##  July 25, 2001

## 

## STATEMENT OF CHAIRMAN MICHAEL K. POWELL

Re: *Assignment of Broadcast Licenses Held by Subsidiaries of
Chris-Craft Industries, Inc., to Fox Television Stations, Inc.*

Today the Commission approved the assignment of certain licenses from
Chris Craft Industries, Inc. to Fox Television Stations, Inc., finding
the assignment to be in the public interest. The Commission conditioned
its approval on the divestiture of various assets in order to bring the
company into compliance with our broadcast ownership rules. I write
separately to highlight the basis upon which the Commission found the
transaction to be in the public interest; and, to challenge the
suggestion by the minority that the Commission has somehow abandoned its
public interest obligation. To the contrary, today's decision affirms
the fact that Commission rules and long standing Commission precedent
guide our public interest deliberations.

**I. THE PUBLIC INTEREST STANDARD**

The Commission is required to examine a license transfer (often in the
context of a merger) and must affirmatively find that the transfer is in
the public interest.[^1]

In the context of mass media transactions, the Commission\'s analysis is
simplified by the extensive structural ownership rules Congress and the
Commission have promulgated. The benefits of these prophylactic rules
are that they are clear and provide some certainty to marketplace
participants. They have the additional benefit of administrative
efficiency in reviewing combinations.

The extensive rulemaking proceedings used to develop the broadcast
ownership rules take full account of the Commission\'s diversity goals
and concentration concerns. These rules squarely embody the Commission's
public interest goals of limiting the effect of market power and
promoting diversity of viewpoints in the market.[^2] A transaction that
complies with structural rules designed to advance the public interest
(when they exist), should not be subject to further ad hoc review;
otherwise the exalted benefits of such rules would be eviscerated.

In other areas, Congress and the Commission have not set out strict
structural rules. As a result, the Commission reviews these transactions
in a more case specific manner. This is the case with telephone mergers.
In this area there are no rules on the number of lines or central
offices that a company may own. As a result, the Commission developed a
four-prong test to guide its review in such cases. The analytical
framework suggested by the minority would have the Commission overlay
this four-prong test, or some other equally ambiguous standard, on top
of our structural rules, to determine if the transaction would
"*otherwise* serve the public interest." I fail to see the wisdom of
this redundancy, applying two bodies of law designed to achieve the same
basic objectives.

### II. PUBLIC INTEREST FINDINGS

This transaction contravenes three of the Commission's broadcast
ownership rules; the national ownership cap,[^3] the local television
multiple ownership rule,[^4] and the television/newspaper
cross-ownership rule.[^5] The Commission *specifically* conditioned its
approval on the licensee's compliance with these rules. Consistent with
long-standing Commission precedent, the *Order* gives the licensee a
reasonable amount of time to divest assets in order to comply with our
rules. In so doing, the *Order* conducts a public interest test under
each rule; weighing the request for a temporary waiver against our
underlying goals of diversity and competition in the broadcast
marketplace.[^6]

For example, with regard to the national ownership cap, the *Order*
finds; "The Commission has consistently determined that in multiple
station transactions the overall benefits of allowing time for an
orderly transition will outweigh any temporary impact on diversity and
competition from common ownership during a reasonable period following
grant of the application."[^7] The *Order* further notes that "given the
size of the proposed transaction, the practical difficulties of
divesting the necessary stations, and our policy of avoiding forced
sales, ... the advantages of granting a ... *temporary waiver* ... will
outweigh any temporary impact on diversity and competition and is in the
public interest."[^8] In regard to the duopoly in Salt Lake City, the
fact that ten independent commercial and non commercial stations and 30
broadcast media voices will remain in the market post merger, provided a
basis for the *Order* to find that a six month waiver from the duopoly
rule would not "disserve the public interest." Furthermore, in granting
the temporary waiver of the television/newspaper cross-ownership rule,
the *Order* points out that the New York market would still have 19
independent TV voices, over 120 commercial and noncommercial radio
stations, 25 daily newspapers and hundreds of weekly papers.[^9]

Given these findings, one is left wondering why the minority so
mischaracterizes the *Order's* grant of compliance periods as somehow
constituting "permanent waivers of the Commission's rules." As is
highlighted above, granting parties a reasonable period of time for
divestiture of assets to satisfy our rules is a long-standing and
well-settled Commission principle**.** *See Shareholders of CBS
Corporation*, 15 FCC Rcd 8230, 8236 (2000) (Commission grants 12 months
for company to comply with the national ownership cap)*; AT&T/MediaOne*,
15 FCC Rcd 9816 (2000) (Commission grants slightly under 12 months for
company to divest assets to comply with the cable horizontal ownership
cap). The Commission is not unique in this regard. In its antitrust
review of mergers, the Department of Justice and the Federal Trade
Commission typically provide parties with a reasonable amount of time
for divestiture in order to come into compliance with the antitrust
statutes. I find it fantastic that the minority would characterize these
divestiture periods as deviations from our rules in order to approve the
transaction.

