UPDATE: FCC Approves Media-Ownership Reform

By: Todd Shields Updated at 3:50 p.m. Eastern Standard Time

In a 3-2 vote along party lines the Federal Communications Commission voted Monday in favor of a sweeping relaxation of media ownership rules that will, taken together, allow companies to own more media outlets and reach more people.

The Republican-led agency raised the number of TV stations a network may own; removed the prohibition on daily newspapers owning nearby broadcast stations; and allowed one company to own as many as three TV stations in very large cities and to hold two TV stations in many more markets than previously.

FCC Chairman Michael Powell said that with its vote the commission had modernized its rules as compelled by critical federal courts, while "striking a careful balance that does not unduly limit transactions that promote the public interest."

The commission's two Democrats issued lengthy, impassioned dissents, with Commissioner Michael Copps decrying what he called "radical deregulation." Copps said today's decision was "wrong for the media industry, wrong for the public interest, and wrong for America."

Before today's vote TV networks were limited to owning stations that reach 35% of U.S. TV households. Commissioners raised that figure to 45% -- a defeat for critics who said the lower limit preserves localism in broadcasting, and a partial win for network owners such as Viacom and News Corp., which argued there should be no limits so networks could freely compete with cable and satellite.

Voting along with Powell were Republican commissioners Kevin Martin and Kathleen Abernathy. Jonathan Adelstein joined Copps in voting against relaxing the rules.

In other votes, the agency left undisturbed the prohibition on one of the major TV networks from buying another major network. And in recognition of unforeseen consequences from an earlier round of deregulation that abolished national ownership limits in radio, the agency tightened rules aimed at preventing a single radio company from dominating smaller markets.

Reaction outside the commission was varied. "This is a dark day for American democracy," said Chellie Pingree, president of Common Cause. "The FCC has ignored mounting public pressure and given the green light to a handful of media moguls to control what the American public sees, hears, and reads. That is frightening prospect."

The Tribune Co., which already holds several newspaper-TV combinations, said the FCC vote reflected a changed marketplace. "Our readers, viewers and listeners across the country are the real winners today -- they will benefit as we explore additional ways of enriching the content of our newspapers, television stations and Web sites," said Tribune President and CEO Dennis FitzSimons.

The Walt Disney Co., which owns ABC, issued a brief statement saying it "strongly supports the FCC's decision which reflects today's marketplace realities."

The FCC with its vote jettisoned a pair of old rules that restricted cross-ownership of radio, TV and newspaper properties within any single market. In their place is a single rule with no restrictions on cross-ownership in markets with nine or more TV stations. Markets with four-to-eight TV stations will face some restrictions, and cross-ownership will not be permitted in markets with three or fewer TV stations.

According to FCC Media Bureau Chief W. Kenneth Ferree, 70 markets have nine or more TV stations and thus are to be unemcumbered by cross-ownership restrictions. There are 31 of the smallest markets where no cross-ownership is to be allowed, and 109 markets in the middle ground where sliding restrictions take hold, Ferree said.

The FCC's vote will permit a single owner to hold three TV stations in markets with 18 or more television stations -- a barrier that is surmounted in the top eight or nine TV markets, Ferree said. A single owner could hold two TV stations in markets with five or more stations -- a definition that Adelstein said includes 162 market areas. Such figures suggest so-called duopoly ownership will be permitted but for the smallest 40 or so markets.

Taken together, the changes represent the most profound recasting of national media ownership laws in decades.

They follow scathing criticism from federal courts that have rejected five major FCC rules in recent years, saying the agency needs to better explain why its regulations serve their stated goals of promoting diversity, localism and competition. Another force for change is Congress, which in the 1996 telecommunications act, directed the FCC to review its rules every two years to see whether they should be modified or eliminated.

Advocates on both sides of the roiling debate leading to today's vote predicted the losers would take the new rules to court. That augurs for a long legal battle before today's decisions become final.

Similarly, members of Congress in recent months have grown increasingly interested in the ownership debate, and they may mount an effort to enact legislation that would overturn the FCC's decision. The agency's commissioners will get an early chance to test congressional waters: Sen. John McCain (R-Ariz.), chairman of the Senate Commerce Committee that oversees the FCC, has called them before his panel on Wednesday to explain today's vote.

The FCC reached its vote after months of intense behind-the-scenes lobbying that began last September, when it said it would review a set of ownership laws together.

Some of the rules under review date to the 1940s; many were cast before the Internet became a popular communications medium, and before cable and satellite TV grew to become a presence in most American homes.

Those favoring relaxation of the rules said such developments dictate the need to reform media law so it conforms to a world where consumers have many choices for news and other information, and where broadcasters face intense competition from many sources.

Opponents of relaxing the rules said most people still get the bulk of their news from local TV stations and from newspapers, and that the diverse arguments needed to animate democracy could suffer if fewer owners control major news outlets.

Some of these critics cited as a cautionary tale the radio realignments that arrived after Congress in 1996 removed all national radio ownership restrictions. This produced one company with more than 1,200 stations and four other companies with more than 100 stations, where before the law limited a single owner to 40 stations. Radio station owners increasingly seek to buy clusters of nearby stations.

Critics say that as a result, many smaller cities are dominated by a few radio broadcasters and have less news programming and more homogenous programming than before the buying spree. Supporters say the realignments brought modern management and economies of scale to an ailing industry, and allowed owners to increase the diversity of music they broadcast.

Despite such arguments, reimposing national radio ownership caps was not under consideration leading to today's vote.

Democratic Commissioner Michael Copps, a skeptic of media concentration, waged a long and unsuccessful battle to delay today's vote, and to bring to light details of the proposals voted upon today. The commission, acting under its normal procedure, kept the proposals confidential until the votes were cast, although many of the key provisions leaked out to reporters and lobbyists.

Powell insisted the questions at issue have been well studied and that public participation was thorough, as evidenced by the tens of thousands of comments filed through the FCC's Web site.

He spoke before the National Rifle Association, suspicious that big media will grow larger, urged its members to oppose relaxing the rules. As other groups, too, organized opposition in recent weeks emails to the FCC grew in volume, totaling more than 200,000 last week alone and more than half a million in all.

The rules as they stood before today's votes:

* allowed one company to own as many as two TV stations in the same market if eight independent TV stations remain, but forbade ownership of two of the market's four top-rated stations;

* allowed common ownership of TV and radio stations on a sliding scale that rises as market size increases, with a TV owner permitted to hold as many as 7 radio stations;

* forbade daily newspapers from owning a TV or radio station in the same market (some cross-owned combinations exist because they existed when the rule was adopted in 1975; others have been formed recently by companies in expectation this rule will be lifted before the FCC reviews the affected TV license);

* forbade a single owner from holding two of the top four TV network;

* limited owners to holding radio stations in a market on a sliding scale, with ownership of up to 8 stations permitted in the largest markets;

* limited TV networks to owning stations that can reach 35 percent of the national TV audience.

Powell has said that after its ownership votes, the agency would move on to consider such issues as limits on cable system ownership, relations between TV networks and their affiliates and the transition to digital TV.