs they watch and hear or the newspapers they read. In time, however, companies are likely to create combinations that might find a newspaper and a TV station sharing stories and resources. Or conglomerates may buy more local stations and fill their schedules with shows that have aired on the company’s cable channels. Companies that own multiple TV stations in a single city also are likely to gain more leverage with advertisers, perhaps by offering ad packages on multiple outlets.

In Los Angeles, Tribune willbe permitted to continue its ownership of both the Los Angeles Times and KTLA Channel 5. Without Monday’s action, the company would have been required to divest itself of one of those properties by 2006, when the station’s broadcast license comes up for renewal.

The new rules will take effect early this summer.

Blair Levin, a former FCC chief of staff who is now a financial analyst for investment firm Legg Mason, predicted “an awful lot of station swaps and trades fairly immediately.”

Some broadcasters had argued vigorously that a relaxed regulatory environment was needed to protect free television in an era of 500-channel cable and satellite TV outlets. A spokesman for Viacom, which had lobbied to lift all FCC media rules, called the vote a “first step” and said it would “help ensure that free, over-the-air broadcasting continues to be available across America.”

Under the new rules, broadcasters are permitted to own stations reaching 45% of the nation’s viewers, up from 35%, allowing TV networks to raise the number of wholly owned stations that carry their shows. Without the reforms, Viacom, which owns CBS, and News Corp., which owns Fox, would have been required to sell properties, because each owns stations covering nearly 40% of national viewers.

But the FCC retained a rule that prevents mergers among the four biggest TV networks -- ABC, CBS, Fox and NBC.

Some of the most significant changes apply to TV ownership in local markets. In the nation’s nine largest cities, including Los Angeles, one person or company may now own three TV stations, up from two.

In all but the smallest markets, moreover, the new rules repeal a 28-year-old ban on cross-ownership of TV stations and newspapers. Such combinations are still forbidden in markets with fewer than four TV stations.

Rules restricting local mergers of radio and TV stations also were relaxed.

The FCC did not alter caps that bar companies from owning more than eight radio stations in markets where 45 or more exist. But the agency will include public radio stations in their market count and redraw local radio markets -- changes aimed at correcting anomalies that permitted radio behemoth Clear Channel Communications Inc. to own all the stations in one city.

The rules generally will not require any broadcaster to shed any holdings, however.

In theory -- though no such plan exists, and this combination would be unlikely -- the net effect of the changes would permit a single company to own the following media outlets in Los Angeles: the Los Angeles Times, KTLA, KCBS Channel 2, KCOP Channel 13, Time Warner Cable, KIIS-FM, KBIG-FM, KLOS-FM, KOST-FM, KROQ-FM, KNX-AM, KFWB-AM and KABC-AM.

The FCC acted under a federal law that requires it to review media ownership rules every two years. The agency also was under a mandate from the U.S. Court of Appeals to justify the need for some of its media ownership rules.

Civil rights activists Jesse Jackson and Dick Gregory were among protesters who gathered outside the FCC’s Washington headquarters Monday and derided the changes. The FCC was inundated with more than half a million e-mails, faxes and phone calls in the months before Monday’s vote.

After the vote, even some broadcasters blasted the FCC.

“In adopting a national television ownership cap of 45%, the Federal Communications Commission has taken a giant step back from our nation’s commitment to localism -- the principle that local programming decisions should be made in the best interests of the local community,” said Alan Frank, president of Post-Newsweek Stations and chairman of Network Affiliated Stations Alliance, a trade group that represents several hundred TV network affiliated stations.

The FCC’s two Democrats, Michael J. Copps and Jonathan S. Adelstein, sided with opponents, saying the rule changes would reduce the diversity of viewpoints and have a chilling effect on local news reporting.

“This is the most sweeping and destructive rollback of consumer protection rules in the history of American broadcasting,” Adelstein said.

Powell, son of Secretary of State Colin L. Powell, said he was disappointed that he was unable to win over either Democrat and was puzzled by their refusal to support any of Monday’s decisions, including the retention of the dual-network rule and tightening of the local radio rule. “At some point, this issue became very political,” Powell said.

