By David Hatch
(Friday, December 7) The Tribune Co. is seeking to challenge the ban on owning a newspaper and broadcast outlet in the same city after receiving a permanent Chicago waiver and temporary exemptions in four other markets from the FCC.
The waivers enable it to preserve combinations granted under various exceptions to the rule, paving the way for real-estate entrepreneur Sam Zell to take the company private in an $8.2 billion transaction.
The FCC acted Nov. 30 amidst a firestorm of controversy surrounding efforts by FCC Chairman Kevin Martin, a Republican, to permit such consolidation in the nation's 20 largest cities. The agency plans to vote Dec. 18 on the proposal.
In a complicated maneuver, the FCC's three GOP regulators technically denied Tribune's request for "indefinite" waivers while granting temporary exemptions under certain conditions. The approach allows Tribune to take legal action against the 32-year-old ban, a source explained.
The Tribune Co. notified the U.S. Court of Appeals for the District of Columbia that it intends to challenge the constitutionality of the so-called cross-ownership restriction and the need for waivers.
FCC Commissioner Michael Copps, one of two Democrats on the five-member agency, strongly criticized the development in a statement. "The FCC majority did everything it could to ensure that Tribune would challenge the newspaper-broadcast cross-ownership ban in court, even waiving certain procedural hurdles so the appeal could be filed immediately," he wrote.
"The next step will be for the majority to mount a lukewarm defense of the rule in court and hope that the entire rule gets thrown out," he added. Copps suggested that the Republican majority scripted the events to have the restriction overturned. An FCC spokeswoman had no comment.
The legal wrangling could extend the length of Tribune's waivers because the FCC specified they would expire in two years or six months after the end of any litigation, whichever is longer. The battle also could delay divestitures that Tribune might have to make in Hartford, Conn., under Martin's proposed rule changes.
In 2004, the 3rd U.S. Circuit Court of Appeals struck down a major relaxation of the FCC's media-ownership rules, including a plan to lift the cross-ownership rule in markets affecting nearly 75 percent of the U.S. population. Nevertheless, the court said at the time that the ban could be eased if the FCC justified the change.
David Kaut, a telecommunications analyst at the investment firm Stifel Nicolaus, observed, "This is Tribune's effort to get media ownership heard before the D.C. circuit, which has been more skeptical of FCC regulations." Kaut said Tribune is angling to strengthen the court's jurisdiction over anticipated challenges to Martin's planned loosening of the ban.
"That certainly was part of our reasoning," a Tribune source confirmed.
"Both sides have a lot at stake in getting their preferred court to hear the case," added Paul Gallant, a communications analyst with the Stanford Washington Research Group. He noted that newspaper companies supportive of relaxation were frustrated with the 3rd Circuit's decision.