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NBC MOUNTS CHALLENGE TO FOX’S EXISTENCE

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In a direct challenge to the very existence of the Fox television network, NBC has petitioned the Federal Communications Commission, asserting that the stations that form the heart of Fox are illegally foreign-owned.

Among those station is Utah's KSTU-Ch. 13.NBC will ask the FCC to rule either that Fox must drastically reduce its level of foreign ownership or that all other U.S. networks may seek unlimited foreign investment.

NBC contends that if the FCC explicitly sanctions the ownership arrangement that underpins Fox, in which more than 99 percent of the equity is held by Rupert Murdoch's News Corp., which is based in Australia, it would eradicate 60 years of excluding foreigners from owning U.S. broadcast properties.

This kind of brawling was unheard of until recently in the once-gentlemanly world of network TV. But the atmosphere has changed: ABC CBS and NBC not only have the sprawling monster of cable to contend with, but also Fox, which is aggressively trying to take viewers and business from them.

NBC's action, called a petition for rule making, requires the commission to respond, though it is not under a specific deadline.

A spokeswoman for the FCC, Karen Watson, said she could not comment on NBC's action or the general issue of foreign control, because the matter of Fox's ownership was already under review.

Preston Padden, Fox's president for network distribution and Washington lobbyist, said Fox's application for licenses had been "blessed by the FCC in 1985."

In addition, Padden said the FCC had the right to allow a foreign investor to own stations as long as it was in the public interest. He accused NBC of acting as a sore loser.

NBC's petition represents a significant escalation of an increasingly bitter war between Fox and its competitors, a war in which NBC has taken a conspicuous leading role regarding the FCC.

In September, NBC asked the commission to keep Fox from gaining control of a station in Wisconsin; last week it filed more petitions seeking to deny licenses for stations that Fox planned to buy in Philadelphia and Boston.

In recent years, of course, numerous U.S. companies have been taken over by foreign interests. But broadcasting has always been different: In that industry, the federal government grants free licenses to entities that, in return, pledge to serve the public interest. It does so because the number of radio and broadcast television frequencies is limited.

A broadcast license must be renewed periodically, and if its holder (the station owner) is shown to be unfit, the license can be revoked, though this is rarely done.

A television network is chiefly based on the handful of stations it owns and operates - referred to as "O and O's" - generally in the biggest cities. They provide the networks with their greatest sources of revenue.

The relationship between Fox and its competitors has soured in recent months, largely because of Fox's aggressive moves to reach parity with NBC, ABC and NBC.

Fox's chairman, Murdoch, has spent freely to acquire the rights to televise National Football League games and assemble a stronger lineup of stations.

The question of Fox's ownership is already before the FCC as a result of a complaint filed earlier this year by the NAACP. Seeking to head off similar challenges, Fox asked the commission to formally review the question of its ownership. The commission has said since May that a ruling was imminent.

It had been widely expected in the industry that Fox would prevail, mainly because the FCC seemed so unlikely to punish Fox after Fox did so successfully what the commission hoped it would do: foster competition with a fourth network.

The new petition greatly raises the stakes, however, because NBC, with the resources of its parent company General Electric, can pursue the case against Fox far more aggressively than the National Association for the Advancement of Colored People, the civil rights organization that is short of resources.

One senior NBC executive, speaking on condition of anonymity, said the best result from the network's point of view would be "if the commission took a pound of flesh from Murdoch: hit him with a heavy fine, and maybe take some of his licenses."

But few industry analysts seriously expect the commission would take the drastic step of revoking Fox's licenses. Instead, the FCC could take several different actions if it decided that Fox had concealed important ownership information in 1985, when Murdoch bought the six Metromedia stations that eventually became the Fox network.

The FCC could insist that the company restructure its finances to comply with the law. In an interview last summer, Murdoch said such a remedy, if ordered, would not be difficult to accomplish.

But one television industry executive said Fox was very concerned about such a restructuring, because it could require Murdoch to pay tens of millions of dollars in capital gains taxes.

The commission could also choose to fine Fox, or simply reaffirm the status quo without responding to the petition. Or it could declare that NBC is seeking the answer to a hypothetical question and decline to give an answer until NBC proposes to bring in a foreign investor of its own.

But NBC may not be easily deterred. Richard Cotton, the senior vice president and general counsel for NBC, invoked the "possibility of litigation" in federal court if the FCC ruled against it in the earlier Wisconsin case.

The NAACP could also choose to press its issue in court.