Worry Over FCC Rules Not Shared on Wall St.

As criticism continued to pulse through Congress on Tuesday over the easing of broadcast ownership rules, Wall Street analysts reacted to the changes with a shrug, saying they are unlikely to have substantial influence on the nation’s television market.

“There may be a bantam wave of media mergers, but surely not the tsunami envisioned� by some in Washington, wrote Merrill Lynch media analyst Jessica Reif Cohen in a report Tuesday.

The five members of the Federal Communications Commission, who approved the new deregulation rules by a 3-2 vote Monday, have been summoned to defend their actions today before the powerful Senate Commerce Committee.

Some Capitol Hill lawmakers, Republicans and Democrats alike, have accused the commissioners of rushing their decision and of potentially sparking a wave of media consolidation that could put control of news and entertainment into fewer hands.

Several senators said this week that they would seek to introduce legislation nullifying some of the FCC rules, particularly one that allows companies to own more television stations.

Sen. Byron L. Dorgan (D-N.D.) began trying to build support Tuesday for a “resolution of disapproval� of the federal rules. The procedure was last used by congressional Republicans in 2001 to scuttle workplace ergonomic rules issued by the Clinton administration.

FCC Chairman Michael K. Powell has said he welcomes input from Congress. In particular, he said, he would like legislators to relax a law that requires the FCC to conduct a comprehensive overhaul of its media rules every two years, a timetable he considers burdensome.

Powell doubted whether Congress, particularly the House, would garner enough support to overturn his panel’s new rules. The powerful chairman of the House Commerce Committee, Rep. W.J. “Billy� Tauzin (R-La.), is a close ally and has said he supports the FCC’s actions.

“At the end of the day,� Powell said, “it’s not likely.�

And perhaps unnecessary, say some industry executives and analysts. The most sweeping consolidations came during the 1990s, after the FCC substantially eased ownership restrictions, clearing the way for several multibillion-dollar mergers. Those included Viacom Inc.’s purchase in 2000 of CBS; News Corp.’s acquisition of station owner Chris-Craft Industries; and the takeover of Spanish-language broadcaster Telemundo by General Electric Co.’s NBC.

Industry experts say the rules probably won’t result in large mergers but rather the swapping or selling of individual TV stations.

That thinking was reflected in Tuesday’s stock trading. For the most part, media stocks didn’t significantly fluctuate, suggesting investors don’t expect big takeovers that would impact shares.

According to Merrill Lynch’s Cohen, now may be the time to sell certain media stocks driven higher recently by anticipation of the FCC changes.

Shares of Paxson Communications Corp., the nation’s third-largest station owner, are up about 220% this year, for example, despite its struggle to start a family-friendly network.

NBC owns 33% of the company, with an option to take control. NBC might be able to buy Paxson because the new rules allow ownership of three stations in about a dozen cities. In some of those, NBC owns two stations.

But some industry executives doubt NBC would take on an additional programming challenge at a time when it is growing more difficult to find a winning formula amid 300 cable channels.

“We are in a period of contraction -- not expansion -- for programming because there are a lot of marginal channels out there,� said Jamie Kellner, founder of the WB. “

He said a more likely scenario would be for an NBC affiliate in a mid-size city, where duopolies now are permitted, to buy the market’s smaller WB station.

Besides savings from combining back-office functions, the NBC affiliate would have another outlet with programming, an established audience and a place for more local news, which generates significant advertising dollars.

Pursuing such a strategy is one of the few ways a broadcaster could increase its stake in a local market because ownership of any of the market’s top-four-rated stations is still prohibited, making second-tier affiliates attractive targets.

Times Staff Writer Richard Simon in Washington contributed to this report.