Financial Times, April 28, 2008
By Stephanie Kirchgaessner and Joshua Chaffin

Rupert Murdoch’s $580m bid for New York’s Newsday, the Long Island tabloid, puts the News Corp chief executive on a risky collision course with the Federal Communications Commission.

The media regulator would not have the power to interfere in the potential acquisition of the newspaper, which is now the subject of a bidding war between News Corp and Mortimer Zuckerman, owner of the rival Daily News. But, if he is successful, the deal will almost certainly create a regulatory problem for Mr Murdoch in the future.

Under revised media ownership regulations passed by the Republican-led FCC last year, the commission could vote to revoke one or both of News Corp’s New York-area television licences because of rules that prohibit a single company from owning newspapers and large broadcasters in the same media market.

However challenging the regulatory hurdle appears, Mr Murdoch has a reputation of successfully challenging ownership limits in the past, and may again this time. News Corp appears to be counting on the slow grind of the regulatory process in Washington in its decision to move ahead with the bid against a rival, Mr Zuckerman, who faces no regulatory hurdles.

News Corp declined to comment.

People familiar with the matter suggested an early decision on the licences was unlikely because the recently revised media ownership rules, which have been challenged in the courts by both proponents of greater deregulation and opponents of consolidation, are still in flux. The rules are also opposed in the Senate, where a law to overturn the regulations was unanimously passed by the commerce committee last week.

The FCC has been sitting on two requests by News Corp’s Fox Broadcasting to renew the existing licences. News Corp’s existing waivers have been challenged by public interest groups that have argued that the company – which would own three daily newspapers, including the Wall Street Journal and New York Post, and two broadcast stations in the New York area – holds too much power.

The central question facing Mr Murdoch is whether a Newsday deal would propel the FCC’s Republican chairman, Kevin Martin, to make a decision on the broadcast licences and bring the matter to a head.

News Corp and its broadcaster, Fox, is widely seen as an ally to the Bush administration by liberal critics, which could give it regulatory clout.

But the company has a history of challenging Mr Martin, particularly on issues involving decency standards on television, an issue that has been at the centre of his agenda.

Just as public advocates say it is dangerous to underestimate Mr Murdoch, few should doubt Mr Martin’s ability to create problems for News Corp. The FCC granted a number of waivers to media companies last December, but declined to take up News Corp’s petitions.

Mr Martin also faces pressure from Congress to prove that the regulations he passed will be enforced.

If the FCC does defer the decision, Mr Murdoch faces another unknown: a new president in the White House in 2009 who will either seek to deregulate the media landscape further, or rein in companies such as News Corp.

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