The FCC's Republican chairman, Kevin Martin, billed as a move that could assist newspapers in difficulty a 3-2 decision by the FCC to revoke in the twenty largest U.S. cities a rule banning common ownership of newspapers and broadcast outlets, Reuters reported Tuesday.[1]  --  But the two Democratic members who voted against the change said that "easing the ownership rule would lead to more consolidation in the industry, eliminate independent voices, and degrade local news coverage," Peter Kaplan wrote.  --  Rep. John Dingell (D-MI 15th), chair of the House Energy and Commerce Committee, said the FCC had acted "arrogantly and brazenly," and Sen. Byron Dorgan (D-ND) promised legislation to overturn the changes.  --  In its piece on the news, the New York Times diverted attention from the decision by giving top billing to the FCC's simultaneous ruling that "no one [cable] company can control more than 30 percent of the market."[2]  --  Stephen Labaton also emphasized details of the ruling on newspaper-broadcasting combinations that may seem to mitigate its seriousness:  "Under the new rule, a company can own both a newspaper and either a television or radio station in those markets as long as there remain at least eight other independent sources of news.  If it is a television station, the rule requires that it cannot be one of the top four."  --  The Times also took an insider's perspective, gauging the political capital expended by Kevin Martin in the struggle over the rulings:  "[H]e has expended significant political capital and made political enemies of powerful industry groups and influential lawmakers."  --  But Forbes, in its report, had no doubt about the real meaning of the news for business:  "Hold on to your hats — the consolidation of the media industry could soon pick up speed. . . . Modest or not, chalk up a win for Big Media. . . . Regardless of what you think about the political or social implications of media consolidation, there's no escaping the fact that Tuesday's FCC decision has cleared the way for more of it."[3]  --  As for political challenges to the ruling:  "For now, his ruling appears safe," said Brian Wingfield and Louis Hau.  --  BACKGROUND:  The FCC is mandated by law to review ownership rules every two years.  --  A leading historian and critic has diagnosed the principal problems of U.S. media as "inadequate journalism and hyper-commercialism" (Robert McChesney, The Problem of the Media: U.S. Communication Politics in the Twenty-First Century [New York: Monthly Review Press, 2004], p. 11).  --  Tuesday's rulings are likely to aggravate both of them.  --  Kevin Martin is a 41-year-old Republican lawyer from Charlotte, NC, who served as deputy general counsel to Bush-Cheney 2000, on the Bush-Cheney recount team in Florida, and on the presidential transition team, before being named FCC commissioner in May 2001 and FCC chairman in March 2006.  --  "Martin has the backing of the White House," Forbes reported.  --  You don't say....

1.

DIVIDED FCC EASES MEDIA OWNERSHIP CURBS
By Peter Kaplan

Reuters
December 18, 2007

http://news.yahoo.com/s/nm/mediaownership_fcc_dc

WASHINGTON -- The Federal Communications Commission narrowly approved on Tuesday a loosening of media ownership restrictions in the 20 biggest U.S. cities, despite objections from consumer groups and a threat by some senators to revoke the action.

The FCC voted 3-2, along party lines, to ease the 32-year-old ban on ownership of a newspaper and broadcast outlet in a single market.

In addition, the FCC action exempted 36 newspaper-broadcast ownership combinations that had been grandfathered under the previous rule. It also gave exemptions to six combinations that were pending before the agency.

The FCC's Republican chairman, Kevin Martin, called the move a "relatively minimal loosening of the ban" that could help bolster ailing newspapers in big cities by spreading local news gathering costs across multiple media platforms.

The vote came over the objections of the FCC's two Democratic commissioners who said easing the ownership rule would lead to more consolidation in the industry, eliminate independent voices and degrade local news coverage.

They also said it created a loophole that would let media owners combine newspapers and broadcast outlets in many smaller markets around the United States, not just the top 20 cities. The S&P publishing index gained 1.7 percent.

The FCC action provoked an immediate rebuke from members of Congress. Martin's chief critic in the U.S. Senate, Democratic Sen. Byron Dorgan, of North Dakota, vowed to make good on a threat to pass legislation overturning the changes.

"We're not done with this, not by a long shot," he said.

LEGAL CHALLENGE SEEN

Analysts at Stifel Nicolaus said the rule changes would probably be challenged in court and on Capitol Hill. But opponents in Congress "will likely have to overcome core Republican resistance and a possible presidential veto," they said in a research note.

