UPDATE 1-US FCC chief Martin defends media ownership plan

(Adds further detail, comment from consumer group)

By Peter Kaplan

WASHINGTON, Dec 5 (Reuters) - The chairman of the U.S. Federal Communications Commission defended his plan to ease media ownership restrictions at a congressional hearing on Wednesday, saying it would leave a "high hurdle" to consolidation in smaller markets.

Facing close questioning from a House subcommittee, FCC Chairman Kevin Martin denied criticism that the plan to relax ownership restrictions in the top 20 U.S. markets would also open the door for local newspapers and TV broadcasters to combine in smaller markets around the United States.

Martin said proposals to combine newspapers and TV stations in smaller markets would still face a steep climb to get FCC approval. But he did not back down on his plan to have the commission vote on his proposed changes at its next meeting on Dec. 18.

The comments came during a hearing of the House subcommittee on the Internet and Telecommunications held to air concerns about Martin's proposed changes to the 32-year-old ownership restrictions.

Martin was questioned by Democrats at the hearing, including Energy and Commerce Committee Chairman Rep. John Dingell, of Michigan, about whether the FCC had taken enough time to hear public comments about the proposed changes.

"I continue to have grave concerns about the lack of time to review comments on the proposed rule," Dingell said.

He said his "initial reaction to any proposal designed to permit greater consolidation of the media is not positive."

Currently, the FCC can grant a waiver to the cross-ownership ban only if one of the media outlets is in serious financial trouble.

Martin's proposal would lift the ban in the 20 largest U.S. markets. Outside those markets, Martin said, the commission would look at deals on a case-by-case basis and consider a series of factors, with particular emphasis on whether a combined company would provide additional local news.

Democratic Commissioner Michael Copps said those changes would create a "tremendous loophole" that would allow the commission to approve cross-ownership deals beyond the top 20 markets.

"I think it's an on-ramp for more consolidation," Copps said.

Martin was pressed by the subcommittee's chairman, Democratic Rep. Edward Markey, of Massachusetts, about those concerns and whether such a deal would face "a high hurdle" to get FCC approval or "just a speed bump."

Martin said it would be a high hurdle.

Gene Kimmelman, a vice president at the watchdog group Consumers Union, said Martin's comment was "a significant clarification, but it's meaningless unless there's follow-up to put language in the rules that truly prevents an avalanche of mergers."

The FCC chairman's proposal has triggered criticism from some lawmakers, consumer groups and other commissioners, particularly because of his insistence on a Dec. 18 vote.

The Senate is considering a bill that would impose a 6-month delay on the FCC in making a decision on the media ownership issue.

Earlier in the week, Dingell ordered a commerce subcommittee to look into "an apparent breakdown in an open and transparent regulatory process" at the FCC under Martin.

Dingell cited said Martin's handling of the media ownership issue underscores broad concerns he has about how Martin is running the agency, including whether he is giving enough notice of proposed new FCC rules and was late giving other four commissioners the details of draft meeting agenda items.

Many Republicans on the panel, meanwhile, said the FCC should take more steps toward deregulation, such as loosening the cross-ownership rules for radio stations.

"We must seize this opportunity to modernize the regulations governing ownership to enable all forms of media to have a fair chance of competing for the attention of our fellow Americans," said Republican Rep. Fred Upton, also of Michigan. (Reporting by Peter Kaplan; editing by Richard Chang)