Merger plan divides industry

Big owners approve of slow and steady approach; smaller ones are frustrated
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Big media companies and activists fighting consolidation may be in rare accord in endorsing the FCC's timetable for revising all broadcast-ownership rules in one fell swoop next spring, but the idea doesn't sit so well with smaller TV-group owners.

Those smaller owners are seeking FCC help in only two areas: making it easier to own two stations in a market and increasing opportunities to own broadcast outlets and a newspaper in the same market. Many believe both can be tackled easily this year.

"It's pretty frustrating to have newspaper ownership put into this hopper," says Shaun Sheehan, lobbyist for Tribune Co., which owns 23 TV stations and 13 major newspapers and wants more in-market combos.

Although the big conglomerates also would be happy if the FCC moved sooner than 2003, they are more concerned that the commission take whatever time it needs to write rules that will withstand court scrutiny and give them clear direction on what they can buy and where.

FCC Chairman Michael Powell decided to tackle all broadcast-ownership rules at once because he believes they share the same goal: ensuring diversity and competition in radio and television. "These rules are all kissing cousins in some sense," FCC Media Bureau Chief Ken Ferree told reporters last week.

Disney/ABC lobbyist Preston Padden calls the FCC's plan "eminently sensible." Fox Network officials also like the roadmap. "We support the FCC's plan to conduct comprehensive studies to ensure rules are defensible in court," said a Fox spokesman.

Public advocates opposing increased concentration are glad for the extra time to draw up evidence of consolidation's harmful effects. "There will be considerable delay before the commission can act," said Jeff Chester, president of the Center for Digital Democracy.

On the other side, Padden predicts the FCC's studies will prove consumer choice will be helped, not hurt, by allowing bigger, more efficient companies to use more resources in creating new services and content. Padden says the station groups and NAB are getting their just deserts for fighting the networks' effort to remove limits on national audience reach. It's inconsistent to argue that competition is sufficient to relax some rules but not others, he says.

Tribune has not opposed the networks' bid to raise audience limits, but Post-Newsweek has, though it has not taken an official position on relaxing the ban on newspaper/broadcast crossownership. Both companies say they staked out different positions on the ownership issues to avoid making inconsistent arguments to the FCC.

But the station groups' network rivals say the attempt at consistency is a phony veneer and notes that the NAB supports loosening restrictions on TV duopolies and newspaper crossownership.

"You can't cut the salami of public policy thinly just to meet your narrow business interests," Padden said. NAB officials declined to comment on the FC timetable.

Alan Frank, president of Post-Newsweek Stations and head of an affiliate coalition opposing an increase in the national ownership cap, said local markets deserve deregulation because audiences have many outlets to choose from. But nationally, he says, the market that counts is the tightly controlled business for network programming. "That's a crucial difference."

But Ferree says the FCC has little choice after the federal appeals court in Washington ordered the FCC to rewrite nearly all its media-ownership rules in the past year on grounds that the FCC failed to adequately justify them. "The court seems to be putting a premium on consistency between the rules."

Besides the national TV-ownership cap and limits on newspaper crossownership and TV duopolies, four other rules are up for review:

  • Concentration in local radio markets
  • Local TV/radio crossownership
  • Dual-network ownership
  • Local cable/broadcast crossownership.

Legg Mason analyst Blair Levin said the FCC's longer timetable gives big media corporations only a "marginal" edge and predicts that station groups that want to buy newspapers in their markets can do so now, betting that the ban will be eliminated before they have to sell.

But a merger that doesn't comply with current rules would likely be viewed as an attempt to force the FCC's hand, Ferree counters. "I don't think it would be warmly received."

Separately, the FCC plans to issue by year-end new limits on cable conglomerates' national subscribership share and restrictions on the number of channels their local franchises may give to programming networks they own.

To comply with the judges' orders, the FCC has embarked on a series of economic studies to back up future revisions.

The studies will examine the extent to which audiences substitute one medium for another, how advertisers view different outlets, the relationship between ownership and public-interest values such as diversity and competition, and a historical survey of the changes in type and number of media available in different markets.

When the studies are completed, the FCC plans to use the data to craft an economic model that would be used to judge whether a particular merger would harm diversity and competition. The model would be akin to the Herfindahl-Hirschman Index, which is used by antitrust regulators to estimate how changes in market share affect concentration in an industry. "We will develop a kind of HHI for diversity," Ferree said.

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