The chairman of the House Energy and Commerce Committee, Democratic Rep. John Dingell of Michigan, said he was "greatly displeased" that Martin had gone ahead with the vote.

"Despite specific bipartisan and bicameral opposition, the Federal Communications Commission acted arrogantly and brazenly today to weaken the newspaper/broadcast cross-ownership ban," Dingell said in a statement.

Existing FCC rules ban ownership of a newspaper, and a television or radio station in the same market, unless the FCC grants a waiver.

Outside the top 20 markets, companies can now get the cross-ownership ban waived if they convince the FCC the broadcast station or the newspaper is financially "failing," or that the combination would lead to a significant increase in local news coverage.

"The FCC has never attempted such a brazen act of defiance against Congress," said Democratic Commissioner Jonathan Adelstein. "The law does not say we are to serve those who seek to profit by using the public airwaves."

The vote came a day after a group of 25 senators led by Dorgan sent a letter to Martin warning they would "move legislation to revoke the rule and nullify the vote" if the FCC went ahead with the ownership rule changes.

The group, including Senate Commerce Committee Chairman Daniel Inouye, a Democrat from Hawaii, and the panel's top Republican, Ted Stevens of Alaska, said the FCC had not spent enough time studying the issue and seeking public input.

On November 30, the three Republican commissioners approved an order temporarily waiving the ownership restrictions for media group Tribune Co., allowing the company to proceed with its planned leveraged buy-out.

The previously pending applications for ownership waivers that the FCC granted on Tuesday included newspaper-broadcast combinations owned by Gannett Co. in Phoenix, Arizona, as well as outlets owned by Media General Inc. in Myrtle Beach, South Carolina; Columbus, Georgia; Panama City, Florida and the Tri-Cities area around the Virginia-Tennessee border.

Tribune shares ended 3.2 percent higher, Media General stock closed up 2.1 percent, News Corp finished 1.2 percent higher and Gannett rose 1 percent, all on the New York Stock Exchange.

While the FCC loosened the ownership rules for newspaper-broadcast combinations, the agency moved on Tuesday to clamp down on U.S. cable operators.

In a move that is likely to face another court challenge, the commissioners voted to bar cable companies such as Comcast Corp., Charter Communications, and Cablevision from owning systems that have more than a 30-percent share of U.S. multichannel video subscribers.

(Reporting by Peter Kaplan, editing by Tim Dobbyn)

2.

Business

Media & advertising

F.C.C. RESHAPES RULES LIMITING MEDIA INDUSTRY
By Stephen Labaton

New York Times
December 19, 2007

http://www.nytimes.com/2007/12/19/business/media/19fcc.html

WASHINGTON -- The Federal Communications Commission approved two new rules on Tuesday that are likely to reshape the nation’s media landscape by setting new parameters for the size and scope of the largest news and cable companies.

One rule would tighten the reins on the cable television industry. By stipulating that no one company can control more than 30 percent of the market, the rule introduces fresh regulation to an industry where there has been little of it, angering both the cable industry and Republican commissioners, who favor a free-market approach.

The other rule, which gives owners of newspapers more leeway to buy radio and television stations in the largest cities, is a step in the direction of deregulation. It is intended to help the newspaper industry, which is suffering from dwindling advertising revenue, and to recognize that the historical conditions that gave rise to cross-ownership restrictions have changed, now that more news sources are available on the Internet and cable television.

But the change drew criticism from newspaper executives, who said it was too modest to be meaningful, and from prominent lawmakers and commission Democrats, who called it a Christmas present to the nation’s largest conglomerates.

Both rules are certain to be reviewed by courts in the coming months. On Capitol Hill, some lawmakers said Tuesday that they would try to undo the rule about the newspaper industry.

Nevertheless, the votes were an important political victory for Kevin J. Martin, the F.C.C. chairman, who presided over a contentious meeting at which he re-established his control over the deeply divided agency. Mr. Martin had suffered a sharp setback three weeks ago when he was unable to find two commissioners to support a plan to regulate cable television more tightly.

The decisions were a blow to Comcast Communications, the nation’s largest cable company, which has grown substantially over the last decade through a series of acquisitions and will now be unable to buy more cable companies unless it can get the order overturned by a court.

By taking Comcast out of any bidding, the new rule was also a setback to smaller cable operators thinking of selling to other companies.

As for the relaxation of the newspaper-broadcast rule, telecommunications lawyers said it could pave the way for Rupert Murdoch to win permanent waivers to control two television stations in New York, as well as the New York Post and the Wall Street Journal.

