FCC relaxes media ownership rule

At the same time, it votes to limit cable companies' growth. Both moves are likely to be challenged in court.

By Jim Puzzanghera | Los Angeles Times Staff Writer

December 19, 2007

WASHINGTON - A bitterly divided Federal Communications Commission voted Tuesday to relax one rule banning corporate ownership of a newspaper and broadcast station in the same city and to tighten another to check the growth of big cable television enterprises.

Both votes were 3 to 2, and both new regulations are likely to be challenged in court.

FOR THE RECORD:
Media ownership: An article in Wednesday's Business section about new Federal Communications Commission rules for owning a newspaper and broadcast station in the same geographic market said waivers granted for 42 existing cross-ownership combinations removed potential hurdles to sales of those properties. Although the loosening of the rules should make it easier for sales to get FCC approval, the waivers do not automatically transfer to new owners and would be subject to review. —

Kevin J. Martin, the Republican chairman of the FCC, became a lightning rod as he pushed hard for the changes, drawing fire from Democrats who opposed the first change as a cave-in to big business and Republicans who complained that the second was an unwarranted government intrusion into the free market.

"I think there's lots of people that would want me to ride off into the sunset," Martin said after the votes. "I'm planning on staying through President Bush's term."

The cable rule, effective immediately, blocks any one provider from reaching more than 30% of the nation's pay TV market so it won't have enough clout to squeeze out new programming networks. The only cable company close to that level is Comcast Corp., which provides service to about 27% of all cable households.

David L. Cohen, Comcast's executive vice president, criticized the FCC for limiting cable company growth after having given the nod to acquisitions by telephone companies to create behemoths such as AT&T Inc. He said Comcast was "highly confident" the courts would overturn the new rule.

A federal court in 2001 invalidated a similar cap.

Martin said he wanted to recalibrate federal regulations to serve both companies and the public in the fast-changing media marketplace -- and in the case of the newspaper-broadcast rule to halt the decline of the newspaper industry.

The ban on so-called cross-ownership of newspapers and TV and radio stations has been in place for 32 years. The new rule permits cross-ownership with some limits in the nation's 20 largest media markets and allows it in some smaller markets if companies can show they will produce at least seven more hours of local news a week and prove they need to also own newspapers to stay in business.

Martin said that would provide the economic synergies needed to help newspapers deal with the loss of readers and advertisers to the Internet.

"I'm certainly not going to speculate that this alone would save the newspaper industry," he said. "But what I do think is that gathering local news . . . is a high-cost thing to do and to be able to take some of those costs and spread it out over other outlets could be important."

Industry experts said the FCC answer probably wouldn't do the trick.

"Nobody's interested in buying newspapers right now," said Edward Atorino, an industry analyst at Benchmark Co.

Tribune Co., which has struggled financially despite having such combinations in Los Angeles and four other markets, is brandished as an example showing that cross-ownership is no magic bullet for newspapers.

"The company that has probably the most cross-owned stations is Tribune, and they're in such dire straits they had to sell themselves," said FCC Commissioner Jonathan S. Adelstein, a Democrat who voted against the rule change. "This isn't the solution to the problems of the newspaper industry."

Martin pushed his plan in recent weeks despite vocal criticism from Democrats on the FCC and members of both parties in Congress that he was rushing to allow more media consolidation without giving the public enough time to comment on the proposal.

Like a bold banner headline on a routine story, the political battle has served to elevate the significance of cross-ownership for the newspaper industry.

"The politics has made it greater than Wall Street's actual concern" about the rule, said Blair Levin, an analyst at brokerage Stifel, Nicolaus & Co. "Wall Street is skeptical that the synergies that drove some of these transactions really exist."