Just hours after the FCC meeting ended Monday, a bipartisan group of U.S. senators said they had the votes to pass a measure, introduced by Sens. Ted Stevens (R-Alaska) and Ernest F. Hollings (D-S.C.), to retain the 35% national TV viewer cap.

“A lot of Republicans ... probably most of the Republicans in Congress, would not agree with this decision,” said Sen. Trent Lott (R-Miss.).

A bill similar to Stevens’ has been introduced in the House.

Sen. John McCain (R-Ariz.) has summoned all five FCC commissioners to a Senate Commerce Committee meeting on Wednesday to explain their actions. But McCain and his counterpart in the House, W.J. “Billy” Tauzin (R-La.), so far have not joined efforts to roll back the rule changes. And many political experts doubt whether opponents can muster the Capitol Hill votes needed to reverse the agency.

The latest rules are almost certain to be challenged in court. In the last two years, the U.S. Court of Appeals has thrown out or asked for modifications of five of the FCC’s media ownership rules, saying the agency failed to adequately justify them.

Richmond, Va.-based Media General has said it may sue because the relaxation of the newspaper-TV rule failed to provide relief to the small markets where it owns properties. Experts say small and local markets are likely to be a major battleground.

“In the end, this isn’t about the national voices because, let’s face it, there are a lot of them out there,” said Robert J. Thompson, founder of the Center for the Study of Popular Television at Syracuse University.

“It’s in the local markets where this is really going to be felt the most. There are a lot of towns out there now that feel lucky if they have one local radio talk show left.”

For Powell, Monday’s vote was something of a political comeback after the embarrassing defeat this year of his telephone deregulation proposal -- and a triumph for his belief that new regulations are necessary.

“I’m proud of what we did,” he said Monday. “But I don’t feel like it’s a vindication. I’m not gloating. I’m not a politician. I’m a regulator.”

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A New View

Five key media ownership rules change with the Federal Communications Commission’s Monday vote, and one remains the same.

National TV Ownership Cap

Old

No company may own TV stations reaching more than 35% of the nation’s viewers.

New

No company may own TV stations reaching more than 45% of the nation’s viewers.

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Rule

Local TV Ownership Limit

Old

One company can own two TV stations in the same market if only one ranks in market’s top four and there are eight remaining separately owned stations after the merger.

New

One company can own two TV stations in same market if only one ranks in the market’s top four and the market has at least five stations. One company can own three TV stations in the same market if only one ranks in the market’s top four and the market has at least 18 stations.

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Rule

Local Broadcast-Newspaper and Local TV-Radio Cross-Ownership Limits

Old

Newspaper: One company may not own a daily newspaper and TV or radio station in the same market.

Radio: One company may own a TV station plus one, four or seven radio stations, depending upon the number of “voices” in the market. Voices include TV, radio, newspaper and cable outlets. Replaces two cross-ownership rules.

New

* Cross-ownership bans in markets with nine or more TV stations are eliminated.

* In markets with four to eight TV stations, a company can own one of following three combinations:

-- A newspaper, a TV station and up to half of the maximum number of radio stations allowed in a market.

-- A newspaper and the maximum number of radio stations allowed in a market.

Two TV stations and the maximum number of radio stations allowed in a market.

* In markets with three or fewer TV stations, no cross-ownership is allowed, but a company may seek a waiver of the ban if it can show that the TV station doesn’t serve the area covered by the radio station or the newspaper.

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Rule

Local Radio Ownership Limit

Old

One company may own eight stations in markets with 45 total; seven stations in markets with 30-44 total; six stations in markets with 15-29; five stations in markets with 14 or fewer. Radio markets are defined by using Nielsen ratings.

New

No change in the caps, but markets now will be defined by an adjusted Arbitron system to correct past anomalies.

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Rule

Dual-Network Ban

Old

Mergers prohibited among top four networks ABC, CBS, Fox and NBC.

New

No change.

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Source: Federal Communications Commission

Los Angeles Times