**III.** **FOREIGN OWNERSHIP**

The Commission takes seriously the statutory limits placed on certain
transactions. Under Section 310(b)(4) of the Communications Act,
Congress prohibits the grant of a license to "any corporation directly
or indirectly controlled by any other corporation of which more than one
fourth of the capital stock is owned of record or voted by aliens ... or
by any corporation organized under the laws of a foreign country, if the
Commission finds that the public interest will be served by the
revocation or refusal of such license."[^10]

In 1995, the Commission, pursuant to the requirements of Section
310(b)(4), found that, although News Corp.\'s interest in Twentieth
Holdings Corporation (the parent of Fox Television Stations ("FTS" or
"Fox")) exceeded the 25% benchmark established in Section 310(b)(4), the
ownership structure was in the public interest.[^11] The Commission also
held that, "it would disserve the public interest to confine our
decision to stations FTS already owns, for doing so would unnecessarily
hinder the company's ability to expand and frustrate its reasonable
expectations for doing so."[^12] The Commission concluded that, "FTS, as
presently structured may, consistent with the public interest, acquire
additional broadcast stations."[^13] As the Order discusses in detail,
the corporate structure present here is consistent with our previous Fox
decision.[^14] The claim that News Corp/Newco, rather than FTS, controls
the stations is simply not consistent with Commission precedent.

The Commission's analysis of the station's locus of control generally
rests on three factors; programming, personnel and finances. FTS will
have the ultimate control and decision making authority in each of these
three areas: all of its programming activities are subject to the
approval and control of FTS; the general manager and all of the
department heads of each station report to FTS; and FTS controls the
budget process.[^15] The Office of General Counsel and the Mass Media
Bureau found that the proposed ownership structure complies with the
Commission's 1995 Fox decision; thereby concluding that no additional
public interest analysis is necessary under Section 310(b)(4). I have
the highest confidence in the independent legal analysis and judgment of
the Commission staff in reaching this conclusion.

The minority's strained effort to distinguish the corporate structure
presented in this transaction from the prior Fox decision is not
persuasive. By elevating "form over substance," the minority essentially
presents the Commission with two alternatives. We could undo the 1995
Fox decision, that created for the first time in the history of
television, a competitive fourth network that provides a uniquely
diverse voice in American political discourse; or turn the clock back to
1995 and freeze the company forever as it existed at that time in an
environment in which its competitors are not similarly restrained. One
is left to wonder why anyone who places a high value on diversity of
voices and competition in the media marketplace would find either result
serves the public interest.

### IV. CONCLUSION

In short, where there are clearly applicable structural rules,
reflecting the Commission\'s or Congress\' diversity and concentration
judgments, I believe a license transfer to be in the public interest if
the parties satisfy the rule. As is the case here, in multiple-station,
multiple market transactions, it is common for the combined entity to
create temporary violations of our ownership rules. Consistent with
Commission precedent, however, the *Orde*r balances the grant of a
compliance period, against any potential harm to the goals underlying
the rule. Beyond this detailed analysis, engaging in an additional, more
subjective, evaluation using some ambiguous standard is unnecessarily
complex and redundant. This additional burden places more weight on a
review process that is already laboring under the demands of a
fast-paced, innovation-driven marketplace.

Finally, on behalf of the agency, I feel compelled to address
Commissioner Tristani's assertion that; "the decision also shows the
lengths the Commission will go to avoid standing in the way of media
mergers." While we may have a respectful disagreement over the public
interest standard and the rote application of the four-prong test in
license transfers, this sweeping assertion is not only offensive, but
absurd. If the majority was on the crusade she suggests, then the
Commission would have granted permanent waivers of our rules, which it
clearly did not.

[^1]: Section 310(d) of the Communications Act provides, in pertinent
    part, that the Commission may only grant a proposed license transfer
    if it determines that \"the public interest, convenience, and
    necessity will be served thereby.\" 47 U.S.C. § 310(d).

[^2]: *See, e.g.,* In the Matter of Review of the Commission\'s
    Regulations Governing Television Broadcasting, Television Satellite
    Stations Review of Policy and Rules, MM Docket Nos. 91-221, 87-8,
    FCC 99-209, *Report and Order*, 14 FCC Rcd 12903, ¶¶ 1, 15 (1999)
    (\"ultimate objectives of \[the Commission\'s\] ownership rules are
    to promote diversity and to foster economic competition. . .\"); In
    the Matter of 1998 Biennial Regulatory Review---Review of the
    Commission\'s Broadcast Ownership Rules and Other Rules Adopted
    Pursuant to Section 202 of the Telecommunications Act of 1996, MM
    Docket No. 98-35, FCC 00-191, *Biennial Review Report*, 15 FCC Rcd
    11058, ¶¶ 5-6 (2000); *Time Warner Entertainment Co. v. United
    States*, 211 F.3d 1313, 1320 (D.C. Cir. 2000) (government responded
    \"the promotion of diversity in ideas and speech, as well as the
    preservation of competition, are important governmental interests. .
    .\").

[^3]: Telecommunications Act of 1996, § 202(C)(1); 47 C.F.R. §
    73.3555(e).

[^4]: Review of the Commission's Regulations Governing Television
    Broadcasting (Television Ownership Order), 14 FCC Rcd 12932-12933
    (1999).

[^5]: 47 C.F.R. § 73.3555(d)

[^6]: *See LINT Co.*, 15 FCC Rcd 18130, 18133 (2000); *Shareholders of
    CBS Corporation,* 15 FCC Rcd 8230 (2000).

[^7]: *Shareholders of CBS Corporation,* 15 FCC Rcd at 8236.

[^8]: *Order* at para. 23. (emphasis added)

[^9]: *Order* at para. 43.

[^10]: 47 U.S.C. § 310(b)(4)

[^11]: *Fox Televisision Stations*, 11 FCC Rcd 5714, 5723 (1995)

[^12]: *Id.* at 5728.

[^13]: *Id*.

[^14]: *Order* at para. 19.

[^15]: *Order* at para. 16-18.