(FORTUNE Magazine) – From Washington ...

Federal regulators are about to allow the highly concentrated media industry to consolidate even more. The Federal Communications Commission is reviewing--with an eye toward scrapping--six broadcast-ownership rules that for 50 years have restrained cross-ownership of television and radio stations and newspapers. The rules limit the number of TV stations a company can own in a single market, prohibit a company from owning broadcast outlets along with a local newspaper, and prevent a company from owning TV stations that reach more than 35% of the country. Consumer advocates worry that easing those rules would threaten the independence of the press. But FCC chairman Michael Powell has called loosening the restrictions "long overdue," and the rest of the commission seems to agree. In September the FCC voted 4-0 to proceed with its historic review, and most observers expect the rules to be trimmed back or repealed by the middle of next year.

to investors

Once new rules are put in place, mergers and acquisitions will probably proliferate even more than they already have. Viacom--which owns the CBS and UPN networks--and News Corp.'s Fox TV network clearly see chances to expand profitably; they've long challenged the FCC's TV-ownership cap. Rudy Baca of Precursor Group in Washington, D.C., says "broadcast networks are likely to benefit" by snapping up as many local affiliates as they can. In particular, says Baca, Tribune Co. stands to be "strengthened" because it can more vigorously pursue its goal of owning newspapers, TV stations, and Internet sites in New York, Los Angeles, and Chicago. General Electric may even sell off its NBC unit, the sole network not owned by a media conglomerate, if the price is right, he adds. Of course, mega-mergers like the ones that created Vivendi Universal and paired AOL and Time Warner (the parent of FORTUNE's publisher) have been big busts to date. Clearly not all deregulation improves the bottom line--or leads to higher stock prices. --Jeffrey H. Birnbaum