Federal Communications Commission (FCC)

On the day after the FCC established new broadcast ownership regulations, companies, Wall St. analysts, consumer groups and others were picking apart the decision, and while some said they saw opportunities for deal-making, others said legal challenges to the decision might threaten those deals. All predicted increased consolidation, but there was some debate over whether the deal-making would begin immediately or would happen over time. Meanwhile, all 5 FCC commissioners were preparing to answer questions before the Senate Commerce Committee today (Wed.), where ranking Democrat Sen. Hollings (S.C.) was expected to be especially tough on the FCC’s 3-Republican majority.

The 3-2 vote by the FCC Mon. to ease some of its media ownership rules lay bare a deep ideological split at the Commission, evoking strong emotions and lofty rhetoric on both sides of the debate. Although Chmn. Powell described the Commission’s action as resulting from the most exhaustive and comprehensive review of broadcast ownership rules ever undertaken, he said the end product was a modest, though “very significant” change. On the other side, Comr. Adelstein called the decision “the most sweeping and destructive rollback of consumer protection rules in the history of American broadcasting.” As expected (CD June 2 p1) Republicans Powell, Abernathy and Martin voted for the changes in the Report and Order, and Democrats Copps and Adelstein voted against them.

Holding out little hope that the Republican majority of the FCC will have a sudden conversion on June 2, activists in favor of retaining limits on media ownership are formulating new strategies on how to challenge the FCC’s expected vote. Meanwhile, Commission sources said those activists probably were accurate in their assumptions that the Commission would adopt the proposals sent to the 8th floor in their original form. “All the cuts that [FCC Chmn.] Powell wanted are sticking,” one source said. Our sources say the Commission is likely to push the national ownership cap to 45% from 35%, that duopoly rules will be loosened considerably, that the newspaper-broadcast cross-ownership ban will be eliminated in most markets and that the TV/radio cross-ownership rule will be similarly loosened.

Northrop Grumman said its Information Technology (IT) sector had petitioned the FCC to make an additional 10 MHz of public safety spectrum available to allow the deployment of advanced broadband wireless applications by first responders. It said that additional capacity would allow federal, state and local govts. to roll out advanced broadband wireless and high-speed data applications and would meet key interoperability requirements. Northrop Grumman asked the Commission to seek comment on making spectrum available for those applications at 747-752 MHz, 777-782 MHz or elsewhere at 700 MHz. “Any new allocation of public safety spectrum in the 700 MHz band must enable use of advanced, next-generation broadband technologies that are available today that Congress may not have envisioned when it allocated public safety spectrum in 1997,” Chief Technology Officer Michael Grady said. The company is seeking identification of spectrum for a national, IP-based interoperable communications network to support broadband services for public safety.

NTIA told the FCC in comments this week that the Dept. of Transportation should conduct a follow-up study on how coordination zones were working for dedicated short-range communications (DSRC) technology. The Commission last fall proposed licensing and service rules for 5850-5925 MHz for DSRC, which can provide short-range wireless links to transmit data between vehicles and intelligent transport systems (CD Nov 8 p9). NTIA said the proposed rules “strike a reasonable balance between establishing new services that will benefit the public and allowing for the continued operation of national defense radar systems used by federal agencies.” Some commenters urged the Commission to require prior coordination procedures when DSRC operations could conflict with systems such as fixed satellite services or high-power radar. NTIA said DoT “expended substantial effort” developing coordination zones to ensure Defense Dept. concerns on interference from high-power govt. radar systems were resolved. “NTIA believes that since many of the technical parameters for the DSRC equipment to be used in the United States have now been finalized, it is appropriate for the DoT to initiate another study to determine the effectiveness of the current coordination zones,” it said. As with the previous study, this would be done with DoD, working through the Interdepartment Radio Advisory Committee process, and would “take into account future government radar operations,” NTIA said. NTIA said site-specific licensing was appropriate for DSRC road-side units to meet the parameters set in a standard developed by the American Society of Testing & Materials (ASTM). That standard offers a way of standardizing access to 5.9 GHz, which could help achieve national interoperability, NTIA said. It recommended the FCC authorize DSRC on-board units under its Part 90 rules instead of its Part 15 unlicensed rules. To bolster national interoperability, NTIA also recommended the Commission incorporate by reference an industry-developed ASTM standard into its Part 90 rules for that band. The FCC’s proposed rules would allow entities providing public safety DSRC operations to use that band and would put application, licensing and processing rules under Part 90 for public safety agencies. The proposal also would apply competitive bidding procedures if the FCC allowed nonpublic safety users in the band and if the licensing scheme resulted in mutually exclusive licenses.

Former FCC Wireless Bureau Chief Thomas Sugrue will lead federal and state govt. affairs for T-Mobile USA when he joins the carrier in mid-June, a spokeswoman confirmed: “He brings tremendous breadth and depth on all aspects of wireless communications and related policy issues.” Sugrue departed from the Commission in Jan. following a 4-year stint as the longest-running chief of the Wireless Bureau. At that time, he became special counsel for what was then the Office of Plans & Policy. Before being named Wireless Bureau chief, Sugrue was a partner in the firm of Halprin, Temple, Goodman & Sugrue and held positions at NTIA and in the FCC’s Common Carrier Bureau, including as chief of the Policy & Program Planning Div.

