Washington-Despite the Internet explosion and the booming direct-broadcast satellite industry, the Federal Communications Commission made a number of moves last week indicating that it believes most media-ownership restrictions are needed to promote competition.
Although the FCC agreed to relax some rules in varying degrees, it declined to lift the ban on the common ownership of a TV station and a cable system in the same market.
The ban-adopted in 1970, when Richard Nixon was president-was designed to prevent cable systems from discriminating against TV stations they didn't own and to block TV stations from retarding the growth of the nascent cable industry.
Given that today's FCC rules require mandatory carriage of local TV stations and prohibit signal-degradation and channel-positioning mischief, the cable industry urged the commission to repeal the cross-ownership ban, calling it a regulatory fossil from a bygone era.
"It still seems to us that this is something where the policies that animated this back in the early 1970s don't really apply in the multichannel-video world of today in most markets," said Daniel Brenner, senior vice president of law and regulatory policy at the National Cable Television Association.
The FCC retained the ban as part of a wide-ranging biennial review of its broadcast-ownership rules, as required the under the Telecommunications Act of 1996. In the law, Congress lifted the statutory ban on cable and TV-station ownership, but gave the FCC discretion to keep a similar rule on the books.
The FCC put out a press release that briefly described its actions. In a one-paragraph statement, the agency said the rule was necessary to further the "goal of competition in the delivered video-programming market," adding that 67 percent of households subscribe to cable.
While acknowledging that current law prohibits cable operators from engaging in discriminatory conduct, the FCC said, "Other forms of discrimination exist that could degrade competition."
"We haven't seen the text yet-that's our problem. It's hard to determine why they decided to keep the rule from this little paragraph," said Frank Lloyd, a cable attorney with Mintz Levin Cohn Ferris Glovsky and Popeo P.C.
The FCC also voted to retain a rule that prohibits one broadcasting group from reaching more than 35 percent of TV households.
This was one of the most contested matters, with NBC and Fox Broadcasting Co. leading the cause for repeal over the objections of the National Association of Broadcasters, an organization dominated by network-affiliate stations.
The FCC said it would consider relaxing a rule so that CBS Corp., NBC, ABC Inc. or Fox could combine with either The WB Television Network or United Paramount Network, and it would consider allowing the common ownership of a broadcaster-either radio or television-with a local newspaper, especially in large markets.
"A combination between a single radio station in a large market and a small, suburban newspaper might raise fewer concerns than other potential combinations," FCC chairman William Kennard said in a statement.
The agency said it would not let any two of the "Big Four" networks combine.
Support for the bulk of the FCC's actions came from the agency's three Democrats-Kennard, Susan Ness and Gloria Tristani. Tristani said she opposed allowing any of the Big Four networks combine with UPN or The WB, though.
Relaxation of the dual-network rule could allow Viacom Inc. to retain both UPN and CBS. In approving Viacom's purchase of CBS last month, the FCC gave Viacom one year to dispose of UPN.
The FCC is expected to take months to consider the changes it proposed in the report. The current commission might not act on the proposals if the presidential election in November results in new leadership at the FCC.
On the 35 percent broadcast cap, network affiliates feared that a broadcasting group with national reach-especially one of the Big Four-could use its clout to alter the flow of compensation to affiliates and interfere with affiliates' ability to freely choose syndicated programming.
"Our view is that if any one company were able to control 55 percent or 60 percent, that may not be, from a public-policy standpoint, the right result," said Michael McCarthy, executive vice president and general counsel for A.H. Belo Corp., owner of 20 local TV stations.
"That much ownership concentrated in one company could make it difficult to function as a network affiliate, [and] it could make it difficult for you to market your own content," McCarthy added.
Fox-which is already at 35 percent with its 23 stations-said it would challenge the cap in the U.S. Court of Appeals for the District of Columbia Circuit.
Fox Television chairman Chase Carey said the rule made no sense because local TV stations compete against cable, direct-broadcast satellite and broadband Internet providers.
Although Fox has the potential to reach 35 percent of viewers, the Big Four networks combined actually reach only about 14 percent of viewers throughout the day in a given market, he added.
Fox had even hired Berkeley University professor Michael Katz-the FCC's chief economist under former chairman Reed Hundt-to draft an extensive analysis showing that the 35 percent cap had outlived its usefulness.
"The FCC's decision is a textbook case of arbitrary and capricious government action," Carey said in a prepared statement.
Because of the controversy and intense lobbying surrounding the 35 percent rule, Lloyd said, the FCC probably did not devote enough staff time to cable and TV-station cross-ownership.
"Clearly, the FCC was more focused on the broadcast-ownership limits because of the strong lobbying by NBC, Fox and the local station groups," Lloyd said. "That became the major issue that the commission decided to focus on in this biennial review."
Helgi Walker, chief of staff to Republican FCC commissioner Harold Furchtgott-Roth, said her boss opposed retaining the cable- and TV-station-ownership ban. "We just think it's an artificial, outmoded restriction with constitutional problems," she added.
She said Furchtgott-Roth also opposed retaining the 35 percent cap and the decision not to repeal the broadcast- and newspaper-ownership ban.
The FCC may have decided that a period of major consolidation in the radio, TV, cable and phone industries dictated a note of caution. "There is a lot of concern about concentration, but there is always concern about concentration," a former FCC official said.
Brenner said it was too early to decide whether cable will fight the FCC in court over the decision to keep the cable and TV-station ban. "I really have to review the report and talk to the companies," he added.
A cable attorney for a leading MSO said a court case would be something to consider, but no decision had been made.
The smarter way to stay on top of the multichannel video marketplace. Sign up below.