WASHINGTON -- Before leaving for their Thanksgiving break, congressional leaders gave current and future chairs of the Federal Communications Commission a gift that could keep giving for years to come.

That gift: easing a mandate that requires the FCC to review politically sensitive media ownership rules. If the compromise becomes law, the FCC will only be required to review its rules every four years, rather than two.

And one of the most sensitive rules - national television station ownership limits affecting the networks and other large group owners - would be exempt from the so-called quadrennial review altogether. That means the FCC wouldn't be forced by Congress to run into the political buzz saw surrounding national television station ownership limits.

Current FCC chairman Michael Powell's push to deregulate both national and local caps on June 2 sparked a huge political backlash - as have efforts by past FCC chairmen. Critics said the FCC's new rules would spark a wave of consolidation, leaving news and entertainment in the hands of a few corporate giants.

The backlash fueled a movement on Capitol Hill, resulting in a rider on a spending bill that restored the old national cap, preventing a single company from owning stations that cumulatively reach more than 35% of the viewing audience. The FCC had raised it to 45%.

Powell justified deregulation as consistent with the law, with past court rulings, and with a media market changed by cable and satellite. But Powell has repeatedly asked Congress to relieve the agency from the treadmill of two-year mandatory reviews.

The White House defended Powell's 45% cap with a veto threat, a threat Senate leaders say was serious enough for them to strike a compromise 39% cap. While the compromise's tighter limits could be seen as a slight rebuke to Powell, it helps the FCC in other ways beyond changing the biannual review to quadrennial.

One way is that the compromise cuts off an avenue that the networks might use to challenge the national cap by forbidding the FCC from considering petitions to forbear from the rule. Another way is that by setting the cap at 39%, it accommodates Viacom Inc.'s (VIA) CBS network and News Corp.'s (NWS) Fox network, which hover at about 38%.

Fox and Viacom were the companies that challenged the FCC's decision not to raise the cap as a result of a biannual review begun in 1998. They won their case in a landmark February 2002 Appeals Court ruling that heavily influenced Powell as he moved toward his June 2 decision.

The compromise also waives the rule for two years if a company exceeds the limit through purchases or mergers. And audience growth that occurs simply through population growth would not count toward the cap.

Of course, the 39% cap could still be challenged in court. But one of the authors of the compromise, Sen. Ted Stevens, R-Alaska, who chairs the Senate Appropriations Committee, maintains that the cap will better withstand legal challenges since it is Congress, and not the FCC, that set it.

That's not so, said Rep. Bernie Sanders, D-Vermont. He maintains that the compromise doesn't really prevent the FCC from raising the cap, and so is no less vulnerable to legal challenge than before.

Indeed, the February 2002 federal Appeals Court decision noted that the 35% limit originally set by Congress was simply a starting point that didn't relieve the FCC from examining the rule every two years to see if it should be raised or repealed. The compromise merely substitutes in communications law "39%" for "35%," leaving open the possibility that the FCC could change it.

"This is not a statutory mandate," said Sanders' spokesman Joel Barkin. "It is a change in the FCC's rules. Nothing in this language legally prohibits the FCC from loosening the 39% cap."

And setting the cap at 39% without any hearings "will make it more vulnerable than past rule changes," Barkin said.

But by removing the cap from the quadrennial review and denying forbearance petitions, the compromise chips away at avenues for legal attacks - and relieves the FCC from undertaking a politically sensitive review of the national cap at all.

The compromise could also help solidify other provisions of the FCC's June 2 deregulation by allowing them to stand for four years without review, instead of two. Consumer groups believe that the FCC's decision to eliminate a provision barring cross-ownership of television stations and newspapers in a market, or a decision allowing ownership of up to three television stations in larger markets, may have a greater negative impact on the diversity of news and information than the national cap.

Indeed, the National Association of Broadcasters, which strongly opposed raising the national cap but supported local ownership deregulation, has backed the compromise.

The measure still faces congressional hurdles, as Senate Democrats have vowed to defeat it. But their task has become more difficult without the key support of Stevens, who joined other Republicans that had bucked the White House by favoring a rollback to 35%.

© 2003 Dow Jones & Company Inc

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