NEW YORK — FOR the first time, the US Federal Communications Commission will officially give a foreign entity major control of an American broadcast firm.
Today, the FCC is expected to grant Australian-born, media mogul Rupert Murdoch a waiver of the rules of the commission's foreign-ownership restrictions. The ruling would permit the core of Mr. Murdoch's Fox television network to remain intact.
While some hail the controversial decision as a victory for free trade, others condemn it as opening the door to foreign influence in the US election process and yet another in a series of regulatory exemptions unfairly granted to the entrepreneur.
''It's the charmed life that Murdoch seems to lead,'' says one communications lawyer.
Other companies may find it harder to win such a waiver
because the FCC is reportedly planning to tighten regulations.
Murdoch, who is scheduled to testify before the House Ethics Committee on Tuesday about his publishing company offering House Speaker Newt Gingrich a $4.5 million book advance, was not available for comment.
''It would be presumptuous for me to say anything before the FCC proceeding,'' said Murdoch's lobbyist Preston Padden, who has a reputation for playing hardball, and winning.
Lawyers for the Metropolitan Council of the National Association for the Advancement of Colored People, which raised the foreign-ownership question, also withheld comment pending the ruling. The NAACP says large infusions of foreign capital make it more difficult for minorities to bid for TV stations.
The dispute, which could have forced Murdoch to dismantle his Fox Network, grew out of the NAACP's attempt to challenge Fox's license for station WNYW-TV in New York in 1994. In its complaint, the NAACP alleged that Fox Broadcasting had misled the FCC about it's foreign ownership when it bought six Metromedia stations in 1986. The stations subsequently made up the core of the Fox Television Network.
Federal law forbids alien ownership of more than 25 percent of American broadcast companies. In 1985, several months before the Metromedia sale, Murdoch became an American citizen to comply with the FCC's ownership rules. In his application to buy the stations, Murdoch stated that he controlled 76 percent of the stock. But, according to the complaint, he deliberately failed to disclose that the stock represented less than 1 percent of the equity. The rest, more than 99 percent, was controlled by Murdoch's News Corporation in Australia.
''The structure of the deal was a pure sham. It was structured purposely to evade the alien ownership laws,'' says another communications lawyer who wished to remain anonymous.
Last April, the FCC staff found that Fox Broadcasting had misled the Commission and was indeed 99 percent owned by News Corporation, an alien entity. It recommended that News Corporation sell all but 25 percent of its equity share in Fox Broadcasting to comply with the alien-ownership rules. Such a sale would have required Murdoch and his Australian News Corporation to pay the United States government millions of dollars in capital-gains taxes.
In a clear sign of Murdoch's growing political clout, two Republican congressman immediately challenged the FCC's staff recommendation. In interviews with Daily Variety published on April 25, Reps. Jack Fields (R) of Texas and Mike Oxley (R) of Ohio ''expressed dismay with the FCC probe.'' Mr. Oxley called it ''bogus.'' Mr. Fields reiterated his plans to hold a ''top to bottom'' review of the FCC.
On May 4, the commission agreed with its staff that Fox was foreign-owned but did not agree that they had been deliberately mislead. So instead of requiring Murdoch to restructure, they allowed him 45 days to demonstrate that it would be ''in the public interest'' to grant a waiver to the alien ownership rules, as the law allows.
''The result was preordained, regardless of what the staff recommended,'' says Andrew Schwartzman, director of Media Access Project, a first amendment law firm in Washington. ''There's an operative here, it's called the 'too big to fail doctrine,' and Murdoch fell on the 'too big' side for the FCC to bite the bullet.''
A spokeswoman for Oxley viewed the FCC's decision as a victory for free trade, noting that this year, the representative had introduced an ultimately unsuccessful bill that would have eliminated the foreign-ownership restrictions completely.
Other analysts were not surprised by word of the FCC's decision. They point out that since the inception of the Fox Network, Murdoch has been granted numerous exceptions. They include an exemption to the ban on selling syndicated programming and a lifting of the three-hour limit for network prime-time programming. ''I think it's because they're just so pleased to have someone competing with the three major networks,'' says one network lawyer.
But others note the significance of this ruling goes far beyond the competition between broadcast giants. While the FCC has bent the rules over the last 15 years to allow passive foreign investment in America's airwaves, this is the first time since the Communications Act of 1934 was passed that the American government has officially allowed foreign control of the American airwaves.
''Because we use the airwaves to inform people about our elections, I know that foreign entities are inappropriate trustees of the process,'' Mr. Schwartzman says. ''I don't want a foreign country, some prince, or any other foreign entity in a position to influence the outcome of our elections.''
Other media analysts contend technology makes the issue moot. With the Internet and satellite technology, they say, there is no longer a pragmatic way to control what gets beamed into American homes.