The Federal Communications Commission is divided over whether to grant media giants ranging from Rupert Murdoch to Capital Cities Communications Inc. more time to dispose of properties that conflict with its cross-ownership rules.
The cross-ownership rules, which prohibit a single party from owning more than one major media property in a single market, were intended to encourage a variety of editorial voices in each city. By prohibiting one party from owning both a daily newspaper and a television station in the same city, the FCC rules also seek to increase competition among the significant advertising outlets.
Most of the waiver requests before the FCC have arisen as a result of pending media mergers and ask for delays in enforcement of the rules. For example, Rupert Murdoch already owns newspapers in New York and Chicago, where he is in the process of acquiring television stations, and is asking for two years to sell the newspapers. The primary reason given for his and other such requests is to avoid either the closing or distress sale of the properties.
Rep. Timothy E. Wirth (D-Colo.), chairman of the House subcommittee on telecommunications, is concerned that broadcasters might use the temporary waivers simply to command a better price for properties they are selling, or hold on to the properties hoping that the rules dissolve in the meantime. Without waivers, Murdoch and others would be forced to sell conflicting properties immediately.
"Wirth is worried companies are assuming they get temporary waivers . . . with the rationale that a distress sale would be necessary if they didn't get a waiver," said one Capitol Hill source. "Wirth has felt the commission should make them demonstrate that there are no bona fide credible offers" before granting a waiver, the source said.
The FCC does not have a specific policy on the granting of temporary waivers, and Wirth has suggested that the commission develop one. In recent years, the agency has granted temporary waivers of up to three years so broadcasters could dispose of media properties.
The division on the commission over the issue became apparent in interviews with four of the five members. Commission Chairman Mark S. Fowler declined to be interviewed on the matter.
FCC Commissioner Henry M. Rivera believes the commission has been too lax in granting temporary waivers. "I have dissented in every case where they have been granted in the past," he said, "because I think an individual going into a situation like that ought to know what kind of property he is getting himself into and ought to be able to divest the conflicting station in extremely short order."
Some others at the commission believe the FCC caters to broadcasters. "There is definitely a bias toward blinking whenever it comes to granting cross-ownership waivers," said one FCC source.
With increasing merger activity in the broadcasting industry, some commissioners think it may be time to reconsider FCC policy. "Maybe the commission needs to initiate an inquiry and look at this issue," said Commissioner Dennis R. Patrick. "The burden ought to be on the broadcaster to say they need time to avoid . . . selling below market value."
Some of the commissioners believe preventing "fire sales" through immediate forced divestiture is in the public interest. "It is the FCC's rule that forces the divestiture," Patrick said. "Under those circumstances, it is appropriate to not force a fire sale."
But, he said, broadcasters should not "automatically" assume they will get a permanent waiver of the rules. "They ought to be enforced vigorously."
Commissioner James H. Quello said a waiver of the cross-ownership rules for up to two years "is a reasonable request because you want to give enough time for broadcasters to consider different bids and not put them into a distress-sale situation."
In fact, Quello said, cross-ownership rules may need revisiting in general. "The rules should be revised to reflect practicalities, be they technical or questions of sufficient diversity in the marketplace, but not to eliminate the cross-ownership rules entirely," he said.
In cases where sufficient diversity of media and competition already exist, cross-ownership rules may no longer be necessary, he said, adding that the rules should be kept fully in force where market domination or antitrust problems exist.
The public-policy considerations in favor of enforcement of the cross-ownership rules are sometimes complicated. For example, if Murdoch gets the waivers he has requested and is then unable to sell the unprofitable New York Post within two years, some sources believe the FCC might allow him to keep the newspaper permanently, because the alternative could be closing it or merging its operations with the rival New York Daily News.
Critics claim that if such temporary waivers are allowed to turn into permanent waivers of the rule, the FCC regulations are being abused. Others argue that it would be better to have Murdoch owning both a newspaper and television station in New York than to enforce the rule and force the newspaper to go out of business.
Tribune Co. has asked the FCC for a temporary waiver of the cross-ownership rules in connection with its acquisition of Los Angeles television station KTLA-TV, where it already owns The Los Angeles Daily News newspaper and two cable systems. The company has asked the FCC for a temporary waiver of 18 extra months in which to sell the newspaper and cable properties.
"The balancing question is what is the pressing public interest requirement to force them to sell the stations immediately," said Jeff Epstein, an investment banker with First Boston Corp. "There also is a fascinating question of fairness in those cases where the FCC has grandfather provisions that allow some, but not all, companies to violate the rules."
The pending combination of Capital Cities Communications Inc. and American Broadcasting Cos. Inc. also has led to a request for temporary waivers. Capital Cities is asking for 18 extra months to sell various radio stations in major markets where it also will own television stations, violating the cross-ownership rules. Capital Cities also has requested a permanent waiver to keep its Philadelphia television station, even though the signal overlaps with that of the New York television station the company is acquiring from ABC. Capital Cities argues that it should be granted the waiver because Philadelphia and New York are two separate editorial and advertising markets. Commissioner Quello said he agrees.
"I think temporary waivers are usually justified," said former FCC chairman Charles Ferris, now a communications lawyer. "What temporary waivers have in mind is giving people enough time for the orderly conduct of business. I think there is a big difference between temporary and permanent waivers. It is hard to have a policy on when to grant waivers. . . because every one of them is an ad hoc policy statement."