FCC opens the door for broadcast-cable combos

Sep 16, 2002  •  Post A Comment

Clearing the way for the potential merger of such media industry giants as AOL Time Warner and NBC, the Federal Communications Commission last week announced that it will make no effort to resurrect a regulation that barred broadcast-cable combinations in the same market.
“It’s finished,” said Ken Ferree, chief of the FCC Media Bureau, of the rule.
The broadcast-cable cross-ownership prohibition, which was intended to check the power of media companies, was vacated by a federal appeals court early this year on grounds that the FCC had failed to adequately justify it.
The court said the agency was free to attempt to reinstate a rule, even though that might prove difficult to do.
But Mr. Ferree told reporters last week that the FCC had decided to punt.
“We did not propose breathing new life into it,” he said.
Mr. Ferree said the agency might adopt some new limits on media industry consolidation that could affect cross-ownership. But he also said the court had handed down a mandate confirming that the rule is officially off the books.
“The rule does not exist right now,” Mr. Ferree said.
At deadline, representatives of AOL and NBC were declining comment.
But industry insiders insist that a combination of the two companies would make sense, if or when the concept of synergy comes back into vogue in the business world-and the financial markets recover.
It’s also worth noting that it was Time Warner’s lawsuit that led to axing of the regulation in the first place.
“In the long term, there will be at least one really big deal with a cable operator buying a broadcast network,” said Blair Levin, a telecom and media analyst for Legg Mason.
The agency’s decision to step on the regulation’s oxygen tube came to light when observers noticed that the rule wasn’t mentioned when the FCC voted 4-0 last week to launch a long-expected review of its other media ownership rules.
Among the regulations that are subject to the review are rules that bar broadcasters from owning TV stations reaching more than 35 percent of the nation’s TV homes, limit local ownership of TV stations and prohibit mergers between daily newspapers and radio and TV stations in the same market.
Other regulations subject to the review prohibit the Big 4 TV networks from merging with each other and affect radio ownership.
“It is long overdue,” FCC Chairman Michael Powell said of a review that many observers expect will result in substantial relaxation of the agency’s regulations.
FCC officials said the agency plans to release for comment within the next several weeks 10 studies about the impact of deregulation and consolidation on consumers and advertisers. Those studies are expected to serve as the basis for whatever action the agency takes on the rules.
Under the game plan, the agency expects to be in a position to vote on what to do about the regulations by spring.
Mr. Powell said the studies are intended to ensure that the agency’s review is “rigorous and thorough.”
But there are skeptics.
“He [Mr. Powell] has an inclination to pick facts that are extremely favorable to further deregulation,” said Gene Kimmelman, director of the Consumers Union’s Washington office.
The FCC’s lone Democrat-Michael Copps-urged the FCC to hold field hearings before taking any action, “to speak with Americans and better gauge what the reality of particular media markets is.”
Mr. Powell declined to commit.
At deadline, the National Association of Broadcasters had no comment on the agency’s decision on the broadcast-cable cross-ownership rule.
But Dan Brenner, senior VP for law and regulatory policy at the National Cable & Telecommunications Association, said, “While not a priority issue for our association, the issue is better addressed by market dynamics, and the cable-broadcast cross-ownership prohibition has outlived its usefulness.”