U.S. government likely to keep media rules strict

By Robert MacMillan and John Poirier - Analysis

NEW YORK/WASHINGTON (Reuters) - Newspaper publishers and other struggling media companies want the U.S. government to help them survive the toughest times they have ever known, mainly by easing rules on how big they can get.

They will be lucky if they get any aid at all.

The Federal Communications Commission held meetings this week with policy experts and consumer groups to see if it should change rules that define how many people newspapers, television and radio stations can reach and that limit their size to protect free speech and allow for healthy competition.

But other more pressing concerns on Capitol Hill and in the Obama administration, and the threat of lawsuits to thwart any changes to the rules, are muffling enthusiasm.

"Nobody cares," said Jonathan Knee, a media banker at investment firm Evercore Partners Inc (EVR.N). "Nobody is willing to spend political capital over it."

As advertising sales shrink and more people get information and entertainment online, media companies want the government to let them operate more freely. Sentiment also is growing that the Internet and other technology advances have rendered media regulation debates obsolete, media industry observers say.

The FCC rules have come up for review before, but the stakes are higher now, with broadcasters and publishers like Tribune Co (TRBCQ.PK) going bankrupt.

But lawmakers and the White House are dealing with multiple problems that loom larger, from health care and climate change to financial industry overhaul, so little might get done.

"This is an administration that's taken on a whole host of very large initiatives that are sucking the oxygen out of Washington in a big way," said John Chachas, a media banker at Lazard who supports deregulation. "Reconsideration of these ancient rules is desperately needed, but not a top priority in a country suffering 10 percent unemployment."

Conversations with congressional and administration staff as well as lobbyists bear this out. As a result, media companies and lobbyists seem gripped by a lassitude that is surprising for people who lobby hard to get what they want.

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The FCC reviews the rules every four years to see whether they should be loosened. During the Bush administration, the agency tried to relax the rules, but consumer groups sued and an appeals court panel effectively froze the changes.

Next year, the FCC may propose more changes to those rules, a process that will throw off plenty of verbal sparks. FCC Chairman Julius Genachowski has not given his opinion.

Among the most important rule is one that generally forbids companies from owning TV and newspapers in the same market. Another limits what percentage of the audience broadcasters can reach.

They are among the obstacles that make it hard for a media conglomerate like News Corp (NWSA.O), for example, to buy a big piece of NBC Universal from General Electric (GE.N), or for News Corp to buy The New York Times (NYT.N) because it owns the New York Post and Wall Street Journal and area TV stations.