Decision may open door for new wave of media megamergers

Firms win court review of TV ownership limits

February 20, 2002|By NEW YORK TIMES NEWS SERVICE

WASHINGTON - A federal appeals court handed a huge victory to the nation's largest television networks and cable operators yesterday, ruling that the government had to reconsider sharp limits on the number of stations a network can own and striking down the regulation that had restricted cable operators from owning television stations.

Unless overturned on appeal the ruling would remove significant impediments that have prevented companies such as AOL Time Warner, a big cable operator, from merging with broadcast networks that own television stations. It would also permit big broadcast networks such as Viacom's CBS and the News Corp.'s Fox, which have bumped against the station-ownership limits, to continue buying stations unimpeded.

The decision, seen as a setback for consumer advocacy groups and smaller owners of broadcast stations, could open the door for a new wave of megamergers in the entertainment and media industries and a continued concentration of power among the biggest media companies.

Executives at big media companies said the ruling was a welcome recognition that the ownership rules had become outdated in the era of media consolidation.

"We're very pleased the court vacated the cable broadcast cross-ownership regulation," said Paul T. Cappuccio, general counsel of AOL Time Warner, which had challenged the regulation in court. "The rule had long ago become an anachronism and did not serve the public interest. It wasn't remotely necessary to protect competition."

But consumer groups expressed alarm at the prospect of further concentration of ownership.

"Comcast and Time-Warner will be kicking the tires on NBC before the week is out," said Andrew Jay Schwartzman, president of the Media Access Project, a nonpartisan group that advocates diversity of the airwaves. Schwartzman said his group would appeal the decision, taking it to the Supreme Court if necessary. "It's a terrible thing for diversity of viewpoint in general, for programming diversity in particular, and it will increase the price of video programming to the American public if upheld."

The media ownership rules were supported by Democratic regulators appointed during the Clinton administration. But yesterday's court decision continues a series of actions in the past year by the courts and by the Federal Communications Commission under the Bush administration to eliminate decades-old ownership restrictions and other regulations that have constrained the expansion of the largest companies in the television, cable and telephone markets.

The ruling came in the consolidation of five separate cases, in which the FCC had sought to defend the ownership regulations. But Michael E. Powell, the agency's chairman, has long been openly skeptical of those rules.

Officials at the FCC and at the National Association of Broadcasters, which represented the network affiliate stations that lost yesterday, said that they had not decided whether to seek an appeal.

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