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from: NY Times

December 19, 2007
F.C.C. Reshapes Rules Limiting Media Industry
By STEPHEN LABATON

WASHINGTON — The Federal Communications Commission approved two new rules on Tuesday that are likely to reshape the nation’s media landscape by setting new parameters for the size and scope of the largest news and cable companies.

One rule would tighten the reins on the cable television industry. By stipulating that no one company can control more than 30 percent of the market, the rule introduces fresh regulation to an industry where there has been little of it, angering both the cable industry and Republican commissioners, who favor a free-market approach.

The other rule, which gives owners of newspapers more leeway to buy radio and television stations in the largest cities, is a step in the direction of deregulation. It is intended to help the newspaper industry, which is suffering from dwindling advertising revenue, and to recognize that the historical conditions that gave rise to cross-ownership restrictions have changed, now that more news sources are available on the Internet and cable television.

But the change drew criticism from newspaper executives, who said it was too modest to be meaningful, and from prominent lawmakers and commission Democrats, who called it a Christmas present to the nation’s largest conglomerates.

Both rules are certain to be reviewed by courts in the coming months. On Capitol Hill, some lawmakers said Tuesday that they would try to undo the rule about the newspaper industry.

Nevertheless, the votes were an important political victory for Kevin J. Martin, the F.C.C. chairman, who presided over a contentious meeting at which he re-established his control over the deeply divided agency. Mr. Martin had suffered a sharp setback three weeks ago when he was unable to find two commissioners to support a plan to regulate cable television more tightly.

The decisions were a blow to Comcast Communications, the nation’s largest cable company, which has grown substantially over the last decade through a series of acquisitions and will now be unable to buy more cable companies unless it can get the order overturned by a court.

By taking Comcast out of any bidding, the new rule was also a setback to smaller cable operators thinking of selling to other companies.

As for the relaxation of the newspaper-broadcast rule, telecommunications lawyers said it could pave the way for Rupert Murdoch to win permanent waivers to control two television stations in New York, as well as The New York Post and The Wall Street Journal.

In one 3-to-2 vote on Tuesday, Mr. Martin sided with the agency’s two other Republicans to relax the newspaper-broadcast cross-ownership rules in the nation’s 20 largest markets. Under the new rule, a company can own both a newspaper and either a television or radio station in those markets as long as there remain at least eight other independent sources of news. If it is a television station, the rule requires that it cannot be one of the top four.

Mr. Martin said that the change was a modest, though vital step toward assisting the newspaper industry, which is struggling financially as advertising and readership migrates rapidly to the Internet. “We cannot ignore the fact the media marketplace is considerably different than when the media ownership rule was put in place more than 30 years ago,” he said.

In a second 3-to-2 vote, Mr. Martin joined with the two Democratic commissioners to impose a limit to prevent Comcast, which controls nearly 30 percent of the market, from getting larger. Mr. Martin has been critical of the cable television industry for raising rates faster than the rate of inflation and for failing to offer consumers enough lower-price choices in subscription packages.

In a series of dissents, the commissioners took issue with Mr. Martin’s assessments.

“In the final analysis,” said Michael J. Copps, a Democratic commissioner who has led a nationwide effort against relaxing the media ownership rules, “the real winners today are businesses that are in many cases quite healthy, and the real losers are going to be all of us who depend on the news media to learn what’s happening in our communities and to keep an eye on local government.”

Robert M. McDowell, a Republican commissioner, was sharply critical of the cable restrictions.

“The cap is out of date, is bad public policy and is not needed in today’s public market,” he said. He called the cable rule “archaic industrial policy” that would surely be struck down by an appeals court, as a similar rule was six years ago.

Although Mr. Martin appears to have won a high-stakes battle over some of the most significant policy decisions of his tenure, he has expended significant political capital and made political enemies of powerful industry groups and influential lawmakers.

For opposite reasons, both rules approved on Tuesday were sharply criticized by industry. John F, Sturm, president of the Newspaper Association of America, called the new cross-ownership rule “a baby step in the actions needed to maintain the vitality of local news, in print and over-the-air, in all communities across the nation.” Mr. Sturm said he favored eliminating the cross-ownership ban completely.

On the other hand, the cable television industry accused Mr. Martin of once again imposing unfair regulations on it.

David L. Cohen, an executive vice president of Comcast, said it was “perverse to see the commission approving huge mergers by the Bell companies while now telling cable companies, who compete toe-to-toe with the Bells, that they may not also grow larger and achieve the same efficiencies.”

Over the last year, the commission has approved a series of proposals over the objections of the cable television industry. Last December, it approved a measure to force municipalities to accelerate the local approval process for the telephone companies to offer video services in new markets. And two months ago, it struck down thousands of contracts that gave individual cable companies exclusive rights to provide service to apartment buildings.

Consumer groups, which have long pushed for tighter cable television regulation, criticized the change in newspaper cross-ownership. “We’re disappointed that he relaxed the rule,” said Gene Kimmelman, the senior lobbyist in Washington for Consumers Union. “But the new language creating a high hurdle in the small markets, if appropriately implemented, could significantly limit the number of mergers that get through, minimizing the danger to competition and diversity in local news.”

A significant chorus in Congress has been deeply critical of Mr. Martin and repeatedly requested that he delay action on the media ownership vote. On Monday, 25 senators led by Senator Byron Dorgan, Democrat of North Dakota, sent Mr. Martin a letter in which they vowed to take legislative action to revoke any new rule or nullify Tuesday’s vote.

But in a letter to lawmakers from Commerce Secretary Carlos M. Gutierrez, the administration expressed support for Mr. Martin.

Both the newspaper-broadcast ownership rule and the cable rule are certain to be reviewed by federal appeals courts. Three years ago, a federal appeals panel in Philadelphia struck down a series of deregulatory measures proposed by Mr. Martin’s predecessor, Michael K. Powell, including one that loosened the cross-ownership rules.