Feds' Deal Sets Station Cap at 39%

The White House and key lawmakers last week reached a deal that would impose a new, higher limit on potential TV-station household reach. Now the question is whether or not the controversial deal can stick.

Under the agreement, a TV-station group could reach up to 39% of households, down from 45% approved by the Federal Communications Commission on June 5, but higher than the 35% favored by many TV-stations groups and their Capitol Hill allies.

The agreement, if it holds, would immediately help Viacom Inc. and News Corp., which are both just under 39%. The deal would give additional headroom to ABC, at 24%, and NBC, at 34%.

NAB's Pleased

"It looks like there is a deal done, but we really can't comment on it. We don't know the details," News Corp. and Fox Entertainment Group chairman Rupert Murdoch said last week. "The 39%, on the face of it, suits us just fine."

Edward Fritts — president of the National Association of Broadcasters, a TV-affiliate group and the 35% cap's most powerful backer — endorsed the deal.

"NAB supports the compromise 39% national-television ownership cap that would be written into statute under this agreement," Fritts said in a statement. "While a 35% cap would have been preferable, we recognize the political realities surrounding this issue."

But Sen. Byron Dorgan (D-N.D.) is vowing to fight the 39% deal. In September, Dorgan sponsored a resolution voiding the entire package of FCC broadcast-ownership rules, in a 55-40 vote that fell short of a veto-proof majority. The House never took up Dorgan's resolution.

Dorgan was upset with the 39% deal because it was struck after he believed House and Senate negotiators had agreed to 35% based on endorsement of 35% by a full House vote and a vote by the Senate Appropriations Committee earlier in the year.

Senate rules are such that one or a few senators can delay action indefinately. In letter to Sevens last Tuesday, Dorgan promise to stir the pot if 39% isn't lowered to 35%.

"If it isn't, I intend to continue to fight to overturn that FCC rule anyway that I can as we return in January and consider this and other legislation," Dorgan said.

The 39% deal — negotiated by the Senate Appropriations Committee chairman, Sen. Ted Stevens (R-Alaska), House Appropriations Committee chairman, Rep. C.W. "Bill" Young (R-Fla.), and White House chief of staff Andrew Card — is contained in a massive spending bill that still requires final House and Senate approval. The White House twice threatened to veto the bill if a 35% cap were included.

The deal needs to be ratified by the House and Senate. The House is expected to consider it on Dec. 8, but the Senate might not get a chance to endorse it until January.

Sen. Fritz Hollings (D-S.C.), the senior Democrat on the Senate Appropriations Committee, was also upset to learn that 35% had been abandoned.

"The item was not in dispute. All had agreed to the 35% cap. The Republicans went into a closet, met with themselves, and announced a 'compromise,' " Hollings said in a statement.

Senate Minority Leader Tom Daschle (D-S.D.) was quoted last week saying the deal was "unacceptable."

A broadcast-network source predicted that at least one of the Big Four networks would go to court to strike down 39%. But Stevens told reporters last Tuesday that the 39% cap would not be an amendable FCC rule.

"That's in permanent law. It cannot be changed by the FCC. It can only be changed by an act of Congress," Stevens said.

Stevens also noted that any legal attack on a law passed by Congress must convince a judge that the measure is unconstitutional — an especially high legal burden for broadcasters, which do not enjoy the same level of First Amendment protection as newspapers and cable companies.

"There will be litigation," a broadcast-network source said.

If the 39% cap became federal law, it would have an impact on the court case in which the FCC's broadcast-ownership rules are being challenged from various directions. NBC, Fox, and CBS want the court to eliminate the 45% cap and block the FCC from adopting any cap. TV-station groups—many of them independent network affiliates—want the court to restore 35%. Enactment of a 39% cap would remove this issue from the case.

"That would moot that portion of the case," said Andrew Jay Schwartzman, president of the Media Access Project. In September, Schwartzman persuaded a panel of the U.S. Court of Appeals for the 3rd Circuit to block the FCC's rules from taking effect while litigation was pending.

In June, the FCC adopted rules allowing an entity to own two TV stations in the vast majority of markets and three TV stations in a few large markets, except that no entity may own more than one of the top-four-rated stations in a market. The agency also largely eliminated the 28-year-old ban on the common ownership of a TV station and a newspaper in the same local market.

Some in Congress were more upset about those changes than the FCC's decision to raise the national TV-station-ownership cap to 45%. But Stevens said last week's agreement did not disturb the new local-market concentration rules.

"We dropped that in trying to get a compromise," Stevens said.

Padden Sees Equality

The Walt Disney Co., owner of 10 ABC stations, has been less aggressive than Fox, NBC, and CBC on raising the 35% cap. Disney did not have problems with the 39% deal.

"We are very pleased with two things. One, the fact all networks are treated equally and, number two, this proposed law would leave us substantial room to acquire additional stations," said Preston Padden, Disney's executive vice president of worldwide government relations.

Every two years, the FCC is required to modify or repeal broadcast-ownership rules that no longer serve the public interest as a result of competition.

Stevens said the 39% deal includes a provision changing the biennial review to a quadrennial review—something FCC chairman Michael Powell has endorsed as a means of reducing pressure on the agency.

Mike Farrell contributed to this report.