Tribune won’t wait for FCC

May 27, 2002  •  Post A Comment

Tribune Co. isn’t going to let a little matter like media ownership rules stand in its way-it plans to move forward if the right acquisition comes along.
Even though the Federal Communications Commission isn’t expected to get around to deciding whether to loosen those rules until sometime next year, “If we’re going to be able to compete effectively, we need to be able to consolidate,” said Dennis FitzSimons, president and chief operating officer, in an interview.
The Tribune chief said he doesn’t have a specific acquisition in mind. But he also made clear that if the right deal comes along, might do it now and seek cover in the courts.
“Unless something happens that really appears to be a strategic opportunity, and then we’ll have to decide whether we challenge the rules in a different way,” said Mr. FitzSimons, when asked whether he felt Tribune was precluded from deal-making pending FCC resolution of its ownership rule review.
If Tribune does opt for an end-run around FCC regulations, the company will hardly be blazing a new trail for the industry.
In recent years, other industry heavyweights, including AT&T, Viacom and Fox, have all been involved in major transactions that blew holes in the caps on various agency ownership restrictions. Nonetheless, the companies were allowed to hold on to all their properties under waivers or other dispensations as they pursued challenges against the ownership restrictions in the courts.
Industry watchdogs are concerned the apparent willingness of the agency to accommodate the industry end-runs is undermining the government’s regulatory credibility. “It may be business as usual, but it’s despicable,” said Jeff Chester, executive director of the Center for Digital Democracy.
“If the FCC doesn’t enforce those rules while they’re still in place, it’s difficult to understand why the FCC would believe companies would comply with new rules,” added Cheryl Leanza, deputy director of the Media Access Project.
But some sources said the industry’s dash for the courts is being propelled by economic necessity. “If broadcasters want to remain relevant, they need to grow and achieve efficiencies in order to compete in the face of the threat of competition from cable and satellites,” said Mark Hyman, VP of corporate relations for Sinclair Broadcast Group. “Is the FCC becoming irrelevant? Certainly the plodding nature of the FCC is not helping its case. If we’re going to wait for the FCC for a rewrite of the rules, it could be a long stinking wait.”
While Mr. FitzSimons said Tribune does not discuss potential company acquisitions, a Tribune source said the sort of deal Tribune would contemplate could end up combining a daily newspaper and a broadcast station in the same market in violation of an agency rule generally barring joint newspaper/broadcast ownership.
“If [the FCC] required us to divest, we would go to court,” the Tribune source said. “We think we should be able to do that. Let the court decide.”
As a result of a previous transaction, Tribune already has a waiver allowing it to jointly own the South Florida Sun-Sentinel in Fort Lauderdale, Fla., and WBZL-TV in Miami.
But much to the dismay of Tribune officials, that waiver has prevented the company for the past six years from taking advantage of what it sees as natural synergies, because joint operation of the properties has been barred.
“It may give you an indication on why we’re somewhat frustrated on this,” Mr. FitzSimons said. “We have said for a long time that the [newspaper-broadcast cross-ownership] rule is archaic. We were expecting [FCC] action on the rule before this. We’re now hearing possibly the end of the year or early ’03. We’re disappointed.”
“The biggest thing we need right now is clarity,” Mr. FitzSimons continued. “Tell us what the rules are, and then we can compete.”
The FCC declined comment.
On a related front, Sinclair last week asked a federal appeals court in Washington to vacate the agency’s duopoly rule, which bars broadcasters from owning more than one TV station in many markets.
In response to a challenge from Sinclair, the court last month held that the agency’s regulation was “arbitrary and capricious” and ordered the FCC to reconsider the rule.
Sinclair wants the court to ax the rule, or at least set a deadline for FCC action.
Earlier this year, the federal appeals court directed the FCC to review its rationale for a rule that bars broadcasters from acquiring stations reaching more than 35 percent of the nation’s TV households. The same ruling vacated an FCC regulation barring cable operators from acquiring broadcast stations in their service areas.
Last year, the court also ordered the FCC to reconsider a rule barring cable operators from owning systems with more than 30 percent of the nation’s multichannel TV subscribers.
Analysts expect the rules to be axed or relaxed. But to the consternation of deregulation fans, agency officials have said the review is unlikely to be completed before next year.