In one 3-to-2 vote on Tuesday, Mr. Martin sided with the agency’s two other Republicans to relax the newspaper-broadcast cross-ownership rules in the nation’s 20 largest markets. Under the new rule, a company can own both a newspaper and either a television or radio station in those markets as long as there remain at least eight other independent sources of news. If it is a television station, the rule requires that it cannot be one of the top four.

Mr. Martin said that the change was a modest, though vital step toward assisting the newspaper industry, which is struggling financially as advertising and readership migrates rapidly to the Internet. “We cannot ignore the fact the media marketplace is considerably different than when the media ownership rule was put in place more than 30 years ago,” he said.

In a second 3-to-2 vote, Mr. Martin joined with the two Democratic commissioners to impose a limit to prevent Comcast, which controls nearly 30 percent of the market, from getting larger. Mr. Martin has been critical of the cable television industry for raising rates faster than the rate of inflation and for failing to offer consumers enough lower-price choices in subscription packages.

In a series of dissents, the commissioners took issue with Mr. Martin’s assessments.

“In the final analysis,” said Michael J. Copps, a Democratic commissioner who has led a nationwide effort against relaxing the media ownership rules, “the real winners today are businesses that are in many cases quite healthy, and the real losers are going to be all of us who depend on the news media to learn what’s happening in our communities and to keep an eye on local government.”

Robert M. McDowell, a Republican commissioner, was sharply critical of the cable restrictions.

“The cap is out of date, is bad public policy, and is not needed in today’s public market,” he said. He called the cable rule “archaic industrial policy” that would surely be struck down by an appeals court, as a similar rule was six years ago.

Although Mr. Martin appears to have won a high-stakes battle over some of the most significant policy decisions of his tenure, he has expended significant political capital and made political enemies of powerful industry groups and influential lawmakers.

For opposite reasons, both rules approved on Tuesday were sharply criticized by industry. John F, Sturm, president of the Newspaper Association of America, called the new cross-ownership rule “a baby step in the actions needed to maintain the vitality of local news, in print and over-the-air, in all communities across the nation.” Mr. Sturm said he favored eliminating the cross-ownership ban completely.

On the other hand, the cable television industry accused Mr. Martin of once again imposing unfair regulations on it.

David L. Cohen, an executive vice president of Comcast, said it was “perverse to see the commission approving huge mergers by the Bell companies while now telling cable companies, who compete toe-to-toe with the Bells, that they may not also grow larger and achieve the same efficiencies.”

Over the last year, the commission has approved a series of proposals over the objections of the cable television industry. Last December, it approved a measure to force municipalities to accelerate the local approval process for the telephone companies to offer video services in new markets. And two months ago, it struck down thousands of contracts that gave individual cable companies exclusive rights to provide service to apartment buildings.

Consumer groups, which have long pushed for tighter cable television regulation, criticized the change in newspaper cross-ownership. “We’re disappointed that he relaxed the rule,” said Gene Kimmelman, the senior lobbyist in Washington for Consumers Union. “But the new language creating a high hurdle in the small markets, if appropriately implemented, could significantly limit the number of mergers that get through, minimizing the danger to competition and diversity in local news.”

A significant chorus in Congress has been deeply critical of Mr. Martin and repeatedly requested that he delay action on the media ownership vote. On Monday, 25 senators led by Senator Byron Dorgan, Democrat of North Dakota, sent Mr. Martin a letter in which they vowed to take legislative action to revoke any new rule or nullify Tuesday’s vote.

But in a letter to lawmakers from Commerce Secretary Carlos M. Gutierrez, the administration expressed support for Mr. Martin.

Both the newspaper-broadcast ownership rule and the cable rule are certain to be reviewed by federal appeals courts. Three years ago, a federal appeals panel in Philadelphia struck down a series of deregulatory measures proposed by Mr. Martin’s predecessor, Michael K. Powell, including one that loosened the cross-ownership rules.

3.

Regulation

FCC LOOSENS OWNERSHIP RULES
By Brian Wingfield and Louis Hau

Forbes
December 18, 2007

http://www.forbes.com/business/2007/12/18/media-fcc-martin-biz-media-cx_lh_bw_1218fcc.html

WASHINGTON, D.C. -- Hold on to your hats — the consolidation of the media industry could soon pick up speed.

In a polarizing 3-2 vote, Kevin Martin's Federal Communications Commission on Tuesday loosened a 32-year-old ban on cross-media ownership. The new rules allow newspaper publishers to expand their influence in the 20 largest U.S. media markets by buying television and radio stations. Two caveats: If the merger involves a TV station, the station being purchased can't be one of the four largest in the area, and there must be at least eight independent media voices in the market after the merger.

