The U.S. Senate has installed a speed bump for large media companies such as General Electric
In a 55-40 vote, the upper chamber acted under a 1996 law to, in effect, "veto" the FCC regulatory action. The majority of Democrats voting to oppose the rules found 12 Republican friends, bringing together some surprising foes -- Sens. Trent Lott (R-Miss.) and Byron Dorgan (D-N.D.). Outside the chamber, New York Times pundit William Safire and former Sen. Jesse Helms also opposed the FCC rules.
Why? Subject to the usual fine print, key elements of the rule would allow a company to own a broadcast station and a newspaper in the same city, and permit it to own up to eight radio and three TV stations and a cable company in some large markets. A broadcast network could reach 45% of the nation's viewers, from 35% now. The opposition fears that, if left to the marketplace, vertically integrated media companies would expand, use more of the same content across media, be careful not to offend advertisers, and present fewer and fewer viewpoints.
Would diversity suffer? There need be no explicit restriction on an opinion contrary to the economic interests of an advertiser, but content providers know who pays their salaries. It's great for The New York Times, which supports the repeal of the restrictions (thereby unmuzzling Safire), but quite another for most large or small media companies to do so in an environment of scarcer advertising dollars.
The counterarguments include that nothing stops a citizen from consulting any number of independent sources, especially via the proliferating Internet.
This was the second punch to the rule this week. On Monday, the federal court of appeals in Philadelphia refused to turn a legal challenge to the rule back to the D.C. court, which has -- at least when this writer went to law school -- sole jurisdiction over challenges to rules promulgated by the executive branch.
The big picture is that battles over federal regulatory rules signal our national ambivalence over where to draw the economic line. The U.S. brand of regulated capitalism falls between Europe -- slowly and painfully retreating from post-World War II democratic socialism -- and a dreamland where Ayn Rand and Milton Friedman run free. Stereotypes may dog the two major political parties' stands, but the reality is a muddy and gray middle.
The near-term picture is that the House hasn't voted on a similar provision, so it's a long way from reaching President Bush's desk and his presumed first veto. A two-thirds vote of both houses is needed to override a Presidential veto, exceeding the 59 presumed Senate votes including those absent lawmakers who have indicated a position.
So why are the senators lining up? The House has already approved an amendment -- supported by the National Association of Broadcasters -- to repeal a provision allowing the biggest TV networks to buy more local stations, and the Senate is expected to do the same. Given that the White House is unlikely to take a make-or-break stand on this with the $87 billion Iraq budget request on the table, this is undoubtedly part of the usual deal-making -- seasoned with a little payback from Sen. Lott for his demotion.
In the end, shareholders of the large media companies should expect that the rules will loosen a little, not a lot, and bring a few more acquisitions and, with luck and skilled management, some efficiencies and savings.
Jump into our own marketplace of ideas -- our Political Asylum and Current Events discussion boards.
Senior Analyst Tom Jacobs practiced law for 13 years before joining The Motley Fool, but he just couldn't get it right. Find his columns in his handy archive. He owns no shares of companies mentioned in this column but does own others disclosed publicly in his profile . We happy Motley Fools are investors writing for investors .
