Company Town : Murdoch Fires Back at NBC Over Legal Challenge

Fox Inc. Chairman Rupert Murdoch--furious over rival NBC’s effort to have the Federal Communications Commission declare Fox’s ownership structure illegal--responded Monday with a combative letter calling NBC’s ploy “a blatant attempt to preserve the status quo” in broadcasting.

The two-page letter, addressed to FCC Chairman Reed E. Hundt, accompanied a lengthy legal response to NBC’s recent petition to the FCC.

NBC wants the agency to declare Fox foreign-owned and thus in violation of a federal statute that generally limits foreigners to no more than a 25% stake in U.S. broadcast stations. Murdoch also took to the phones to press his case with reporters.

The 50-year-old federal law on foreign ownership of U.S. communications properties stands as one of the few remaining restrictions on communications ownership in an increasingly global communications age. But the law is ambiguous in crucial respects and has not been widely tested.

In his letter to the FCC, Murdoch, a naturalized U.S. citizen who was born in Australia, said officials of his native country treat Fox, a unit of Murdoch’s News Corp., as an American company.

“Because I am an American and because I control News Corp., our company is deemed to be an American-controlled foreign company under Australian law and therefore, neither I nor News Corp. is eligible to hold more than a 15% interest in broadcast licenses in Australia.”

In an interview, Murdoch accused NBC of “abuse of the (legal) system” and said the network would rather “compete by using legal tricks instead of engaging in open competition” in the marketplace.

Murdoch also said he will not hesitate to raise questions about controversial past activities of NBC’s parent, General Electric Co., including allegations of fraud involving the sale of computer equipment to the government in 1988.

But NBC general counsel Richard Cotton said NBC will stick to its guns.

“No amount of (Fox) rhetoric will change the fact that more than 99% of the Fox TV stations are owned by an alien corporation,” Cotton said. “The question is, is the commission going to enforce its historical interpretation and require Fox to comply with the law?”