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News Corp. Scandal Stokes U.S. Media-Ownership Debate News Corp. Scandal Stokes U.S. Media-Ownership Debate

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News Corp. Scandal Stokes U.S. Media-Ownership Debate

Introspection: A News Corp. paper reports on scandal.(Paul J. Richards/AFP/Getty Images)

photo of Josh Smith
July 18, 2011

The Federal Communications Commission is staying out of the growing News Corp. phone-hacking scandal in the United Kingdom, but the agency may be unable to dodge the controversy when it wades into the U.S. media-ownership debate later this year.

“I think this scandal has to be taken into account by anyone who wants to lift the limits on media ownership,” said Craig Aaron, president of the reform group Free Press. “It brings to light the danger of too much power in too few hands.”

(PICTURES: Who's on Murdoch's Payroll?)


U.S. lawmakers have called for investigations into News Corp.’s actions in the United States, and the FBI has launched a preliminary probe. So far however, officials at the FCC, which regulates media companies, have declined to join the fracas.

“There is obviously a process going on in the U.K., and that is not a process we expect to get involved in or interfere with,” FCC Chairman Julius Genachowski told reporters last week. But even without official action, the commission is likely to face the implications of the controversy as the agency takes on a highly divisive review of media-ownership regulations.

On July 7, the U.S. Court of Appeals for the 3rd Circuit in Philadelphia restored restrictions on ownership of both a newspaper and television station in 20 of the country’s largest markets. That decision paved the way for the FCC to release a long-awaited review of the media-ownership rules, expected sometime later this year.

News Corp., which owns Fox News, 27 American TV stations, The Wall Street Journal, and other media properties in the U.S., as well as news outlets around the world, has long been a bogeyman for media reformers. Now it’s inevitable that the giant’s travails will influence the coming debate in a big way, Aaron said.

“If you’re at the FCC and you’re considering loosening media regulations, this scandal should certainly give you pause,” he said in a telephone interview. “You absolutely can’t have this conversation without looking at what’s going on in England. It’s a stark reminder of what can happen with such concentrated media.”

Broadcasters have asked the FCC and the courts to loosen restrictions on media ownership, which they say are increasingly outdated. Given the changes in communication and media, it is “inexplicable” that media-reform groups continue to push to preserve 40-year-old rules, said Dennis Wharton, spokesman for the National Association of Broadcasters, adding that the phone-hacking scandal shouldn’t prevent the FCC from updating U.S. rules.

“The situation at News Corp. is irrelevant to the modest media ownership reform that NAB is seeking to allow free and local broadcasting to compete against national, subscription-based platforms,” Wharton said by e-mail.

Not all reform groups are predicting a major impact on the U.S. debate. Media critic Jeff Jarvis used a blog post on Monday to argue that more government regulation is not the way to prevent abuse. “We don’t need more controls on journalism. We need more journalism,” he wrote. “In the U.S., you can bet we’ll hear more about regulating media consolidation. But that’s not the issue. Morality is.”

Andrew Schwartzman, vice president of the Media Access Project, said that the hacking and bribery scandal will likely only have an indirect impact on the broader U.S. media-ownership debate but potentially a bigger effect on Rupert Murdoch and News Corp.’s efforts to renew broadcast licenses in the United States. “It affects their credibility and how much weight the FCC puts on their statements,” he said.

Still, analysts at the investment firm Stifel Nicolaus said on Monday that they “continue to believe it is very unlikely, based on the public facts so far, that News Corp. will lose its broadcast licenses in the United States.”

The allegations of hacking and bribery at News of the World have already led to the demise of the best-selling Sunday tabloid, and the resignation of top British police officials and executives in Rupert Murdoch’s News Corp., including Wall Street Journal Publisher Les Hinton.

Amid the broadening fallout, lawmakers in Great Britain and in Murdoch’s birth country of Australia have called for investigations into media ownership, and some have even called for dismantling the News Corp. media empire. Already the company has been forced to give up its bid to fully acquire British broadcaster BSkyB.

In an editorial on Monday, The Wall Street Journal defended its parent company and said that it’s unfair to link the actions at one News Corp.-owned publication with all of its other outlets.

More important, The Journal argued, government overreach could undermine First Amendment protections in the United States. “In braying for politicians to take down Mr. Murdoch and News Corp., our media colleagues might also stop to ask about possible precedents,” the editorial says. “Do our media brethren really want to invite Congress and prosecutors to regulate how journalists gather the news?”

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