The Cap as Hot Potato

Mass Media Bureau won't handle it, tosses it back to FCC commissioners

FCC commissioners will be deciding one of the most contentious portions of their media-ownership review without formal advice from the agency's career staff.

<p>See How They Grew</p><p>Over the years, the FCC kept upping the number of stations that one owner could hold</p>


One broadcaster can own 7 AM, 7 FM and 7 TV stations (if 2 of those stations are UHF)


The limit is raised to 12-12-12, with no UHF requirement.


12-12-12 is retained but with a 25% cap on TV: Stations can't reach more than 25% of the nation's population.


Under new Telecommunications Act, numerical limits are tossed, and TV cap is raised to 35%.


Federal appeals court in Washington says cap is "arbitrary and capricious" and tells FCC to justify cap, come up with a new number or scrap it.

In a sign of the potential difficulty that FCC Chairman Michael Powell faces in reaching consensus on the volatile issue, Media Bureau staffers are planning leave it to the five commissioners to decide whether to retain or raise the 35% cap on TV-household reach and will not make a formal recommendation.

"We have an equal amount of evidence on both sides," Media Bureau Chief Ken Ferree said last week. "At the bureau level, I'm not sure we feel there is a strong argument one way or the other."

His reluctance to make the call indicates that the TV-reach limit is among the most hotly debated issues of the FCC's media-ownership review, which also is examining local broadcast-ownership limits, restrictions on media crossownership and the dual-network rule.

Debate over the 35% cap has divided broadcasters. Broadcast networks CBS, Fox and NBC have made its elimination their top priority and, in fact, withdrew their membership from the National Association of Broadcasters because the NAB still supports the cap. So do many affiliate group owners and independent stations, which are fighting to keep the nets from getting more power that can be leveraged during affiliation-contract negotiations.

Democratic FCC Commissioners Michael Copps and Jonathan Adelstein are presumed to favor retention of the 35% limit. But, generally, bureau recommendations reflect the thinking of the FCC chairman. Given that Powell apparently won't order the bureau staff to recommend a higher number, he may be indicating a peace offering to win the Democrat commissioners' support on other parts of the ownership review.

Others in Washington, however, question whether retention can be defended in court if the staff can't conclusively endorse preservation. In February 2002, federal appeals judges in Washington ordered the FCC to remove the 35% cap unless it is "necessary" to protect the public interest. The cap was raised from 25% to 35% by the 1996 Telecommunications Act, but Congress also ordered the FCC to review all media-ownership rules every two years and remove any not needed to ensure viewpoint diversity.

Some speculate that Powell is trying to build consensus before staking out a position that can be attacked by his colleagues. By angling for a deal, he could avoid an embarrassing defeat akin to the coup that torched his plan to deregulate network access rules for local phone service.

An olive branch to Democrats may build support for a new approach that Powell is crafting that would shift the focus of ownership limits from hard local and national limits to market-by-market measures of local concentration.

Before the House Energy and Commerce Committee two weeks ago, Powell acknowledged that he has ordered agency economists to develop an economic model akin to the Herfindahl-Hirschman Index used by antitrust officials to gauge the impact of mergers (BROADCASTING & CABLE
reported the project in November 2001).

The new model, which Powell has not yet committed himself to, will be evaluated as a way to weigh measure impact of media mergers on specific markets. Powell also confirmed that concentration in local markets would become a major factor of any new media-ownership restrictions.

"Everyone knows New York City is not the same as Minot, N.D." Ferree said.

The index could be a substitute for restrictions on crossownership of different media in local markets. In March 2001, federal judges vacated the FCC ban on crossownership of local TV stations by cable operators and indicated that restrictions on crossownership of local newspapers by stations faced a steep burden to prove their legality.

Powell acknowledged last week that "the media environment will have to be partially liberalized" because of the court decisions. But the index is seen as a stop-gap to prevent the kind of consolidation that occurred in radio after Congress eliminated that sector's national ownership limit.

As for other rules, the Media Bureau is reviewing a bevy of plans for relaxing the restriction on owning two TV stations in a market. A rule barring mergers between ABC, CBS, NBC and Fox has gotten so little attention that few expect any change.