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At a Difficult Time, Split Roils the NAB

4/29/2001 8:00 PM Eastern

Las Vegas— With the advertising market mired in a deep slump, this is no time for broadcasters to be squabbling among themselves.

But that's where things stand today for the National Association of Broadcasters, the industry's lobbying mother ship that is taking on water faster than NAB president Edward Fritts and his crew can bail.

"Rather than focusing 100 percent on meeting the challenges from without, all of a sudden we are challenging ourselves from within," said Fritts, whose NAB has lost all of its major network members except ABC. "What I am talking about, of course, is the split between the affiliates and the networks."

Credit Fritts for his candor. When Fox, NBC and CBS headed for the exit, NAB's response was a stiff upper lip and pointed reminders that prodigal networks, both TV and radio, had fled NAB once before, only to see the light when the benefits of unity outweighed the costs of conflict.

"What we are experiencing now is nothing new," Fritts explained in a speech here last week. "There was a time, for instance, when radio was deeply divided, but they came back together for the common good."

The chief reason NAB's team photo is showing more bench than bodies is a Federal Communications Commission regulation designed to promote diversity in the ownership of the nation's 1,288 local TV stations.

Specifically, the rule limits one TV station group from reaching more than 35 percent of TV households. Congress established the 35-percent cap, but the FCC has the authority to relax or abolish it.

POWELL'S DOWN ON CAP

The FCC under new Republican chairman Michael Powell is promising a fair and thorough review of the cap, but Powell has made it unmistakably clear that the cap is operationally and constitutionally flawed.

"I make no secret that I am skeptical generally, including of this rule, of the straight prophylactic prohibitions on ownership or reach," Powell said here last week.

Powell noted that although the FCC places no limit on the number of stations one company might own, he believes the agency's 35-percent cap is a restriction on free speech.

"There is something somewhat offensive to First Amendment values about that sort of limitation," he said.

Debate over the 35-percent cap is so contentious that some Capitol Hill politicians who normally aren't loath to take a stand are seeking refuge in the nest of neutrality.

"Put me down as friendly to both sides," Rep. Joe Barton (R-Texas) last week told an NAB audience chock-a-block with network affiliate executives who want to preserve the 35-percent cap.

"I think Joe has announced a terrific principle on this subject. I am with Joe," Rep. Rich Boucher (D-Va.) told the same audience.

Moments earlier, Boucher got a big hand for endorsing the NAB's call for the inclusion of digital tuners in all new DTV sets, though he opposes the association on copy protection of high-value content carried by digital TV stations.

Some lawmakers demonstrated a little more willingness to suggest that NAB's defense of the 35-percent cap is likely to fail.

Rep. Cliff Stearns (R-Fla.), who sponsored legislation last year raising the cap to 45 percent, predicted the cap would rise and urged all parties to rally behind a level the networks and the affiliates could support.

"I am sensitive to the fact that the affiliates are against it," Stearns said. "Realize that the compromise might be something that everybody can work with."

"My gut is that it's probably going to happen," said Rep. Eliot Engel (D-N.Y.). "If it is done in a responsible way where we don't go crazy, then probably it's something that's going to happen."

Power and control are at the heart of this debate. CBS, NBC and Fox claim the networks can't make any money unless they can own more of the very profitable local stations.

Moreover, the networks claim that the 35-percent cap overstates their reach — a point they are pressing in federal court in an effort to void the cap. Even though a network's signal can reach up to 35 percent of TV homes, that does not actually mean that all of those homes are tuned into the same network at any given time.

The affiliates, by contrast, argue that if the networks grow too large, they could use their leverage as program distributors to exercise dominion over those stations' daily operations.

"People who want to be in this business in markets large or small feel there needs to be some equilibrium with the people who are in both the content and conduit business," said David J. Barrett, who runs Hearst-Argyle Television Inc. and serves on NAB's TV board of directors.

HAVING IT BOTH WAYS

The split within NAB is not solely between the networks and the affiliates, as Fritts suggested.

For instance, Paxson Communications Corp., which is one-third owned by NBC, wants the cap abolished, while LIN Television is neutral.

LIN chairman and CEO Gary Chapman refused to walk on both sides of the fence. Chapman said he could not support FCC repeal of a rule that limits his ability to own two stations in one market and also insist on retention of the 35-percent cap.

"I believe in being intellectually honest. I don't believe you can take both sides," he said.

In a recent complaint filed with the FCC, hundreds of affiliates of CBS, NBC and ABC accused the networks of interfering in the sale of TV stations, laying claim to their digital TV bandwidth and placing limits on the amount of network programming that could be pre-empted.

FCC officials here declined to comment on the complaint, saying rules prevent them from discussing a "restricted proceeding" with the media.

Unless the FCC checks the networks' ambitions, the affiliates fear being reduced to powerless conduits that no longer have the best interests of their local communities at heart.

"The reason is pretty simple. We feel the greatest strength of the industry is the stations' dedication to local issues and community service. And we want to maintain this commitment and maintain local control," said K. James Yager of Benedek Broadcasting Corp., who is chairman of the NAB's joint Radio and Television Board of Directors.

With Congress as divided as NAB on the 35-percent cap, two key House lawmakers are urging Powell to take the lead on whether the cap needs to be relaxed or eliminated.

On April 16, House Energy and Commerce Committee chairman Rep. Billy Tauzin (R-La.) and Telecommunications and the Internet Subcommittee chairman Rep. Fred Upton (R-Mich.) sent Powell a letter stressing the need for the FCC to act on a range of media ownership rules, including the national television ownership cap.

The letter, which didn't take a position, suggested that Tauzin and Upton believe that numerous ownership rules adopted decades ago no longer promote ownership diversity and competition, but rather stifle broadcasters' ability to compete against cable, satellite and the Internet.

"Chairman Tauzin does not want to pick winners and losers in the industry," said Tauzin aide Jessica Wallace. "His central concern is that broadcasters are able to remain viable in an increasingly competitive marketplace."

Wallace, addressing an American Bar Association forum here, indicated that any movement in the 35-percent cap would be up to Powell.

"Chairman Tauzin is going to defer to the FCC to make the important distinction of which ones are outdated and which ones need to remain," she said.

The FCC will conduct a review, as required by law, of all of its media ownership rules sometime before the end of next year.

But Powell indicated the FCC would not act on the 35-percent cap until the U.S. Court of Appeals for the District of Columbia Circuit has ruled on the case brought by Viacom Inc. He expects a ruling no sooner than December.

"It's a waste of time to put out a rule, then only to find out under what the court handed down, your rule is ridiculous on its face. That's just stupid," Powell said.

When Viacom won FCC approval to buy CBS, the company had 41-percent household reach and had until May 4 to get to 35 percent. But the D.C. Circuit stayed that merger condition while Viacom's legal attack on the 35-percent cap was pending.

Powell told an NAB audience here that obtaining a stay is no ordinary judicial feat and warned that it could signal the demise of the cap in court.

"Many people see that as a grave sign for the life of the rule," Powell said.

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