SENATE COMMERCE ROLLS BACK FCC 35% CAP, CROSS-OWNERSHIP CURBS

It’s unclear what will happen next, but several options appear possible. An industry source said it was unclear whether Senate Majority Leader Frist (R-Tenn.) would support the bill and noted that he had been focused entirely on subscription drug issues. An industry source said it was important that there was no roll call vote on the bill and therefore it didn’t require senators to “show their hand.” There’s still opposition by key House leaders and an industry source said recent statements by Commerce Secy. Donald Evans suggested President Bush supported the FCC’s media rule changes. The NAB has said it won’t support the bill, nor will several large media companies such as Clear Channel.

Gene Kimmelman, of Consumers Union, said the radio divestiture amendment, introduced by McCain, could lead him to support the bill more actively. Senate Appropriations Chmn. Stevens (R-Alaska), who introduced the bill, was regarded as likely to be more supportive since the cross- ownership provisions included exceptions for small markets. It was suggested that Stevens could use the appropriations process, even though House Appropriations Chmn. Young (R- Fla.) said he wouldn’t support such an effort. Sen. Dorgan (D-N.D.) said he still intended to pursue his “legislative veto” measure. An industry source said that measure could be more effective since it would take the support of just 30 senators to bring it to the floor. The measure can’t be introduced until the FCC publishes the new media rules in the Federal Register or in a report to Congress.

The cross-ownership amendment by Dorgan and co-sponsored by Sen. Snowe (R-Me.) was approved after Stevens included an amendment that would provide for exceptions in some circumstances. That amendment would give the state PUCs the ability to review cross-ownership in a small markets (Designated Market Area of 150 or higher) and recommend an exception if there was economic validity for cross-ownership. The FCC still would review any PUC recommendation for a cross-ownership exception. The Dorgan cross-ownership amendment passed on voice vote after Stevens’s amendment was approved 14-9.

Stevens emphasized he thought local control of media was more beneficial than out-of-state control. He said he agreed with a cross-ownership ban in larger markets, but said that in rural areas it could lead to newspapers’ going out of business or out-of-state entities’ buying stations or newspapers. Under the amendment, a cross-ownership exception could be made for failing newspapers or stations. Dorgan strenuously objected to Stevens’s amendment, saying it could provide “codification of cross-ownership” and actually could make things worse because the broad public interest standard could be used to justify cross-ownership. Stevens said the amendment would allow a more orderly process for local entities to apply for exceptions since they were more familiar with their local PUCs than the FCC and Washington bureaucracy.

McCain, who originally said he didn’t support the 35% cap but would allow a markup, squeaked an amendment onto the bill that would force divestitures in some radio markets. It would prevent a company from being grandfathered from new ownership restrictions approved by the FCC. Primarily targeting Clear Channel, the bill would force companies that were over the cap to sell. When adopting the ownership ruling, the FCC acknowledged that several markets would be over the cap. Several Republicans voted against the measure, which passed 12-11. Sen. Breaux (D-La.) questioned how Congress could require companies to sell radio stations that were acquired legally. Sen. Brownback (R-Kan.) said it was unusual for Congress to retroactively enforce provisions and that it would create confusion in the radio industry. “If there’s a problem, there’s a problem,” McCain said, noting that all 5 FCC commissioners agreed radio ownership was too concentrated in some markets.

McCain also attached an amendment that would allow the FCC to reregulate media ownership -- an effort to correct the so-called “deregulatory bias” that the courts have interpreted in the Telecom Act with respect to media ownership. That provision is also included in the FCC Reauthorization Act (S-1264), scheduled to be marked up June 26. Sen. Boxer (D-Cal.) included an amendment that would require the FCC to hold at least 5 public hearings before its next media review. McCain said the amendment “smacks of micromanagement” but was a product of good intentions and supported it, and it passed on voice vote. S-1264 would lengthen the period of media ownership review to 5 years from 2.

Several amendments were rejected. (1) Breaux lost 2 amendments: one that would evaluate media ownership on total viewership based on a yearly average of Nielsen ratings, and another that would allow a 45% cap if the FCC found that network-owned stations provided more local news coverage. (2) An amendment by Sen. Sununu (R-N.H.) Committee that would have grandfathered News Corp. and Viacom, the 2 networks that currently are over the 35% cap, in a 16-7 vote.

Senators held amendments they originally considered for Thurs. markup until next week’s FCC Reauthorization Act markup, scheduled for June 26. Sen. Lautenberg (D-N.J.) said he would introduce an amendment to eliminate the 50% UHF discount on all new UHF stations and by 2008 would eliminate all discounts for all UHF stations.

Sen. Wyden (D-Ore.) withdrew an amendment after McCain said he and House Commerce Committee Chmn. Tauzin (R-La.) would initiate a dialog between the creative community and networks. McCain said the goal was to produce “more diverse programming.” The Writers Guild of America West praised the dialog and said more diverse points of view were needed in network programming.

FCC Comr. Copps said the agency should stay its decision on media ownership until Congress decided whether to reverse it. In a written statement, Copps reminded his fellow commissioners that he had warned on the day of the FCC vote that their action could awaken “a sleeping giant -- the American people.” He said that just 17 days later, even before the final FCC order had been issued, the Senate Commerce Committee had voted to roll back the Commission’s 3- 2 vote. “This strong and bipartisan committee action should flash the orange light of ’slow down and prepare to stop’ for those media companies rushing to buy, sell or swap stations all across America,” Copps said. FCC Comr. Adelstein called the congressional action a “dramatic rebuke of a bad decision. This is what happens when an agency ignores an outcry from Congress and the public to slow down and tread cautiously.” Like Copps, he said the FCC shouldn’t let the rules take effect until Congress acted.

NAB Pres. Edward Fritts said the association had mixed feelings about the vote and ultimately would oppose the bill that emerged from the committee. On the one hand, NAB was pleased with the proposal to roll back the national TV ownership cap to 35%. But it was disappointed that the bill also adopted provisions to reinstate the newspaper-broadcast cross-ownership ban and require radio companies to divest legally acquired stations. “Consequently, NAB will strongly oppose this legislation,” Fritts said.