Longshot Bills Would Help Viacom, CBS Merger

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Washington -- A week after Viacom Inc. proposed buying CBS
Corp., policy circles started buzzing with proposals to make the deal an easier sell at
the Federal Communications Commission.

Senate Commerce Committee Chairman John McCain (R-Ariz.)
introduced a bill Sept. 13 that would allow a TV station group to reach 50 percent of U.S.
TV homes, erasing the 35-percent cap currently enforced by the Federal Communications
Commission.

Two days later, the House Telecommunications Subcommittee
held a hearing on a bill sponsored by Rep. Cliff Stearns (R-Fla.) that calls for raising
the cap to 45 percent.

If enacted into law in a timely manner, either bill would
help Viacom win FCC approval of its $37 billion takeover of CBS. Under the deal, the
combined company would reach 41 percent of U.S TV homes through ownership of 38 stations.

McCain, in a statement, said he would favor the FCC's
pushing the 50 percent cap he is proposing even higher.

"The proliferation of alternative sources of
electronic news and entertainment hasn't just made old ownership rules useless --
it's actually made them harmful," McCain said.

The ownership cap is controversial, driving a wedge between
the networks and their affiliates.

The networks want to own more stations to improve their
bottom lines. The affiliates, by contrast, want to retain the cap to preserve the balance
of power that keeps the networks from exercising dictatorial control over those affiliated
stations they don't own.

The split was on display at Tauzin's hearing.

Peter Chernin, president and COO of News Corp., owner of
the Fox broadcast network, said the cap should be abolished or relaxed because the
networks face too much competition from cable and satellite to justify limiting his
company's station-ownership level.

Chernin said the affiliates defend keeping the 35-percent
cap solely because it's in their best financial interest.

"It's all about protecting one set of business
interests," Chernin said.

Andrew Fisher, executive vice president of
television-network affiliates at Cox Broadcasting, spoke in favor of retaining the cap on
behalf of 700 affiliates of NBC, ABC, CBS, and Fox.

Increasing the cap above 35 percent, he said, would give
the networks too much market power, especially in the aftermath of the FCC's Aug. 5
decision to allowing company to own two TV stations in a market where eight stations would
remain independent.

"For the Congress to increase the network-affiliated
audience cap at this moment would be to move from revolution change to chaos. It would be
the equivalent of throwing gasoline on an already raging fire of local television-station
consolidation," Fisher said.

After the hearing, Tauzin said he had no idea whether
Congress would enact a version of the McCain or Stearns legislation. He pointed out that
lawmakers would be reluctant to vote for the networks over the objections of station
managers in their districts.

Congress can get off the hook if the FCC takes the
initiative. Both House Commerce Chairman Rep. Thomas Bliley (R-Va.) and Tauzin said the
FCC should have increased the 35-percent cap in August.

"The FCC should get the rest of the job done and write
rules to foster today's competitive marketplace as well as ensure a diversity of
voices over the airwaves," Bliley said.

The FCC, however, has been as reluctant as Congress to
modify the 35-percent cap in the face of a divided industry.

Rep. Edward Markey (D-Mass.) said he opposed further media
deregulation, calling the Aug. 5 relaxation "the worst FCC decision" since
children's TV rules were eliminated in the 1980s. Markey said he was against lifting
the 35-percent cap because it would "tip the balance" toward the networks.

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