Media Cap Moves Hit Senate Roadblock

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Washington— A debate over media-ownership limits picked up steam last week when Sen. Fritz Hollings said he plans to introduce legislation that would force the Federal Communications Commission to notify Congress of any rule change to relax media-ownership limits.

The bill would also delay the implementation of an ownership-cap change for 18 months after the FCC sends Congress a report that would explain how the rule changes would "promote competition, diversity and localism in the public interest," Hollings said.

Hollings discussed the idea last Tuesday as he grilled Viacom Inc. president Mel Karmazin and other media executives at a Senate Commerce Committee hearing on media consolidation.

In his testimony, Karmazin argued for the repeal of an FCC rule that limits Viacom-owned CBS and other broadcasters from owning stations that reach more than 35 percent of U.S. homes.

The proposed Comcast Corp.-AT&T Broadband merger and a possible News Corp. acquisition of DirecTV Inc. were among the factors Karmazin cited for justifying that the ownership cap be lifted.

"In order for us to compete against them, we need to have a stronger free, over-the-air broadcasting system, and I believe we need to see changes that have to be made in order to have a fair seat at the table with these companies that consolidate," Karmazin said.

Networks like CBS, Fox and NBC want the ownership cap lifted, and bolted from the National Association of Broadcasters after the lobbying group wouldn't support their stance.

The companies argued that with declining profit margins in the network business, they need more owned-and-operated stations, which are more profitable.

Karmazin told reporters after the hearing that Viacom wouldn't have an incentive to continue investing in broadcasting unless the cap was lifted. Unless things change, he said, it's possible that broadcasting could turn into a pay-television business, and that expensive programming such as National Football League games could migrate to pay television.

"If broadcasting is not going to be able to pay the extra money, then they would probably look to pay-per-view or they would look to pay television. And there may be more things like DirecTV [NFL] Sunday Ticket and less games on free, over-the-air broadcasting," Karmazin added.

CBS agreed to pay the NFL $4 billion for an eight-year TV rights deal in 1998. Karmazin said the company could justify the huge price with money its owned-and-operated stations will earn, and that the network itself will take a loss on the NFL deal.

Smaller station group owners are opposed to lifting the cap.

Echoing the sentiment of Hollings and some other members of the Commerce Committee, Post-Newsweek Stations Inc. president Alan Frank testified Tuesday that localism and diversity would be threatened if the cap were lifted.

"When NBC told its affiliates last fall to air game one of the American League playoffs instead of the first presidential debate, it was the affiliates that complained, and ultimately, the network relented and allowed the affiliates to pre-empt the baseball game for the debate," Frank said. "Allowing the network to own more stations means that next time, there will be no local pressure to correct the network's bad judgment."

Tribune Co. president Jack Fuller asked the committee to lift the newspaper-broadcast cross-ownership rule, noting that it makes it more difficult for companies like Tribune to compete with Internet news sites, cable channels and other new media.

Sen. John McCain (R-Ariz.) supported lifting the station ownership cap, pointing out that the networks' primetime audience share has declined from 71 percent in 1996 to 58 percent last year.

Calling the diversity and localism argument "a smokescreen," Sen. John Breaux (D-La.) insisted that both network- and affiliate-owned stations realize the importance of covering local news.

"It's good business. People buy ads when they see local news being covered and community affairs being covered," Breaux said.

The Walt Disney Co. president Bob Iger, who did not testify at the hearing, offered a similar argument in a letter he sent last week to FCC chairman Michael Powell regarding the ownership cap.

Iger said that the ABC O&Os frequently offer more local news programming than smaller station groups, such as Cox Broadcasting Inc., Belo Corp., Post-Newsweek and Hearst-Argyle.

"The true measure of localism in broadcasting is not who owns the station, but how committed that station owner is to the local community," Iger wrote.

Sen. Ron Wyden (D-Ore.) sounded an alarm on the entire cap issue at a hearing, panting a scenario in which AOL Time Warner Inc. could buy AT&T Broadband, which, in turn, could snatch up NBC along with some radio and TV stations.

"You could have a single, massive media company in the country," he said.

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