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The phrase “world domination” conjures up images of James Bond villains and their hordes of jumpsuited minions. But in this Information Age, world domination may have another, more familiar face. Fewer companies are controlling more information, dictating an ever-increasing amount of what the world reads, hears, and sees. Let’s say you come home from work, watch some music videos on MTV, get a news fix from Dan Rather on CBS, go see a movie released by Paramount Pictures, then rent a DVD from the neighborhood Blockbuster on the way home. All of that infotainment comes courtesy of Viacom Inc. The world’s third-largest media company (behind AOL Time Warner Inc. and The Walt Disney Company) owns each of those companies — among many others. And it looks like the big media consolidation that helped make a Viacom possible is picking up a lot of momentum. Years of persistent lobbying of the Federal Communications Commission by giant media and entertainment companies is starting to pay off. The new, Republican-controlled FCC has accelerated a rolling back of some long-standing ownership regulations that was started at the end of the Clinton era. This will not only clear the way for more mergers and acquisitions, but also speed up a snowball effect: The bigger the companies get, the more pressure they can exert on the FCC, the fewer rival companies they have offering resistance to their wishes, and the bigger they get. Question is, how far can they go? Right now, the real push for change at the FCC is coming straight from the top — from chairman Michael Powell himself. A longtime communications attorney, Powell served as an FCC commissioner under Bill Clinton before President George Bush named him chief. The son of Secretary of State Colin Powell, Powell The Younger brings a free-market, less-is-more philosophy of regulation to his post. And he has wasted no time putting it to work. Speaking at a conference for media types in Las Vegas in late April, Powell dealt Mammoth Media a winning hand. He announced that the FCC would begin chipping away at decades-old regulations that prevent one company from owning a newspaper and television station in the same city. He also said the rule preventing any single broadcaster from owning stations that reach more than 35 percent of the nation’s television viewers is likely to fall to Viacom’s recent challenge. Viacom already owned the CBS Television Network when it bought the much smaller United Paramount Network last year. The combination pushed the media giant over the 35 percent cap. Powell says that the FCC is likely to approve the purchase — without forcing Viacom to divest anything. The potential impact of these rule changes gives some hint of the mounting pressures on an agency grappling with the biggest challenges in its existence. Ironically, as the FCC becomes more powerful, with bigger companies and new technology falling under its domain, it is choosing to exercise that power by taking an increasingly hands-off approach to regulating. In just one generation — a fairly short time frame, especially by bureaucratic standards — the universe governed by the FCC has experienced its own big bang. The agency once regulated just the three television networks, radio, and the telephone lines. Those entities haven’t gone away. But they’ve been augmented by cable, satellites, wireless, more broadcast networks, low-frequency radio, and — looming over it all — the Internet. Moreover, these mediums keep converging and combining in ways no one could have imagined just a decade ago, much less could have imagined how to govern. Powell put it best in his first appearance before Congress as FCC chairman in March: “The commission is experiencing a challenge it has never faced. Each industry segment in our portfolio is in the midst of a revolution, and is attempting to adapt to the most fundamental changes in their history. … Competition and deregulation in telephones, DTV transition in television, modem and interactive services in cable, wireless Internet and digital services, consumer-accessible satellite service, broadband everywhere, and on and on. Moreover, the changes are blurring the lines that once separated these industry groupings. The game has become three-dimensional chess, where each board is spinning.” As a result, says former FCC chief Richard Wiley: “The top FCC job is definitely more difficult than when I was chairman. … It’s a very complex environment for the FCC to govern. It takes a lot of organization. In the 1970s you saw MCI coming in to challenge AT&T and cable coming in to compete with broadcasting. The situation is more complex now. And you’ve got the overlay of the Internet.” As FCC chair, Wiley implemented the cross-ownership rule in 1975. Since then, every one of his successors has been lobbied to do away with it — and to lift the station ownership cap. The argument in favor of its abolition seems to get stronger every year. Newspapers and the four major networks point to the steady dilution of their dominance by satellite and cable competitors. Even Wiley’s firm — Wiley, Rein & Fielding, one of the top FCC law and lobbying shops in Washington, D.C. — represents both the National Newspaper Association and several major broadcasting companies in this effort. “It’s a changed environment,” says Wiley, who nevertheless would not offer an opinion on what he thinks should be done because he represents both the broadcasters that stand to gain from such a change and station groups, which stand to lose. As important as the cross-ownership rule may be, some think it pales in comparison to the transition to digital television. Notes John Blake, a partner at D.C.’s Covington & Burling, who also represents station groups: The FCC is requiring television stations nationwide, no matter how small, to convert from analog broadcasting technology to state-of-the-art digital technology during the next couple of years. The conversion is expensive, and smaller broadcasters don’t want to pay for it — especially as so few consumers have been forking out the big bucks necessary to buy digital TVs. Smaller broadcasters worry that the conversion expense will drive them out of business, or into the arms of the biggest media companies. In other words, DTV could force still greater industry consolidation. Blake claims that his station clients have been left “high and dry” by the commission’s failure to act on the transition. To date, the conversion has been stalled because, as Blake sees it, the FCC has been caught between two opposing motives: The agency “wants to be less involved in it, yet they want to … have auctions to get money.” Both impulses are understandable. Auctioning off the spectrum will generate multimillions for the government. But, as Roy Stewart, chief of the FCC’s mass media bureau, notes, the transition to DTV is “a massive undertaking involving virtually every sector of the television industry.” It requires, Stewart says, “a complete retooling of our video distribution infrastructure. It requires consumer electronics firms to develop and build new products that can decipher the new technology. It requires content producers to develop new ways of creating content and new ways of protecting content in a world in which perfect copies can be made at the click of a button.” Adding to the gridlock: Digital content makes up a tiny percentage of programming, and that won’t change anytime soon. “Content providers are reluctant to transmit high-value digital content in an unprotected environment,” says Stewart, “because, unlike in the analog world, digital copies are perfect and easily reproduced.” Congress, Stewart suggests, may want to jump in with a legislative remedy. “There’s a lot of pulling and tugging, but no overall game plan,” Blake says. “We want them to have an all-embracing strategy.” That strategy may be coming together at last, but Blake might not like what he and his clients get. Powell has said that he will not waive upcoming deadlines for stations to convert to digital transmission. The FCC plans to begin auctioning off the DTV spectrum in September. And the agency is studying whether to require that new TVs be able to receive digital signals — a move that could hasten the changeover. “Ultimately,” Powell has said in full free-market mode, “stations will have to find business models to sustain themselves in the digital environment. It’s important to keep driving toward the objective.” The objective for the Viacoms, the Rupert Murdochs, and the AOL Time Warners appears simple: Grow. The question now is just how big Powell and his boss will let them get. Related Charts: Big Media’s Lawyers, Lobbyists and Spending on Lobbying Typical Legal Tab for a Giant Media Company

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