Paxson Communications Corp. charged Tuesday that by planning to acquire
Telemundo Communications Group Inc., NBC is violating its 1999 partnership
agreement with Paxson, in which NBC got a stake in the network.
In return, NBC also agreed not to take any actions that would inhibit NBC
from acquiring all of Paxson later if rules limiting ownership changed.
The Paxson charges seemed to set the stage for a messy breakup of the Paxson
alliance with NBC, which owns 32 percent of the company and which pledged,
according to Paxson, to take no action that would create 'additional regulatory
hurdles' to complete the acquisition eventually.
Instead, the Telemundo acquisition, Paxson said, would make it 'virtually
impossible' for NBC to buy Paxson, and it wants NBC to either give up the
Telemundo deal or relinquish its stake in Paxson.
For its part, NBC said it was still interested in Paxson and it hoped
regulations would change by the time the pact ends in 2009 so that NBC would be
allowed to acquire Paxson.
West Palm Beach, Fla.-based Paxson, represented by noted attorney David
Boies, initiated a binding arbitration and filed complaints with the Federal
Communications Commission to block the Telemundo acquisition, alleging that NBC
representatives on Paxson's board acted improperly to the extent that NBC now
has an 'attributable interest' in the network.
FCC rules allow an entity like NBC to own a stake in another network as long
as it doesn't exert control. Paxson claimed that NBC has tried to by forcing
items onto the agenda and thwarting or influencing financial matters to the
benefit of NBC, and not Paxson.
But NBC said later that its three members acted properly, and when they
became an issue, NBC offered to have them resign. But, an NBC attorney said,
Paxson refused that offer.
At the heart of the matter, in Paxson's view, is that if NBC acquires
Telemundo, any attempt to later acquire Paxson would be imperiled by the fact
that NBC would essentially have 'triopolies' in New York, Chicago, Dallas and
Miami, and it would far exceed ownership limits, which are now at 35 percent,
even if they are liberalized.
Neither situation would likely get FCC approval.
At the same time, with its stake, Paxson president and CEO Jeff Sagansky
said, NBC has kept the smaller network 'on ice'
Moreover, network executives said, NBC has not made good on financing and
programming promises it made, and it used its three members on the Paxson board
to make decisions that benefited NBC, and not the Paxson network.
In a press conference Tuesday morning, Paxson chairman Bud Paxson said of
NBC, 'I feel like a woman that's just been jilted and then finds her husband out
with another woman.'
Boies said Paxson is asking for damages that would 'obviously be substantial.
We made an effort to resolve it, and that effort was
unsuccessful.'
