FCC Chief Backs Easing Limits on Ownership

Repudiating decades-old media ownership rules, Federal Communications Commission Chairman Michael K. Powell said Tuesday that he envisions a broad rollback of restrictions, which could bring about a tidal wave of consolidation.

In some of his most candid remarks yet about the role of the FCC, Powell said he will move in early May to eliminate regulations that prevent one company from owning a newspaper and a television station in the same city.

He also said Viacom was likely to prevail in its challenge of federal rules that prevent any broadcaster from owning stations that reach more than 35% of the nation’s television viewers. The courts already have thrown out cable ownership rules that restrict any one operator to more than 30% of the nation’s multi-channel households.

Powell said newspaper-television cross-ownership rules would be the first step in a “long overdue” review process at the agency aimed at ensuring that rules are either “validated or eliminated.”

He said the FCC would issue what is known as “a notice of proposed rule making” on the issue of newspaper cross ownership at the agency’s May 10 meeting, which would be followed by the routine period of public comment before a vote by the commission. Powell needs two other votes from FCC commissioners to push through the proposed rule making, and FCC watchers believe they will be easy for him to come by.

Powell, who addressed broadcasters during a breakfast at the industry’s annual convention here, made his most provocative comments hours later, during a noon panel discussion at an A.G. Edwards investment conference that also is being held here.

Broadcasters gave Powell high marks in his first appearance before the industry.

“Our company welcomes the fresh point of view,” said David Barrett, president and chief executive of Hearst-Argyle, which has championed the elimination of newspaper cross-ownership rules but opposed the easing of the ownership caps. “We’re anxious to have clarity. Everyone is going to benefit from clarity of regulation.”

Although the ownership limits have been a lightning rod issue that has divided the industry, many executives here said they were encouraged by Powell’s promise of decisive action after a prolonged period of stagnation at the FCC that has led to uncertainty in the market and contributed to a slowdown in broadcasting stocks.

For their part, the four major networks have lobbied heavily for several years to repeal ownership caps that they claim are outmoded in an era when their market share has been eroded by cable and satellite rivals. News Corp. and Viacom have pending or completed acquisitions over the last year that have increased their station reach to about 40% each, putting them in violation of the 35% cap.

News Corp., which owns the New York Post, also has been seeking a waiver of newspaper cross-ownership rules because of its proposed purchase of Chris-Craft Industries, which would give the company a station in New York.

Fox, CBS and NBC have resigned from the National Assn. of Broadcasters, host of the convention this week, because the group opposes easing the caps.

Most of the smaller broadcasters oppose easing ownership caps, arguing that it would result in further consolidation of power into the hands of the major networks. They say networks already have too much power over the programming that local stations carry and that further consolidation could endanger the diversity of local voices.

“Our Oklahoma station will tell the Timothy McVeigh story in a much different way than the networks,” Barrett said during the panel discussion at the A.G. Edwards conference.

Companies such as Hearst, Tribune Co., New York Times and Cox, which own both newspapers and television stations, have been pushing for changes in the cross-ownership rules to consolidate their power in the local market. They have faced stiffer competition with the radio industry, which has undergone the most profound consolidation as a result of aggressive deregulation.

Tribune Co., which owns TV stations and newspapers in Chicago, Orlando, New York and Los Angeles, would be a beneficiary of the relaxed ownership rules. The company, which owns KTLA in Los Angeles, needs a waiver of the rules because of its recent purchase of Times Mirror, the parent company of the Los Angeles Times.

Powell suggested that a national cap on station ownership has little bearing on local content and that free-market forces would protect its survival. “There is a commercial value to local content,” said Powell, a free-market thinker.

At the luncheon panel, Powell said he would begin a biennial review of the agency’s rules this summer rather than waiting until the winter and that the station ownership caps would be at the top of the list. Also on the list are rules that prevent companies from owning cable systems and television stations in the same market.

Although Powell said he would not disclose his position on the caps, he said, “I think it’s important to be critical of the cap in terms of its stated purpose” of promoting a diversity of voices in a market.

He said the agency has no good way to measure whether concentration of media has affected the diversity of voices in a market and therefore has had to resort to economic measures that are better left to antitrust departments.

Earlier in the day, in a wide-ranging question and answer session with ABC newsman Sam Donaldson during an NAB session, Powell suggested that it might be better to evaluate whether media concentration is impeding competition on a case-by-case basis.

In a departure from his predecessor, William E. Kennard, who championed increased minority ownership of broadcast stations, Powell said, “I don’t care as much whether this wealth class or that wealth class has ownership.”

Powell also said cable rates have not risen enough to justify re-regulation. As competition from satellite and phone rivals grew, Congress eliminated the regulation of cable rates in the late 1990s.

In elaborating, Powell said he considered all the services the FCC oversees, including telephone, wireless, cable and satellite television, to be very reasonably priced. “More Americans have television than indoor plumbing,” he quipped. “That is value.”

Addressing one of the most pressing issues in broadcasting, Powell said he would not waive upcoming deadlines next year for the conversion of smaller television stations from analog to state-of-the-art digital technology.

Broadcasters are dragging their feet in converting to digital because they have found no way to pay for the huge investment. What is more, few people are equipped to receive the digital signal because the high cost of these sets has prevented wide-scale ownership. Powell said the FCC is studying whether to mandate that new TVs be capable of receiving digital signals as a way to jump-start the transition. But he said it is doubtful the FCC has the authority.

“Ultimately, stations will have to find business models to sustain themselves in the digital environment,” Powell said. “It’s important to keep driving toward the objective.”