Television Digest with Consumer Electronics: Kennard Delays Action On Ownership Rules

Faced with increasing pressure from broadcasters and Capitol Hill, FCC Chmn. Kennard decided to pull broadcast ownership issue from Dec. 17 agenda, Commission officials confirmed Dec. 4. Key controversy appeared to be over proposed new limits on local marketing agreements (LMAs), which could have substantially limited number of stations that some groups could control. Major broadcast officials, including Disney Chmn. Michael Eisner, were meeting on issue with FCC officials throughout week. Perhaps more importantly, new limits were opposed by Senate Commerce Committee Chmn. McCain (R-Ariz.), Communications Subcommittee Chmn. Burns (R-Mont.), House Telecom Subcommittee Chmn. Tauzin (R-La.), Rep. Dingell (D-Mich.), senior Commerce Committee Democrat. Kennard spokesman said chmn. decided there had not been enough time to discuss "complicated and interrelated issues," and said Kennard is "in a listening mode."

NAB and Assn. of Local TV Stations (ALTV) called out troops last week against FCC staff documents that have gone to commissioners proposing sharp cutbacks in LMAs and keeping in place most of duopoly restrictions and one-to-a-market rule. Assns. worked hard at FCC (NAB Chmn. Richard Ferguson visited commissioners Nov. 30), and on Hill seeking support. Key legislators, meanwhile, began signaling their support for broadcasters' position.

Bid for Hill support proved particularly successful, with McCain and Burns sending Dec. 1 letter telling Commission to stay away from LMA and other ownership-related issues. Senators said that if FCC acts, "the Commission will likely issue an order that is in direct defiance of the 1996 [Telecom] Act." If Commission alters LMAs, then "the path the FCC appears to be following would be inconsistent with both the 1996 Act and the 1997 Balanced Budget Act," senators said. Requiring broadcasters to have stricter waiver standard for one-to-a-market rule would be "completely contrary to Congress's decision to expand" that rule in top 50 markets, letter said, and any FCC decision to apply rule to radio stations would be "patently inconsistent" with Telecom Act.

Senators said that duopoly rules no longer are relevant and there's "no rational justification for preventing an underdeveloped station in a top-50 market from entering into a duopoly or other ownership arrangement with another station in that market." Such arrangements could result in "revitalization of the programming and diversity" for underdeveloped station, or perhaps for both, McCain and Burns said. They said that Telecom Act grandfathered existing LMA arrangements and that it would be contrary to Act for FCC to disturb those situations.

FCC should "take no action inconsistent with the expressed will of the Congress," lawmakers said, and they have "clear understanding" of intent of law: "As with other issues, in this matter the Commission appears ready to substitute its judgment for ours." They warned that if Commission "shows itself incapable of following congressional intent, these issues will become part of our overall review of the Commission's function and structure during the next session of Congress."

Tauzin spokesman Ken Johnson said FCC, by considering changes in LMA rules, "is playing Russian roulette with the financial lives of many companies." Commission reportedly is considering new LMA rules that could force some group owners to end LMA agreements as part of ownership proceeding that had been expected to be on Dec. 17 agenda. Johnson said: "We are strongly urging the agency to delay action on the issue of LMAs until Congress has an opportunity to conduct its own review of all ownership related issues." Tauzin will hold hearing on ownership issues next year, Johnson said. Commission got similar signals from Commerce Committee Democrats. Spokesman Dennis Fitzgibbons said that aside from fact that LMAs were grandfathered under Telecom Act, there also are practical considerations. He asked what FCC could accomplish by seeing "certain stations go dark? Is that useful in promoting diversity of voice?" On ownership issues, Fitzgibbons said it's useful to look at cap, but in "closer consultation with Congress." He said that TV markets can't be sliced "as neatly as you could when there were only 3 networks," and that national- local distinctions have blurred.

Broadcast representative said staff proposals would be "particularly unjustified because the Commission has no evidence of harm to the public interest from these combinations. Indeed, for many LMAs, the evidence shows that the public has obtained important benefits... It is particularly ironic that, while claiming to advance diversity in broadcasting, these [proposed] FCC actions would reduce diversity of programming and make efforts to expand minority and female ownership substantially more difficult." Broadcast groups are seeking "congressional pressure on the FCC to avoid this harsh restructuring of the industry based on an outdated view of ownership policy." While confirmation couldn't be obtained, it appeared broadcasters would at least be successful in getting ownership items taken off agenda for Dec. 17 open meeting, sources inside and outside Commission told us.

ABC, which has several TV LMAs, also was working hard at Commission and Hill on that issue, including bringing in Eisner. While network put news blackout on its efforts and refused to talk with reporters, ABC's position is said to be either all or none of existing LMAs should be allowed, not grandfathering some and killing some, as staff proposed. NBC and CBS said they weren't involved with LMA issue but want to see relaxation of duopoly and one-to-a-market restrictions. Staff proposals are "more regulatory, rather than less," said network official, and "we've been talking to folks on the Hill and folks at the Commission."

On LMAs, we have learned that staff has proposed (with Kennard's backing) to make existing agreements attributable under ownership rules, which would put them in violation of duopoly rule (one TV station to a market). LMAs in existence Nov. 7, 1996 (date FCC issued latest ownership rulemaking), would have lesser of 3 years or rest of term of LMA to divest. LMAs created after that would have to be dissolved within year, with limited exceptions to be granted. Staff proposal would relax TV duopoly rule to encompass only Grade A contours, thus permitting common ownership of stations with Grade B overlap.

Under 1996 Telecom Act, FCC has granted more than 50 ownership waivers conditioned on outcome of rulemaking. Staff proposal (which would allow common ownership of one TV and either 4 or 6 radios in same market) would require divestiture in 33 situations if 4-radio standard is adopted. Proposal is said to permit ownership of TV and up to 6 radios in same market if licensee has financed purchase of 2 radio stations by new entrants in same market. Also under consideration is relaxing newspaper- broadcast same-market ban, but we're told it will apply only to major markets where there are "a large number of independent media voices." Changes in 35% TV ownership cap, which is sought avidly by Big 4 TV networks, aren't expected to be taken up until next year, along with other ownership biennial review issues.