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Big victories, small gains - Broadcasting & Cable

Big victories, small gains

Court-ordered FCC rule rewrites don't necessarily mean broadcaster windfall
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In recent court cases, federal judges handed broadcasters—big and small—hope for bulking up and boosting profits. But the fine print in rulings ordering the FCC to rewrite limits on national audience reach and local TV ownership and comments by commission officials offer little reason to expect big changes in the short term.

For starters, the FCC was ordered to rewrite the 35% cap on national TV-household reach and the limits on TV duopolies—rulings granting the most relief to broadcasters—but the old rules remain in effect until the new ones are 0-written.

Plus, the FCC's efforts to justify new limits are in the earliest stages. An agency working group is only beginning to identify what type of data is necessary to back up new limits, much less setting out to collect it.

Chairman Michael Powell is embarrassed that long-standing FCC ownership rules have been struck down and is determined to prevent a similar fate for rules established under his watch. "Haste is why we lost six decisions in five years," he told reporters at NAB 2002 last week.

In addition to remanding national-reach and TV-duopoly limits, the federal appeals court in Washington has vacated rules limiting cable ownership reach and crossownership of broadcast stations and cable systems in the same market. The string of losses also weakens the FCC's power to uphold the current ban on same-market ownership of broadcast stations and newspapers.

It's clear that Powell is of no mind to wipe the rules away completely. He told ABC News' Sam Donaldson during a Q&A he believes there can be too much media consolidation: "Yes, we believe in diversity in media. Yes, we believe in diversity of viewpoints. The problem is choosing vehicles for fostering that. It's not just about efficiency and competitiveness. Otherwise, we'd just punt to the [DoJ] Antitrust Division and be done with it."

The FCC seems to have no idea how to establish rules aimed at preventing companies from getting too big, because the court seems to be forbidding "predictive judgments," said Media Bureau Chief Ken Ferree.

On broadcast ownership, the FCC is hoping for more court direction and is mulling whether to ask for a Washington court rehearing or for a Supreme Court review.

With the FCC's options unclear, Congress ultimately may step in. Again, no one seems in a hurry. Two lawmakers with broadcast experience see no problem with media concentration so far. "I don't think we've seen a time in the broadcast industry when diversity is as great as it is now," said Sen. Conrad Burns, the Communications Subcommittee's ranking Republican, to a group of broadcasters in Las Vegas last week. Rep. Greg Walden (R-Ore.), addressing the same NAB crowd, predicted the big groups will be paring off stations added in recent buying sprees. "My guess is we will see the breakup of some companies and the return of these stations to local owners."

Only a merger so big it "shocks the conscience" will prompt Congress to rein in consolidation, predicted Legg Mason analyst Blair Levin.

The delays spell bad news for small-market broadcasters. While the FCC rule barring TV duopolies in markets with fewer than eight separately owned stations blocks creation of advertising and operating efficiencies, local cable competitors are free to buy broadcast properties and pressure remaining TV competitors. "It's already a completely unfair fight," said LIN Television lobbyist Greg Schmidt, "and it looks like it's going to get a lot more unfair."

Despite small-market broadcasters' dire predictions, the FCC is most reluctant to relax rules in areas where one company could dominate a local media market. "Everybody at the commission is sympathetic," says Ferree, "but diversity concerns in small markets cut more deeply."

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