Media ownership issue dogs FCC chief

by Ron Orol, The Deal

Just as it was for his two predecessors, the media ownership debate is shaping up as a paralyzing tar pit for Federal Communications Commission Chairman Kevin Martin.

Martin indicated Wednesday that the agency's controversial review of its limits on media mergers could take longer than a year to complete because it has so many moving parts and complications.

A lengthy proceeding would be a blow for owners and potential investors in the rapidly evolving media business.

"We haven't even finished half of the hearings we've committed to," Martin said in a briefing to reporters.

In July, Martin launched the agency's third attempt to craft media merger regulations, but the proposal has few specifics. Due to pressure from Democrats, Martin agreed to a laundry list of commitments that will take significant time before the agency votes on new rules. The FCC pledged to hold six media ownership hearings around the U.S. and so far has held only two -- in Los Angeles and Nashville, Tenn. Martin hopes to have a third hearing in February or March, but noted that the five commissioners' conflicting schedules made it difficult to set a schedule.

In addition to hearings, Martin also has promised to complete a pending review of TV and radio localism issues before completing the agency's review. (That review will examine whether locally owned TV and radio stations produce better service to their communities than outlets around the country owned by larger media conglomerates.) Finally, Martin also pointed out that the agency is still collecting data on the overall media marketplace and awaiting the results of 10 media studies it has commissioned, all of which must be completed and reviewed before the agency approves new media rules.

Martin reiterated his desire to have the agency remove a three-decade-old prohibition on one company owning the major newspaper and a broadcast outlet in a particular community. He argued that greater consolidation is justified because people have more options getting news and information than in 1975, when the cross-ownership prohibition was adopted.

"We want to make sure the rules are reflective of the changing media landscape and of the competition that media companies are facing," Martin said.

He added that the 3rd U.S. Circuit Court of Appeals in Philadelphia upheld a 2003 FCC rule eliminating the ban. (The court did rule, however, that the underlying justification for the looser cross-ownership rule was flawed and needed reworking.)

Responding to consolidation critics who say looser limits on media mergers will make it more difficult for minorities and women to own radio and TV stations, Martin said the commission seeks to balance opportunities for minorities and diversity of viewpoints in the media realm. "We value that as one of the core principles of the commission," Martin said.

Martin would not comment specifically on the FCC's review of Clear Channel Communications Inc.'s pending acquisition by private equity investors Bain Capital LLC and Thomas H. Lee Partners LP, but he pointed out that the agency could consider looking at ways smaller participants can gain access to properties spun off as a result of the transaction.

As part of the deal, Clear Channel plans to sell 448 outlets in smaller markets. It may need the FCC's help to complete some of these auctions.

For example, sources close to the FCC say Clear Channel is seeking waivers of certain media ownership rules and permission to offer so-called seller paper -- financing for smaller and first-time buyers of radio stations that do not have necessary access to the capital.

Because of the FCC's complicated ownership attribution rules, local radio clusters resulting from a self-financed deal could cause Clear Channel and its new owners to be deemed in violation of limits on ownership in a single market.

Clear Channel wants to ease another rule to make certain clusters of radio stations available to small buyers. The agency permits certain small buyers of radio outlets to purchase clusters of radio outlets if their business has less than $6 million in annual revenue. Clear Channel is pushing to have that revenue limit raised to increase the number of potential buyers.

"I can't comment on specifics of proposals before us but we will take an active look ... to make sure that people who otherwise might not have participated in the past at owning media properties or smaller entities can get access to them."

Separately, Martin said the agency can begin auctioning valuable 700 MHz spectrum to be reclaimed from TV stations no sooner than August. A wide variety of companies hope to bid for the spectrum licenses in an attempt to build new commercial broadband and other services that will rival high-speed Internet offerings by cable and phone companies.

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