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Company Town: Entertainment Upheaval : POLICY : Mergers May Put Pressure on Legislation


The two huge proposed network sales announced this week have raised alarms that could help the Clinton Administration force changes in a sweeping telecommunications bill making its way through Congress.

"The media giants are giving us a sneak preview of what they plan to do when there are no safeguards to prevent monopolies," said Rep. John Conyers Jr. (D-Mich.), referring to Walt Disney Co.'s $19-billion planned takeover of Capital Cities/ABC Inc. and Westinghouse Electric Corp.'s $5.4-billion proposed purchase of CBS Inc.

The House bill, expected to pass as early as today, would remove regulations that restrict telephone, cable and media companies from owning significant portions of each others' businesses. A similar Senate bill passed in June.

Administration officials said the two planned mergers are not a major concern by themselves but that they raise troublesome questions about the potential problems that could be created by the new telecommunications bill.

"If ABC and Disney aren't required to divest one of their two stations in Los Angeles, for example, that would concern us," said Lawrence Irving, assistant commerce secretary.

The House and Senate bills would not only allow one company to own two televisions stations in one town, they would also allow the same company to own the local newspaper, the local phone company, the local cable company and all the local radio stations.

"One person owning the majority of the media outlets in a community is a threat to the very system of democracy upon which our society is built. And it is wrong," said Vice President Al Gore, attacking the measure at a news conference Thursday.

President Clinton threatened Monday to veto the legislation, arguing that "instead of promoting investment and competition, it promotes mergers and concentration of power."

Analysts agree that the new bill will accelerate consolidation in the industry. "The mega-mergers this week were built on the assumption that rules would be relaxed," said Richard Klugman, telecommunications analyst at PaineWebber. Future mergers among phone and cable companies could reduce competition in some markets and lead to higher prices, Klugman said.

The original idea of the landmark bill was to increase competition by removing legal barriers that prevent cable, phone and television companies from invading the others' turf.

While analysts expect such competition over the next decade as cable companies upgrade their systems so they can be used for phone service and phone companies add new lines for video service, many are concerned that in the meantime, a few dominant players will be able to drive up cable, phone and advertising rates in the markets they control.

Most observers still expect the Republican majority to push through the bill pretty much as it has been written with minor changes taking place in conference between the House and the Senate.

But the recent mergers and the public attention they have received, have awakened interest among legislators and their constituents. "The chemistry is changing," said one lobbyist. "Things are getting unpredictable.

Conyers was expected to introduce an amendment Thursday night that would require the Justice Department to review the antitrust implications of any Bell company that chooses to enter the long-distance phone business.

Rep. Edward J. Markey (D-Mass.) has introduced one amendment that would restrict the number of stations a broadcaster can own nationwide and another that would make it more difficult for cable owners to own broadcasters in the same market.

The first amendment would restrict broadcasters from covering more than 35% of the country instead of the 50% allowed by the latest version of the House bill.

Passage of the amendment would force Westinghouse to let go of some of its television properties before completing its acquisition of CBS. Broadcasters are currently allowed to own only enough television stations to enable them to cover 25% of the nation.

Administration officials worry that if the networks are each allowed to have 50% coverage, they could make it virtually impossible for new television networks to emerge, thereby limiting competition.

Even if the Markey and Conyers amendments fail to pass, as most predict, substantial support for the changes would show Republicans they do not have enough votes to override a Clinton veto, congressional aides said.

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