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Localism's National Consequences

Financial fallout for networks seen as likely result of FCC requirement 5/09/2008 08:00:00 PM Eastern

A TV industry trying its best to keep up with nimble new-media competitors may have an expensive new albatross to deal with: the FCC's series of proposals to promote localism.

Among the proposals the commission offered up last December was one requiring TV stations to locate their main studios in their cities of license. But network executives fear that the industry has already spent billions on new facilities now in jeopardy if the FCC forces stations to move those facilities back to their home markets. The moves could lead to a hefty tab for those stations.

The FCC had initially adopted this home-market requirement to make sure viewers had easy access to their local station and its management. But the commission loosened the rule in 1987 during its Reagan-era broad deregulation of the industry, and further loosened it in 1998, allowing stations still more flexibility.

The FCC justified its 1998 decision by arguing that stations were more easily reachable by virtue of “mass transit and modern highways.” Today, the Internet makes the link between viewers and stations, wherever they're located, virtually instantaneous.

The FCC is also requiring stations to put their public files online, rather than make viewers visit the station to peruse them.

The commission has not indicated any definite return to the old rule, but is considering it. That alone is enough to alarm skittish broadcast executives already dealing with a down economy and the expense of the switch to digital, particularly since FCC Chairman Kevin Martin has backed other localism proposals in the media ownership review.

The FCC's more relaxed 1998 ruling permitted broadcasters to consolidate facilities, according to a veteran communications attorney intimately familiar with the issue. But while that was economical, it also proved a target for anti-consolidation activists.

“We seek comment on whether we should revert to our pre-1987 main studio rule in order to encourage broadcasters to produce locally originated programming,” the FCC posed in its Jan. 24 localism order, “and seek comment on this, and on whether accessibility of the main studio increases interaction between the broadcast station and the community of service.”

One of the companies that took advantage of the 1998 rule change was ABC, which told the FCC two weeks ago it had spent $100 million on new facilities for TV station KABC Los Angeles, locating the studio in nearby Glendale. And with no mention of grandfathering existing stations in the proposal the FCC has floated, broadcasters are worried they might have to spend millions more to move.

Disney called the new suggestion an “irrational” proposal, adding that, “Forcing KABC to change locations after its staggering investment—all made to better serve the Los Angeles community—would be arbitrary and capricious.”

Allbritton's WJLA Washington moved to new digs in nearby Roslyn, Va., just across the Potomac River, in 2002. “We did a real estate search; the FCC rules permitted us to move,” says senior VP Jerald Fritz. “If I have to move a couple of hundred yards, it's going to cost me millions of dollars. And to what end?”

Not to grandfather existing facilities would punish all the companies that built those facilities based on the old FCC rules. Would the FCC really create such an ex post facto nightmare? “I have no idea,” says the communications attorney. “I have given up thinking what they could or could not do.”

And for the stations that have moved or consolidated, “It would cost [each one] millions and millions of dollars,” he adds. “The burden would be horrendous. They would have to find a building or build one, and the one that they had built would be empty space they couldn't use.”

National Association of Broadcasters spokesman Dennis Wharton calls derailing the studio proposal a “huge priority” for the association. He points out that more than 120 House members and 28 senators have sent letters to the FCC expressing their concern, which he calls “reflective of the broad, bipartisan concern of members of Congress.”

Wharton points out that Post-Newsweek built its main studio in Miami outside the hurricane zone so that it could continue functioning in the event of a storm. “What is more important here,” he posits, “having a studio in the hurricane zone or actually staying on the air and saving lives?”

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