U.S. law requires that media ownership rules be reviewed every four years. FCC Chairman Martin, joined in his vote by Commissioners Deborah Taylor Tate and Robert McDowell, says the changes are "modest modifications" to existing rules because they affect only a small number of markets. And he adds that they are necessary because the U.S. is in the midst of a communications revolution.

Modest or not, chalk up a win for Big Media. Among those who stand to benefit from the ruling are companies that already have sizable print and broadcast operations, including Gannett, News Corp., Tribune, Media General, Belo, and Hearst.

There is one potential hurdle for Martin's plan: Congress. On Monday, 25 senators, including influential Republicans Trent Lott of Mississippi and Ted Stevens of Alaska, urged Martin to delay the vote because they did not feel the public had ample opportunity to comment on his proposal.

"[I]f you proceed to take final action on this rule on Dec. 18 without having given a reasonable opportunity for comment on the actual rules and study the related issues, we will immediately move legislation that will revoke and nullify the proposed rule," the senators warned.

Sounds tough. But if this year's record is any indication, Congress has shown that it isn't capable of getting much done, and Martin has the backing of the White House. For now, his ruling appears safe.

When the cross-ownership ban was adopted in 1975, newspapers and broadcast media dominated the news market, with no threat from the Internet or cable and satellite TV. In the past three decades, more than 300 newspapers have folded, Martin pointed out.

Media companies and their trade group lobbyists highlighted the changed landscape to support loosening the cross-ownership restrictions. In fact, they claimed Martin's plan didn't go far enough.

"Today's vote is only a baby step in the actions needed to maintain the vitality of local news, in print and over the air, in all communities across the nation," said John Sturm, president and chief executive of the Newspaper Association America. He says the cross-media ownership ban should be dropped altogether.

But consumer advocates counter that the ability for media companies to ask for permanent waivers from the remaining cross-ownership restrictions meant that the rule change will essentially allow newspaper-broadcast combinations in virtually any market, no matter the size.

"It is hard to understand why the chairman has been so stubborn about pushing through such an extreme and unjustified change in rules which have long protected the public's right to have access to diverse sources of information," Media Access Project President and Chief Executive Andrew Jay Schwartzman said in a statement.

For all the excitement over new media platforms, a small number of conglomerates control a larger portion of the publishing, broadcast, cable, film, and music industries than ever before.

But what about all the news, information, and entertainment options that consumers have via the Internet, cable, and satellite? Doesn't that start to flatten the competitive playing field? In a filing last week with the FCC, Gannett neatly summed up this point of view.

"The record in this proceeding amply demonstrates that, particularly given the explosion of information available via the Internet, competition and the diversity of voices available in virtually every market nationwide are sufficient to render limitations on cross-ownership unnecessary," Gannett said.

But while the new-media landscape is indeed giving birth to a "diversity of voices," many of them wind up getting co-opted by big media anyway. Publishers and broadcasters have been as active in acquiring new-media properties, like blogs and Internet video sites, as they have old media properties, such as newspapers and TV stations.

Some examples: McClatchy acquired local entertainment news blogs Fresno Famous and Modesto Famous. CBS purchased high school sports Web site MaxPreps, Wall Street video blog Wallstrip, and online radio Web site Last.FM. News Corp. snapped up properties ranging from online social-networking giant MySpace and gaming and movie site IGN to karaoke site Ksolo and religion and spirituality Web site BeliefNet.

Regardless of what you think about the political or social implications of media consolidation, there's no escaping the fact that Tuesday's FCC decision has cleared the way for more of it.

Commissioners Michael Copps and Jonathan Adelstein voted against the rule change. Copps warned that as big companies acquire small, independent TV stations, the result will be fewer minority-owned media outlets, which already account for only 3% of all commercial TV stations, even though minorities make up 33% of the population.

Copps also takes issue with another provision of Martin's plan, which says that in order for a newspaper-broadcast merger to be approved, a paper in financial distress must show it will invest in newsroom operations. The provision is aimed at preventing the new owner from abandoning the newspaper altogether, but Copps said it is unlikely an ailing company will continue to dump money in its unprofitable business after the merger. Rather, the merger will lead to consolidation and job loss.

"Isn't cutting jobs about the first thing a merged entity almost always does?" he asked in his statement at Thursday's hearing.