What Will Life Be Like After FCC Ruling?

By: Mark Fitzgerald and Todd Shields Newspapers will be able to tell quickly what life without a cross-ownership restriction holds for them, some analysts say. Just watch how the sale of Freedom Communications Inc. goes.

"Most of us realize the reason the Freedom sale has not yet gone forward is that purchasers were waiting for the FCC to make its decision," said Scott A. Stawski, client executive with the media practice of Jersey City, N.J.-based Inforte. "Freedom will be our first sign of what this FCC decision is going to do to the valuations of newspaper, radio and TV."

One likely outcome is higher prices, he added: "You can't help but think this is going to make multiples go up, and make the entry for newspapers a little more costly."

The newspaper industry -- at least, that part of the newspaper industry that has chafed under the cross-ownership ban since it was imposed in 1975 -- got virtually everything it wanted when the FCC voted 3-2 along partisan lines last week to permit common ownership of papers and broadcast stations in all but the smallest markets. "To have access to 85% of the markets is not bad," said Newspaper Association of America (NAA) President and CEO John F. Sturm.

The actual FCC regulations on cross-ownership have not yet been released, but based on analyses by NAA and others, here's how the buying combinations shape up for newspapers:

* In about 70 large markets with nine TV stations or more, newspapers can own a TV duopoly (two stations) plus as many as four radio stations.

* In 109 markets with between four and eight TV stations, a newspaper can own one TV property and half the radio limit for that market. Example: three radio stations, if the market's common ownership limit is six.

* In 31 small markets with three or fewer TV stations, cross-ownership is not permitted, except by getting a waiver from the FCC.

Newspaper executives immediately complained that it is these smaller markets that could benefit most from the news combinations of newspaper and broadcast. "We just couldn't get them to see that," said MediaNews Group CEO William Dean Singleton, whose chain announced last week that its Fairbanks (Alaska) Daily News-Miner is likely to exercise its option -- taken out three years ago in anticipation of a repeal of cross-ownership restrictions -- to buy KTVF-TV, a NBC affiliate in Fairbanks owned by Clear Channel Communications Inc.

Some political leaders, however, are determined to rain on the industry's parade -- spurred perhaps by the surprising interest in the issue among the public, which flooded the FCC with 750,000 messages mostly opposing media deregulation. "People are up in arms," Sen. Barbara Boxer (D-Calif.) told the commissioners at a Senate Commerce Committee hearing last Wednesday. "I hope to overturn what you did ... It is your job to represent the people, not the big special interests."

The FCC's decision prompted a vigorous reaction on Capitol Hill, where members of both parties said they would try to override all or parts of the FCC's decision. The ferment on the Hill put newspaper lobbyists on high alert. "We will work assiduously to keep any legislative vehicle in either house (of Congress) clear of an anti-newspaper cross-ownership provision," Sturm said.

But even Sen. John McCain (R-Ariz.) said the ruling had changed his thinking. "I have a long voting record in support of deregulation," McCain said. "But the business of media ownership, which can have such an immense effect on the nature and quality of our democracy, is too important to be dealt with so categorically." He said he would seek legislation to ensure the FCC could re-regulate, as well as deregulate.

FCC Chairman Michael Powell, a Republican, defended the media rules as "modest."

Most of the senatorial wrath was reserved for the FCC decision to allow networks to own as many stations as can reach 45% of the nation's households. Congress had set the previous limit at 35%. McCain said he would allow the committee to vote on a bill by Sen. Ted Stevens (R-Alaska) to roll back broadcast network size, and Sen. Byron Dorgan (D-N.D.) said he would seek to amend that bill with a measure of his own to re-impose the ban on same-market common ownership of newspapers and broadcast.

Dorgan was not alone in emphasizing dismay at the agency's newspaper-broadcast decision. Sen. Kay Bailey Hutchison (R-Texas) sketched the ownership situation in Atlanta, where Cox Enterprises holds five radio stations and a TV station in addition to the dominant daily, The Atlanta Journal-Constitution. "I think that is an alarming amount of concentration," Hutchison said. She also pointed to Dallas, where Belo Corp. owns The Dallas Morning News and a TV station. "I don't want to see other cities get into that concentration," Hutchison said.
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