The Federal Communications Commission is staying out of the growing News Corporation phone-hacking scandal, but the agency may be unable to dodge the controversy when it wades into the 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 media reform group Free Press. “It brings to light the danger of too much power in too few hands.”
U.S. lawmakers have called for investigations into News Corporation’s actions in the United States, and the Federal Bureau of Investigation has launched a preliminary probe. So far however, officials at the FCC, which regulates media companies, have declined to wade into 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 FCC is likely to face the implications of the controversy embroiling News Corp. as the agency takes on a highly divisive review of media ownership regulations this year.
On July 7, the 3rd U.S. Circuit Court of Appeals in Philadelphia restored restrictions on owning 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 media ownership rules, expected sometime later this year.
News Corp., which owns Fox News, 27 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 bogey man for media reformers. Now it’s inevitable that the media giant’s travails will impact the coming FCC media ownership 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have asked the FCC and the courts to loosen restrictions on media ownership, which they say are increasingly outdated.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, and the phone-hacking scandal shouldn't prevent the FCC from updating the system, said Dennis Wharton, spokesman for the National Association of Broadcasters.
"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 email.
And not all media 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 Media Access Project, said the hacking and bribery scandal will likely only have an indirect impact on the broader media ownership, but potentially a bigger effect on Rupert Murdoch and News Corp.’s efforts to renew their 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 the 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 Corporation, including Wall Street Journal publisher Les Hinton.
Amid the broadening fallout, lawmakers in the United Kingdom and Murdoch’s birth country of Australia have called for investigations into media ownership and some have even called for the News Corp. media empire to be dismantled. Already the media 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 it is unfair to link the actions at one News Corp.-owned publication with all its other news outlets.
“We… trust that readers can see through the commercial and ideological motives of our competitor-critics,” the editorial board wrote. “They want their readers to believe, based on no evidence, that the tabloid excesses of one publication somehow tarnish thousands of other News Corp. journalists across the world.”
More importantly, the Journal argued, government overreach could undermine First Amendment protections. “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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