FCC Backs Media Ownership Rules, Limits Cable Growth (Update5)

By Todd Shields

Dec. 18 (Bloomberg) -- The U.S. Federal Communications Commission approved rules today that allow publishers to own both newspapers and broadcast stations in the biggest U.S. cities and that limit growth for cable-television companies.

Chairman Kevin Martin and the other two Republicans on the five-member panel backed the loosened rules for newspaper owners, which modify a ban adopted in 1975. Martin joined the agency's two Democrats in approving the cable limit.

Publishers Tribune Co. and News Corp. had said the ownership proposal didn't go far enough, while consumer groups said it threatened diversity in local media. The FCC disregarded 25 U.S. senators, who vowed in a letter released yesterday to block the decision. They said more time is needed to review a policy that has ``a substantial impact on the American people.''

``The media marketplace is considerably different'' than when the rule was put in place 32 years ago, Martin said just before the vote. ``Allowing cross-ownership may help to forestall the erosion in local news coverage by enabling companies to share news-gathering costs across media platforms.''

Tribune, based in Chicago, rose $1.02, or 3.2 percent, to $33.31 at 4:03 p.m. in New York Stock Exchange composite trading. The shares have gained 8.2 percent this year. News Corp. Class A shares, down 5.7 percent this year, gained 23 cents to $20.26.

Cable

The panel approved in a 3-2 vote Martin's plan to allow cable companies to serve no more than 30 percent of the U.S. market, restoring a cap set aside by a federal court in 2001.

``While competition has reduced cable's dominance, concentration remains a very serious concern,'' Democratic commissioner Jonathan Adelstein said before the vote. He pointed to price increases.

Comcast Corp., the largest U.S. cable service, opposed the proposal, saying cable providers' market share has eroded since then because of competition from companies such as AT&T Inc. and Verizon Communications Inc. Comcast says it controls about 27 percent of the national market, while cable critics including Andrew Schwartzman, president of the Washington-based Media Access Project, say it has almost 30 percent.

``The record simply does not support the divided commission vote,'' Comcast Executive Vice President David Cohen said in a statement. ``We remain highly confident that the federal courts will agree.''

Republican Commissioner Robert McDowell, who voted against the plan, also said the courts would reject the limit. ``This order goes out of its way to remain ignorant of current market conditions, which obviate the need for a cap,'' he said.

Martin said today that the 30 percent cap also covers telephone companies' video services.

Comcast shares fell 2 cents to $18.08 in NYSE trading.

`Shortchanged the Public'

Martin told Congress last week he would press ahead with his plan to ease the newspaper-broadcasting limits, which affects the top 20 U.S. markets. He called the rule change ``minor'' and said it would help sustain the ``viability of newspapers'' without harming diversity in local markets.

``When newspapers were prohibited from owning any broadcast stations, cable was barely available, satellite technology wasn't there and the Internet wasn't there,'' Martin said in an interview. ``Today you have a whole plethora of new sources of news and information, and I think it's important that we recognize that in our rules.''

The senators, in their letter to Martin dated Dec. 14, called for more review. ``We believe you have shortchanged the public comment process,'' said the senators, who included Democrat Daniel Inouye of Hawaii and Ted Stevens of Alaska, the leading Republican on the Commerce Committee that oversees the FCC.

`Bazaar of Consolidation'

Some Democrats in Congress objected to the vote. Sen. John Kerry of Massachusetts said he would use the appropriations process to deny the FCC funds to carry out the ownership change.

Adelstein and the panel's other Democrat, Michael Copps, both said they hoped Congress and the courts nullify the vote.

``Today's decision will open up a nationwide bazaar of consolidation,'' Adelstein said. ``Any newspaper could buy any TV station in any city.''

The FCC approved the continuation of 42 newspaper-broadcast combinations that already exist through waivers or exceptions, Martin said. Companies that benefited include Gannett Co., the biggest U.S. newspaper publisher, and Media General Inc., said Schwartzman of the Media Access Project.

News Corp.

Martin said at a news conference after the meeting that today's order doesn't contain explicit relief for News Corp., which is seeking a waiver for continued ownership of two TV stations in the New York market, where it publishes the Wall Street Journal and New York Post.

Shedding a station wouldn't harm News Corp.'s outlook, said Richard Dorfman, managing director at New York investment firm Richard Alan Inc.

``News Corp. is too large, too diversified, too global in nature to be impacted in any meaningful significant way,'' Dorfman said in an interview.

Tribune, the Chicago-based owner of the Los Angeles Times, owns newspaper-TV combinations in five cities, including four in the top 20. The FCC on Nov. 30 granted it waivers for all five.

To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net

Last Updated: December 18, 2007 18:17 EST

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