The FCC maintains a “cozy relationship” with the telecom and broadcast industries, taking more than 2,500 trips paid for by the industries to the tune of $2.8 million over the last 8 years, the Center for Public Integrity charged in a new report. That was in addition to $2 million a year in official travel funded by taxpayers. “The report… reveals more than ever before just how incestuous the relationship is between the Federal Communications Commission and the broadcasting and cable industries it is supposed to regulate. The idea that the FCC can render an objective, independent judgment about media ownership is laughable,” said Center Exec. Dir. Charles Lewis. An FCC spokesman said it was important for Commission officials to get outside the Beltway to exchange information with a wide variety of groups and to get a wide variety of opinions. He said some of the trips are sponsored by universities and some were for technical conferences. In the report itself, Comr. Abernathy said she believed in meeting with an array of people and such trips provided crucial opportunities for information-gathering. The report also quoted an FCC ethics official as saying each trip was scrutinized to determine whether it was legal and “seemly.” Other FCC officials said those trips were important for learning what each industry was doing. The report said FCC commissioners and agency staffers attended hundreds of conventions, conferences and other events all over the world, including Paris, Hong Kong and Rio de Janeiro, staying in such high-priced hotels as the Bellagio in Las Vegas. The report said the top destination was Las Vegas, with 330 trips, 2nd was New Orleans with 173, 3rd was N.Y. with 102, and 4th was London, with 98. Other popular destinations included Orlando, San Francisco, Miami, Anchorage, Palm Springs, Buenos Aires and Beijing. The biggest industry sponsor of the trips was the NAB, which paid $191,472 for 206 FCC officials at its events. The center also unveiled a 65,000-record, searchable database containing ownership information on virtually every radio station, TV station, cable system and telephone company in America. In its report, the center analyzed media ownership in the home towns of the 5 FCC commissioners. Of the 203 commercial radio stations in those 5 home towns, 50 are owned by 4 publicly traded, out-of-state radio conglomerates and 27 by radio giant Clear Channel Communications. The cable systems in the 5 communities are controlled by 4 companies -- AOL Time Warner, Advance/Newhouse, Insight -- and one locally owned company. Of the 20 network affiliates in the 5 cities, 14 are owned by out-of-state companies, including 2 each by News Corp. and Hearst-Argyle. The center said the FCC was too dependent on information from the companies it regulated in making its regulatory decisions.

Analyzing all the various leaks to the media about the FCC’s plans to relax media ownership rules (CD May 13 p1), the Consumer Federation of America (CFA) and Consumers Union (CU) said the new rules would lead to consolidation of the 2 most important sources of news -- newspapers and local TV -- for as many as 70 million U.S. households. CFA and CU argued that the FCC proposal effectively would gut the public interest standard of the Communications Act and would afford less protection for media mergers than the antitrust laws traditionally did for other kinds of mergers. “The Justice Department doesn’t do democracy, they do commerce,” CFA Research Dir. Mark Cooper said. The FCC is set to vote June 2 on the draft proposal. CFA and CU said their own sources within the FCC confirmed the media reports on which they based their analysis. “Unfortunately, the proposed rules circulated by the FCC are driven by political deals and deregulatory ideology, not rigorous analysis or First Amendment principles,” said Gene Kimmelman, CU senior dir.- public policy. Cooper, who wrote the analysis, said the FCC draft order ignored audience size, actual patterns of media use and the dramatic difference between entertainment and the dissemination of news and information. The analysis said mergers would be allowed in 140 concentrated local markets and in as many as 100 of the local markets representing nearly half the national population there already was one dominant newspaper. Allowing a merger between a dominant newspaper and a large TV station would create a local news giant that would threaten alternative news viewpoints, Cooper and Kimmelman said. In those markets, Cooper said, one company would have half of the total audience and half of the reporters. They criticized the idea of allowing cross- ownership in places other than small rural areas, such as Atlanta, Louisville, New Orleans and San Antonio, where one newspaper would have a 90% or larger share of the newspaper circulation and a merger typically would attract 1/3 of the TV audience. CFA and CU said the FCC proposal failed to properly define markets by ignoring the fact that almost half of all broadcast stations did not provide news and would set a “dangerously low standard” for competition in local media markets by allowing the count of major news media voices to decline to as low as 3 or 4 in many markets. The groups also charged that the draft appeared to be driven by a “results- oriented political agenda.” One example they cited is that UHF stations appear to be discounted for purposes of the national cap on network ownership of local stations, but not for purposes of the cross-ownership and the duopoly rule. CFA and CU proposed that no mergers between TV stations and newspapers be allowed if the market was or would become concentrated because of the merger, that no mergers involving TV stations be allowed if the same conditions existed. At the beginning of a news conference discussing the analysis, Kimmelman wryly noted that none of the major TV networks were covering the event. Cooper later said he didn’t expect that the new analysis would necessarily sway the Republican members of the Commission. “The battle over media ownership doesn’t end on June 2. It begins on June 2” when people and communities react to a wave of consolidation, he said.

When AOL wanted to merge with Time Warner back in 2000, critics feared the marriage of such a large content company with an Internet service provider would put a stranglehold over a relatively new communications technology -- Instant Messaging (IM). The federal govt. agreed then, placing as one of the conditions on the merger a requirement that the new company work toward developing interoperability for IM that would allow other companies to provide IM services that would let their customers communicate with AOL’s IM customers.

The FCC entered a consent decree with Qwest Wed. in which the company agreed to pay the govt. $6.5 million and admitted violating a ban on providing long distance in its territory before receiving Commission approval. The payment eclipses a $6 million fine the FCC levied on SBC in Oct. for violating a condition of its 1999 merger with Ameritech, which the agency touted at the time as its largest fine ever.