May 03, 2003

There were no major surprises yesterday as the FCC loosened restrictions on media ownerships.

The most important areas from yesterday's decision to the media business covered four areas. One: One company is now allowed to own multiple TV stations in a local market. Two: the commissioned incrementally increased the 35% limit on reach. That means a company can own TV stations reaching no more than a 45% share US TV households. Three: ownership criteria for radio stations were changed in several areas. For example, in markets with more than 45 radio stations, a company may own no more than eight. Four: Newspaper companies can now buy TV stations.

In the end, the FCC decision was driven by Chairman Michael Powell's belief that the rules would eventually be overturned by court rulings. He said in a statement after the vote: "I must punctuate one irreducible point: Keeping the rules exactly as they are, as some so stridently suggest, was not a viable option. Without today's surgery, the rules would assuredly meet a swift death. As the only member of this Commission here during the last biennial review, I watched first hand as we bent to political pressure and left many rules unchanged. Nearly all were rejected by the court because of our failure to apply the statute faithfully. I have been committed to not repeating that error, for I believe the stakes are perilously high. Leaving things unaltered, regardless of changes in the competitive landscape, is a course that only Congress can legitimately chart."

The only unpredictable turn of events involved the radio ruling. In an internal memo obtained by MediaDailyNews, Clear Channel worldwide president Mark Mays told his employees that "the FCC's actions were deregulatory for every industry other than radio which was re-regulated." Published reports have speculated that Clear Channel might have to divest some of its stations. Mays denied that in the memo.

"That is not true," the memo states. "The ruling does not require us to sell any stations; the rules are totally prospective."

Publicly, Mays said the ruling "missed the mark by a mile. This FCC action will extinguish the substantial consumer benefits brought on by radio deregulation in 1996. Just ten years ago, nearly 60 percent of the nation's radio stations were operating in the red, cutting news budgets and laying off employees. Deregulation changed all that. But instead of letting radio stations find better and more innovative ways to serve their listeners, the FCC is intent on turning the clock back to a time when the industry was incapable of providing consumers the variety of programming it does today."

Other media owners and their representatives were much more positive. Newspaper Association of America President and CEO John F. Sturm even indicated his organization would push for full repeal of all media ownership regulations. "While full repeal continues to be NAA's ultimate goal, we believe the Commission, for the first time in more than 25 years, took a significant step today to loosen significantly the regulatory shackles that have prohibited a daily newspaper from owning a broadcast station in the same market," Sturm said. "The relaxation of the rules will allow newspaper-owned broadcast stations to offer more and better local news and public service programming, as well as all-news formats to radio markets of all sizes. It will positively impact competition in local markets and provide healthy and diverse competition to large radio station owners. Local audiences will be the big winners."

That sentiment was echoed by Tribune Company President and Chief Executive Officer Dennis FitzSimons. "The media landscape has dramatically changed -- consumers have more choices for news, information and entertainment than ever before. The FCC's action today recognizes these changes. Tribune is in full compliance with the FCC's new regulations in all of the markets in which we have media businesses," he said. "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."

Don't expect any big deals anytime soon however. Most experts predict that most media companies will wait a period of time to gauge the seriousness of potential Congressional challenges to the new rules. Hearings on that front cold start by the end of this week. Court challenges are expected as well.

"I don't expect any wholesale mergers. I don't expect anyone to make any early deals," said Veronis Suhler Stevenson executive VP Jim Rutherfurd. "I think enough people have talked on background enough to know that they will wait to see if these rules are really going to stay in effect."

By John Gaffney
Courtesy of http://www.mediapost.com

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