Power Shift Augers New Direction on Media Issues

Media legislation will likely take on a new tone in the wake of a Democratic takeover in the House and Senate.

Democrats John Dingell of Michigan and Ed Markey of Massachusetts will likely take back the House Commerce Committee and Telecom and Internet Subcommittee respectively. Both lawmakers chaired those committees before the GOP congressional takeover in 1995.

In the Senate, the chairmanship of the Commerce Committee will fall to Daniel Inouye of Hawaii. Inouye and fellow World War II veteran Ted Stevens (R-Alaska) now co-chair the committee; the arrangement is expected to be maintained under Inouye.

None of the four committee leaders are staunch supporters of relaxing media ownership rules, and Wall Street expects elevated scrutiny on the matter. An analyst note from Victor Miller of Bear Stearns said "the House and the Senate committees and subcommittees that oversee media ownership rules will be more active in holding hearings and more vocal in the disapproval of any proposed changes."

The FCC is charged with determining how many media outlets in a community can be owned by a single company. Following a successful legal challenge by News Corp. in 2001, the commission dropped several restrictions in 2003, which led to garment-renting on Capitol Hill. Congress rolled back the FCC's network reach rule from 45 to 39 percent of the national audience, and a federal court remanded most of the TV rules.

The FCC continues to review the rules, with final reply comments due in late December. A revised media ownership rulemaking is expected in early to mid-2007. Given the climate change on Capitol Hill and a Republican-led FCC, a radical rewrite is unlikely, Bear Stearns analysts said:

"We believe very little will happen in the media ownership realm. The FCC may make changes to ownership rules in the very largest markets and may focus these rules on newspaper-broadcast cross-ownership only. And Tribune, with outstanding waivers in New York City and Los Angeles, may be the only real beneficiary. But this rule is not a 'slam dunk' by any stretch."

The analyst note went onto say share prices would be largely unaffected by the new leadership because "stocks have nothing baked in on rule changes now."

In addition to media ownership rules, a comprehensive telecom bill remains in limbo. Stevens and Inouye managed to get the bill out of the committee in June, but a controversial Internet provision hindered a full floor vote. The heart of the bill standardizes the video franchising process across the country; it also reforms the Universal Service Fund; addresses emergency communications interoperability; opens taboo broadcast channels; and grants the FCC the authority to implement the broadcast flag. What it does not do is prevent broadband providers from fiddling with the download speed of a given Web site--the concept known as "network neutrality."

Supporters of network neutrality, mostly Democrats, slapped a hold on the bill the minute it was voted out of the Commerce Committee so it couldn't be voted on without debate, and potentially, a filibuster. Consequently, no floor vote was scheduled, but in September, Sen. Bill Frist (R-Tenn.) promised get it on the floor after election. Frist, who's Nashville constituency favors the broadcast flag, may not be able to follow through with majority leadership now falling to Sen. Harry Reid (D-Nev.). The majority leader has the power to schedule floor votes.

Radio World contributed to this report