Proceed With Caution

Cable World, June 9, 2003

Byline: ALICIA MUNDY

Within 48 hours of the Federal Communications Commission's vote last Monday to loosen broadcast media ownership rules, Sen. John McCain (R-Ariz.) had the five commissioners seated before his Commerce Committee to explain the decision.

McCain announced that he would move a bill to roll back the FCC's new network cap of 45% to the existing 35% on June 19 - Hill staffers said it will probably pass in committee. In theory, the general concern on the committee with the FCC's omnibus deregulation of broadcasting had nothing to do with the cable industry. However, the fallout from the FCC vote among both Republican and Democratic politicians suggests that the broadcast decision could have wide implications for many cable-oriented issues due to come up at the FCC and in Congress.

The worst moment for cable with the Senate Commerce Committee probably came when FCC Chairman Michael Powell was explaining to the senators that the much-vaunted "public interest" obligations of media magnates only applied to broadcasters - not to the cable industry that serves 76% of the nation.

McCain interrupted Powell with an ominous threat: "We will be reviewing that," he said, sounding alarmingly like Arnold Schwarzenegger's Terminator intoning, "I'll be back." Caught completely by surprise, several cable lobbyists in the audience twitched, while members of the National Association of Broadcasters grinned. Later, McCain told Cable World, "I'm serious about this issue. There's a lot we have to look at with the cable industry, and we're going to."

A Hill staffer said it will be "difficult, but not impossible" to deal with cable and the public interest.

The FCC's 3-2 partisan decision on June 2 was monumental: It raised the TV network ownership cap to 45%, which helps News Corp. and Viacom, both over the current 35% limit, and NBC, which is at 34%.

The vote also opened the top 79 markets to cross-ownership of newspapers and broadcast stations, which Sen. Byron Dorgan (D-N.D.) says he wants overturned. It allows broadcasters to own as many as three stations in the largest markets. And it redefined radio markets in a way that will prevent another Clear Channel market oligopoly - although it grandfathered that corporation's existing empire.

To some analysts, such as Blair Levin of Legg Mason, the FCC's review of the rules and their investigation of likely transactions and their impact on localism, diversity and competition should have included the "cable factor." "I don't understand the intellectual reasoning there in leaving out how additional ownership by and of cable entities figures in their evaluation of the marketplace," he said. FCC Media Bureau Chief Ken Ferree said that in such a case, all the license transfers would be reviewed.

Now that the broadcast ownership issue is moving to court and Congress in the form of suits, appeals and potential legislative delays, the door is open to move on critical, bottom-line cable matters. The ownership cap may be first on the agenda - raising it from 30%, a figure which the Appeals Court disputed, to 40%. But with the backlash in Congress over broadcast ownership changes, it's not certain whether the FCC will push ahead with this as planned, or wait longer, and then move to raise it incrementally. One cable lobbyist who declined to be quoted said that if the FCC moved quickly on cable caps, they would be waving a red flag in Congress's face.

Other issues will be must-carry and plug-and-play, both important to the digital transition to which Powell has again turned his attention. The 9th Circuit Court of Appeals will soon decide the FCC cable modem ruling case.

And, finally, there's McCain's growing concerns about cable rates: He's unleashed the General Accounting Office on cable and on the FCC. Cable will need a good PR campaign, Hill staffers said, to preserve its position.

THE NEXT QUESTION:

*Will the FCC withhold its action on the cable ownership cap until fall?