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Viacom, CBS executives pitch regulators on merger

Updated:
WASHINGTON (AP) -- Media titans Viacom Inc. and CBS Corp. are
going to have to make their case to regulators if they want to
complete a proposed $35.89 billion marriage with all of their
possessions intact. Of particular concern is whether they'll have
to sell off some television stations.

Top executives from both companies headed to Washington today to
meet with regulators and lawmakers to discuss the deal. Viacom and
CBS announced Tuesday they wanted to merge their extensive
interests in TV, movies, radio and outdoor advertising.

The proposed merger would run up against restrictions on the
percentage of the national audience that one company may reach
through its owned TV stations. Another rule prohibits a company
from owning more than one TV network in certain combinations -- a
category that CBS and Viacom, with its half-interest in the UPN
television network, would fall under.

The companies could have to get rid of some of their stations to
comply with the regulations.

A team of six, including the chiefs of both companies and
attorney Dick Wiley, a former FCC chairman, spent the morning
meeting with FCC Chairman Bill Kennard and three other
commissioners.

The executives made no specific requests in their meetings but
updated the commissioners on the proposed deal, according to an FCC
official, speaking on condition of anonymity.

Kennard, in a statement today, stressed that the proposed merger
is not yet before the commission. "Once it is, the essential
question will be: How will this merger accelerate delivery of
digital age services to all consumers?" he said.

Other sources familiar with the matter, and speaking on
condition of anonymity, said they believed the proposed merger
would undergo its antitrust review at the Justice Department.

The deal is just the latest result of recent FCC actions that
made it possible for a single company to own more than one local TV
station in a given market. The trend has consumer groups on guard
that more consolidation will lead to a handful of companies
controlling the information people receive.

"Even if they comply with the rules, it's just a very dangerous
consolidation of potential media competitors," said Gene
Kimmelman, co-director of the Washington office of Consumer's
Union.

Former FCC Commissioner Rachelle Chong said such unions are a
reaction to the changing demands of the marketplace.

"What I see are the people that have content starting to pair
with people who have pipes" to provide services, said Chong, now a
partner in the San Francisco law office of Coudert Brothers.
"Broadcasters have been asking the FCC to recognize this shift in
the marketplace for a long time."

She expected the companies would have to sell some of their
stations to comply with federal regulations.

Current FCC rules forbid companies from owning two or more
networks in certain combinations. A CBS/UPN union would fall under
this regulation, leaving the door open that the UPN network may be
sold off or folded into CBS.

FCC regulations also prevent broadcasters from operating
television stations that reach more than 35 percent of the nation's
home. CBS comes close to hitting this cap now, and company
officials say the deal would give the new Viacom about 41 percent
of the national audience.

CBS President Mel Karmazin and Viacom chairman Sumner Redstone
planned to bring their cause to the capital today, but said they
would dispose of properties if need be. "At the end of the day,
all we can do is go to Washington and make our case," Karmazin
said Tuesday.

Two antitrust lawmakers said they are considering holding
hearings on the matter, that may take place sometime this fall.

Sen. Mike DeWine, R-Ohio, chairman of the Judiciary antitrust
subcommittee, and its top Democrat, Sen. Herb Kohl of Wisconsin,
said they need to look carefully at the merger, which would greatly
bolster the new company's "ability to influence the information
delivered to consumers."

Staffers said they expected some committee members would meet or
speak with the company officials, but could not say when.

The executives also had requested an audience with Rep. Billy
Tauzin, R-La., chairman of the House Commerce telecommunications
subcommittee, to brief him on the merger. Tauzin spokesman Ken
Johnson said it was likely the congressman would talk with them in
the coming days.

Tauzin believes that the new company may have to spin off some
of its television stations to satisfy federal ownership rules. He
also predicted that regulatory obstacles limiting TV ownership
would fall eventually, but not until local affiliates -- some of
which oppose changing the rules -- and networks come together on a
plan, Johnson said.

Others say opposition is strong enough to prevent the rules from
being relaxed.

"I don't see the rules being changed very easily," Andrew Jay
Schwartzman, president of the Media Access Project, a watchdog
group.

The FCC has never granted a waiver to the national television
audience limit, according to a commission official, speaking on
condition of anonymity.

In addition, the companies will have to follow specific criteria
in order to own more than one local TV station in a given market.
Under the changes adopted by the FCC last month, a company could
own two TV stations in the same market if there were at least eight
other competitors after the deal and if one of the stations is not
among the market's top four.



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