NBC has filed a petition with the Federal Communications Commission, seeking to put the brakes on the Fox network's ambitious campaign to expand its broadcasting interests.
In the petition, filed on Friday, NBC said Fox Inc. had improperly set up a corporation to gain control of a Wisconsin television station, calling the move a brazen violation of FCC regulations.NBC is taking the extremely unusual step of initiating legal action against another network because, as one senior NBC executive put it Monday, "We just decided to say enough is enough with Rupert Murdoch."
NBC contends that recent moves by Murdoch, the chairman of Fox, amount to an effort to get around federal limitations on the number of stations that one network can own.
The petition also asks the commission to examine whether the purchase of the station - WLUK in Green Bay, Wis. - violates the commission's limits on how much foreign capital can be invested in an American television station, a question that dovetails with a standing challenge by the National Association for the Advancement of Colored People to the ownership of all Fox stations.
The petition argues that while the other networks have followed the commission's regulations, Fox is ignoring them.
"NBC is prepared to compete on the basis of any clear set of rules," the petition states. "But the rules must be clearly stated and must apply to all competitors."
A spokesman for Fox said the network was in full compliance with all federal regulations.
The filing took place on the last possible day to challenge the license - partly, NBC executives said, because Fox had waited until the last day to submit information on WLUK's ownership structure that should have been on file for 30 days.
But a senior NBC executive, who spoke on condition of anonymity, said his network took the step with "huge reluctance" because "going to the government is time-consuming and a tremendous pain in the neck."
Indeed, another senior NBC executive said the decision to "take a shot across Fox's bow" had been intensely debated inside NBC.
"There was some opposition to going after another network," he said, "but a group of us urged that we had to make a stand."
There have been grumblings through the network industry about how Fox Broadcasting has been to allowed to expand, free from many of the governmental restrictions that have limited the other networks.
This summer, both Laurence A. Tisch, the chairman, president and CEO of CBS, and Don Ohlmeyer, the president of NBC West Coast, questioned what each called the "Australian accounting" that has backed Murdoch's extravagant spending on deals, including Fox's purchase of the rights to National Football League games. Fox's parent, News Corp., is based in Australia.
The enmity toward Fox reached a high point in May, when Fox shook the industry by investing $500 million in another broadcaster, New World Communications.
More recently, Fox announced a deal with Savoy Pictures Entertainment to set up a new entity called SF Broadcasting. SF, in turn, purchased four stations owned by the Burnham Broadcasting Co., including WLUK - which is now an NBC affiliate - for a total of $268 million.
In the deal that set up SF Broadcasting with $100 million in equity, Fox provided 58 percent of the financing, while Savoy provided 41 percent. But they ceded all control to the 1 percent stakeholder, SF Broadcasting.
NBC argues that the deal simply set up a dummy company controlled by Fox and Savoy, so that the SF stations would not count against FCC limits on station ownership. The FCC says no entity may own more than 12 stations; Fox already owns eight stations and has agreements to buy two more.
If the SF stations were counted, Fox would own 14 stations and be in violation of the FCC limits.
Fox argues that the SF stations do not count toward the limits. "Our participation in SF Broadcasting complies with all FCC television station ownership regulations," said Dennis Petrovsky, the corporate spokesman for Fox.
Essentially, Fox's argument is that SF controls the stations and that Fox is a passive investor.
But NBC contends that any entity with that sort of financing arrangement is obviously functioning in the interests of those with 99 percent of the investment.
Moreover, NBC said, the majority owners will clearly influence the management of the stations in making certain decisions, including moves to affiliate with networks. In the past, NBC said, the FCC has said a network should not be allowed to influence that kind of decision by a station it does not own.
In another part of the petition, NBC said the amount of foreign capital used to form SF Broadcasting far exceeded the FCC's limit of 25 percent. NBC said Savoy was backed by significant foreign investors and Fox was supported by News Corp.
The NAACP has already asked the FCC to examine the foreign ownership of Fox because of News Corp.'s financing of Murdoch's original purchase of Fox stations in the mid-1980s.
Though Fox executives, including Murdoch, have previously dismissed that challenge as groundless, the addition of NBC to the claim may force the FCC to look at the issue even more seriously, one senior entertainment industry lawyer said.