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FCC Plan to Ease Cross-Ownership Rules Points to Consolidation

The Federal Communications Commission agreed to propose easing limits on one owner holding a television station and newspaper in a top 20 U.S. market.

The FCC plan keeps existing caps on TV and radio station ownership. “The public interest is best served by these modest, incremental changes to our rules,” the agency said in its notice on the proposed rule.

Approval of the FCC action may spur acquisitions, increasing the value of media companies. Gannett Co. (GCI), owner of television stations and newspapers such as USA Today, rose 1 percent to $13.39 yesterday in New York trading.

“The consolidation of media assets in the same market would lower costs for these businesses and would make them more profitable,” Laura Martin, an analyst with Needham & Co. in Pasadena, California, said in an interview. “Consolidation would give them a better ability to compete.”

The FCC proposal said that some newspaper and broadcast cross-ownership restrictions are needed to preserve a diversity of viewpoints in communities.

The FCC plans to take comments on the proposal, and no date has been set for a vote. Neil Grace, an FCC spokesman, declined to comment.

Second FCC Attempt

This is the second proposed change in cross-ownership rules in the past four years.

On July 7, a U.S. appeals court in Philadelphia vacated an FCC rule adopted in 2007 to let one owner hold a daily newspaper and a broadcast station in the largest markets. The court sent the rule back to the FCC for more consideration.

CBS Corp. (CBS), Clear Channel Communications (CCMO) Inc., Gannett, Media General Inc. (MEG) and Cox Enterprises Inc. had challenged the 2007 FCC order for failing to relax the rule further.

The FCC’s procedures leading to the 2007 vote were “irregular,” the appeals panel said.

Representative Edward Markey, a Massachusetts Democrat on the House Energy and Commerce Committee that oversees the FCC, criticized the agency’s plan.

Citizen Kane ‘Underachiever’

“Loosening ownership rules could enable the type of media consolidation that would make Citizen Kane look like an underachiever,” Markey said in a statement. “This cannot be allowed to happen.”

Consumer groups said the move would concentrate too much power in the hands of large companies and limit the number of voices.

“The already dwindling number of smaller and independent media owners will be swallowed up by the same media giants that have crushed local journalism, killed local radio and left us with the same cookie-cutter content,” Craig Aaron, president and chief executive officer of Free Press, a Florence, Massachusetts, nonprofit that promotes diverse and independent media, said in a statement.

The Newspaper Association of America, an Arlington, Virginia-based trade group, has argued that the media market has undergone “massive” changes because of the growth of the Internet, cable channels and satellite TV. It said the cross- ownership restriction isn’t needed to preserve a diversity of voices. The group didn’t immediately comment today.

‘Essential’ Rules Change

“The bottom line is it is absolutely essential that the ownership rules be changed,” John Lavine, dean of Northwestern University’s Medill School of Journalism, Media, Integrated Marketing Communications, said in an interview.

He said technological changes have made the current FCC rules obsolete. And, small and minority-owned media are at a disadvantage now because they can’t own other media outlets in the same market.

The current FCC restrictions aren’t helping newspapers as circulation falls, said Barry Lucas, senior vice president of research at Gabelli & Co.

“The thought used to be a publisher and broadcaster in the same market would have too much influence over public information, he said. ‘‘While that may have been the case, with the Internet and cable TV, the dynamics have changed in terms of where you get your news and opinion. Newspapers have become much less meaningful, and you don’t need to wait for the 6 p.m. newscast to get an idea of what’s happened.”

‘Very Helpful’

Sean Sheehan, the vice president of government relations for Tribune Co., said “this will be very helpful for us. It’s an opportunity to remake the case.”

Maryam Banikarim, the chief marketing officer at Gannett, declined to comment.

Andrew Schwartzman, senior vice president of the Media Access Project, a nonprofit that promotes low-cost access media, praised the commission for not relaxing rules on how many TV and radio stations one company can own in any particular market.

To contact the reporters on this story: Eric Engleman in Washington at eengleman1@bloomberg.net; Chris Strohm in Washington at cstrohm@bloomberg.net

To contact the editor responsible for this story: Steve Walsh at swalsh@bloomberg.net

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