Regulators Opt for Compromise in Murdoch Case : Broadcasting: They will ask him to explain why he shouldn’t be forced to comply with foreign-ownership rules.

Setting aside a controversial proposal to force a costly restructuring of Fox Broadcasting Corp., federal regulators on Thursday will ask media mogul Rupert Murdoch to explain why his company should not be forced to comply with U.S. foreign-ownership laws.

The eleventh-hour compromise was reached late Tuesday after FCC Chairman Reed Hundt proved unable to persuade fellow commissioners to approve a staff proposal that would have required Murdoch’s Australian holding company, News Corp., to reduce to 25% its current 99% equity interest in eight stations that make up part of the Fox television network.

Instead, Murdoch, who is chairman of News Corp., would need to present evidence that the equity arrangement of Fox Broadcasting promotes diversity and advances other policy goals of the Communications Act of 1934. “Murdoch needs to (show) that the arrangement is in the public interest,” one FCC official said.

Murdoch is a U.S. citizen, but his News Corp. is an Australian company, and it is News Corp. that owns almost all the equity in the TV stations. The NAACP, NBC and others have contended that the commission erred when it approved the arrangement in 1985, and the FCC staff recommended last month that Murdoch be forced to restructure--which could have resulted in a tax bill of more than $100 million.

Although commissioners were still undecided Tuesday about how much time they will give Murdoch to make his case to the FCC, the order giving him an opportunity to argue his case is expected to be drafted today, and at least four of the five commissioners are expected to support it, an industry lawyer and FCC official said late Tuesday night.

The FCC has broad discretion to waive its rules on foreign ownership. And the agency briefly considered levying a fine against Murdoch for allegedly violating the foreign ownership rule.

The rule, first enacted more than half a century ago, was designed to thwart foreign interest from using U.S. broadcast properties for propaganda. The FCC has been reviewing the ownership of the eight Fox stations since the NAACP alleged the company violated FCC rules limiting foreign ownership of TV stations.

Separately, the Federal Trade Commission cleared the way for Fox to acquire two TV stations from New World Communications. The FTC found no antitrust concerns with the purchase of WBRC in Birmingham, Ala., and and WGHP in Greensboro, N.C. The deal also requires FCC approval.