Lawyers for CBS Inc. plan to argue that the Federal Communications Commission has the power to block Ted Turner's attempt to gain control of the television network, and should apply a higher standard in this case than it does when asked to approve routine TV station license transfers, sources said yesterday.
There is no specific statute that requires FCC approval for a change in control of a television network, and no established network has ever changed hands. But CBS plans to urge the FCC to block Turner's bid to take over the network by not allowing the transfer of licenses to operate CBS-owned television stations, sources said.
Turner has asked the FCC to approve the transfer of licenses to operate the five television stations the network owns.
Meanwhile, Turner may face another hurdle because of a Justice Department rule barring a network from having an affiliate and owning a station in the same market. One of CBS' affiliates is in Atlanta, where Turner operates WTBS, the Superstation.
CBS lawyers plan to raise this issue with the Justice Department, sources said, and will argue that Turner made no mention in his filings with the government of how he would satisfy this restriction.
If Turner were to succeed in obtaining control of CBS, the rule would require him to dispose of the Superstation or not to have an Atlanta affiliate for the CBS network, unless the Justice Department waived the rule.
CBS lawyers also plan to argue that a combination of Turner's Cable News Network and CBS News violates antitrust laws, sources said. To support their argument, CBS lawyers are expected to cite the anticompetitive effects such a combination would have, making special mention of Turner's own argument that CNN is truly the fourth network news operation, and the only nationwide television news alternative to the three major networks.
Most communications analysts expect Turner's bid to be approved by the FCC, which has made it clear that it does not want to be used to block hostile takeover attempts, provided the hostile bidder meets its standards. In this case, Turner can argue that because he already is an FCC-approved holder of broadcast licenses -- to operate WTBS -- there is no reason he should not be allowed to operate the CBS-owned stations.
The only chance CBS may have to block Turner at the FCC, sources said, will be to persuade the agency that it should take a closer look at an applicant seeking control of a network than it does when the issue is merely transfer of a TV station license.
CBS may try to show, for example, there are material facts that the FCC was not aware of when it granted Turner the license to operate WTBS. CBS lawyers also may present new information to try to raise questions about Turner's character that have never before been presented to the FCC, sources said.
CBS lawyers also are expected to challenge Turner's FCC request by stating that his bid is not financially viable because of its excessive use of leverage. Under FCC rules, CBS would have to prove that Turner's bid is so risky that he would not even be able to operate the company for three months after receiving FCC approval.
Turner announced his multibillion dollar bid for CBS last Thursday, a bid that CBS has rejected on the grounds that it would leave the company so burdened with debt that it might be bankrupt by 1987. Turner's offer, which includes no cash, offers CBS stockholders a complex package -- including high-yielding, risky securities known as "junk bonds" -- in exchange for their stock and includes a plan to help finance the proposed takeover by selling all of CBS' nonbroadcasting businesses. Turner has requested FCC, Justice Department and Securities and Exchange Commission approval of his bid. He will take his offer directly to CBS shareholders if, as expected, he receives the necessary government approval.