FCC Leans Toward 'Diversity Index'No big cap expansion, but crossownership protected 4/20/2003 08:00:00 PM Eastern
When the FCC issues new ownership rules, media companies with broadcast holdings will face specific limits on the number of stations, newspapers and other media that they can own in individual markets, Washington sources say.
FCC Chairman Michael Powell's decision to set numerical limits rather than rely on a case-by-case model for approving each media merger apparently heads off one potential dispute among the FCC's Republican majority and alleviates a major threat to his June 2 deadline for revising media-ownership rules.
At the NAB convention in Las Vegas two weeks ago, Powell again seemed to be butting heads with fellow GOP commissioner Kevin Martin, this time over the so-called "diversity index" that the FCC staff is devising to help determine when media mergers cause unacceptable concentration in a local market. Last week, though, the two commissioners were coming to terms, Washington sources say.
Resolution would be welcome relief to broadcasters, especially TV-station groups that also own newspapers. Many executives fear that use of the diversity index would eliminate opportunities for many mergers even if the FCC repeals its outright prohibition on crossownership between broadcast stations and local newspapers as widely expected.
Media companies seeking to add TV/newspaper combos, particularly those in midsize and small markets, appear relieved. One company likely to benefit is Media General, the Richmond, Va.-based company that owns and operates newspaper/TV combos in six Southeastern markets. It plans to pair more outlets among its 22 daily newspapers and 26 TV stations if the current restriction is eliminated.
Media General is so eager for relief on crossownership that it has asked the FCC to vote on the provision individually if debate over other rule changes delays a vote on the entire package beyond June 2. The company also voiced concerns about the diversity index in meetings with FCC staff last month.
Also pushing hard for relief on newspaper crossownership are Tribune, Belo, Gannet, Cox, Hearst-Argyle and Dispatch Broadcast. NAB and the Newspaper Association of America also have made relaxation a top priority.
With a GOP majority likely on newspaper crossownership, that leaves changes to the national cap on TV-household reach as the major hurdle to Powell's deadline. With the NAB opposing an increase in the 35% cap on one company's share and the major broadcast networks supporting its expansion, the issue has divided Republicans in Congress, and more than a slight increase is unlikely.
The diversity index, still being designed by FCC staff, is an econometric model that would be used to gauge market concentration and possible anticompetitive effects of media concentration. The index will be akin to the Herfindahl-Hirschman Index used by antitrust regulators to estimate how mergers affect industry concentration. The FCC's measure would account for availability of separately owned media in a market, including broadcast, print and the Internet.
The prospect of set numerical limits is a bit of a compromise by Powell, who has long questioned whether what he calls "prophylactic" restrictions are the right tool for reviewing mergers when each market has unique characteristics. To alleviate a standoff, he has assured Martin that the diversity index won't be used on a merger-by-merger basis as HHI is used by the Justice Department and the Federal Trade Commission. Instead, the index will be used to provide the economic underpinning for new limits on the number of TV and radio outlets that can be owned in markets of various size.
The FCC's current limits, which in addition to the TV/newspaper-crossownership ban, also include restrictions on TV duopolies and local radio/TV crossownership, face elimination by the court because they were not justified economically in the eyes of judges.
Despite his harsh critique two weeks ago, Martin indicated last week that he has no problem employing the index to design easy-to-follow limits on what one company can own in a market. He also was pleased by Powell's assurance that the new limits will create opportunities for companies seeking to establish newspaper/TV combos.