Public interest groups, two Connecticut newspapers, and the co-owner of the Journal Inquirer have asked the Federal Communications Commission to reject Tribune Co.’s request for a renewed exemption from the commission’s ban on cross-ownership of television stations and newspapers in the same market. Tribune has been in violation of the cross-ownership rules for more than 10 years, operating on a supposedly temporary waiver.
The two newspapers, the Norwich Bulletin and the Meriden Record-Journal, have filed statements with the FCC in support of a petition from JI co-owner Neil Ellis.
As it tries to emerge from its 21-month Chapter 11 bankruptcy, Tribune’s major creditors, including J.P. Morgan Chase, are on the verge of taking over the media conglomerate. A mediator was recently appointed to negotiate a new structure for the company with the contentious creditors.
The creditors have asked the court to assign them ownership of Tribune’s Hartford Courant and TV stations WTIC-TV61 and WCCT-TV20, both in the Hartford-New Haven TV market, as well as Tribune media properties elsewhere.
In addition to the ban on cross-ownership of newspapers and TV stations in the same market, FCC rules prohibit common ownership of two TV stations in the same market unless certain audience share criteria are met. Tribune has asked for a permanent waiver of the rules, or, failing that, a temporary waiver lasting another 18 months after the FCC completes its recently initiated general review of its media ownership rules.
The finances of Tribune and other media companies collapsed as the economic recession engulfed the nation. Then Chicago real estate magnate Sam Zell undertook a controversial buyout of Tribune that burdened the company with almost $13 billion in debt, leading to the company’s bankruptcy in December 2008.
Tribune contends that the cross-ownership rules – although provisionally loosened this year – make its survival more difficult in light of increased competition from the Internet, satellite TV, and other programming sources. Allowing media consolidation would maintain diverse broadcast and newspaper outlets, Tribune says, and so waiving or repealing the cross-ownership ban is in the public interest.
In addition, Tribune contends, with a waiver in hand, transferring the company’s cross-owned properties to new owners is within the bankruptcy court’s prerogative and should be honored by the FCC.
Tribune further claims that WCCT, formerly WTXX, is a “failed” or “failing” station that can be sold to an out-of-market buyer only at an “artificially depressed price” if it’s not operated by Tribune, the only reasonably available and willing entity – a condition for a waiver of the divestiture required by the cross-ownership and duopoly rules.
In their petitions against another waiver for Tribune, Ellis and the public interest groups argue that Tribune’s need to emerge from bankruptcy doesn’t outweigh the potential “loss of diversity and viewpoints” from disadvantaged competitors that don’t have broadcast licenses.
As co-owner of a competing newspaper, Ellis says, he “suffers from the Tribune’s use of the benefits it receives as a result of the cross-ownership to prop up the bankrupt Hartford Courant.” Tribune, Ellis says, offers advertisers discounts for using both its TV stations and its newspaper, handicapping the JI, which has not been given similar broadcast licenses by the FCC.
As for the proposed transfer of the cross-owned newspapers and TV stations to Tribune’s successor, the petitioners argue that FCC policy favors termination of common ownership of newspapers and broadcast stations in the same community upon sale of the broadcast properties to a new owner.
The public interest petitioners also note that a petition for reconsideration and a judicial challenge to the FCC’s 2007 waiver remain pending, “so the commission’s 2007 waiver decision is not final and subject to reversal. A fundamental underpinning of the FCC’s licensing policies is that an invalidly granted license cannot be assigned. Before the FCC acts on the new requests for waivers, it should complete its reconsideration of the 2007 decision.”
Also, they argue, Tribune has not promised any increase in local news, which would be in the public interest. “In fact, Tribune has significantly degraded newsgathering capacity in Hartford and does not intend to reverse that practice,” their petition says. Also, “Tribune boasts about the degree to which it has integrated the Hartford newsgathering operations, rather than show that the newsrooms are operated independently.”
Tribune argues that “principles of comity” – uniformity between courts – require the FCC to subordinate its policies to those of the bankruptcy code. But the petitioners argue the FCC’s policy is to coordinate the two sets of law, “not to place the interest of private parties ahead of the public. Sale of the cross-owned Tribune properties as a package is not required to assure comity with the bankruptcy laws; the commission can require sale of the broadcast stations and the newspapers to different owners without in any way undermining the bankruptcy laws.”
Tribune’s opponents also say that none of the cross-owned properties, including WTXX, now WCCT, is either failed or failing in any way that would justify a waiver of the TV duopoly ban. “WTXX has not gone dark and is not in involuntary bankruptcy,” another waiver requirement, the petitioners say. “Nor has Tribune shown any efforts to sell the station to an out-of-market buyer since 2006. It simply asks the commission ‘to assume’ that the properties cannot be sold except at an artificially depressed price.
“While the stations may not be salable at the unreasonably high price that the prior ownership team unwisely agreed to pay, the test is not whether the sale is at a loss but whether the price would be artificially depressed.”
Finally, the petitioners ask the FCC to limit to six months any waiver it may grant, six months being “ample” for “the orderly disposition of media properties.”
“This newspaper supports the petition of Neil Ellis,” Norwich Bulletin Executive Editor James Konrad wrote FCC Chairman Julius Genachowski. “We urge the FCC to hold a formal hearing on the issue so that we may opposed the Tribune waiver on the record.”
Eliot White, owner of the Record-Journal and the Sun of Westerly, R.I., also expressed support for Ellis’ petition and urged the FCC to hold a public hearing “so that we may oppose the Tribune waiver on the record.”
A Tribune spokesman did not respond to a request for comment.
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