Analysis: Murdoch's Fox TV licenses seen surviving UK scandal

(Reuters) - Rupert Murdoch faces limited risk of losing News Corp's broadcast permits in America, even amid screaming headlines in Britain that the media mogul is unfit to run a major company.

The U.S. Federal Communications Commission has the power to deny a license renewal if it finds the license is not being used by people of good "character" who will serve "the public interest."

But former FCC officials and other experts say the agency has been loath to use that power in the past, and is highly unlikely to challenge News Corp's 27 Fox U.S. television licenses despite calls from a Washington-based ethics watchdog to do so.

"As a result of Reagan-era deregulation and broadcaster-friendly legislation in 1996, it is very, very hard for the FCC to take away a license," said communications lawyer Andrew Schwartzman.

Last week, a British parliamentary report scolded News Corp's British newspaper arm for misleading a five-year investigation into the hacking of the phones of politicians, murder victims, soldiers and celebrities, and said Murdoch was "not a fit person" to oversee a major international company.

The report dropped a heavy hint to British communications regulator Ofcom, which is investigating whether satellite TV provider BSkyB is a "fit and proper" broadcaster. News Corp has a 39 percent ownership stake in BSkyB.

In the United States, the FCC can refuse to renew the license of a U.S. TV station if it has evidence of misconduct involving that particular station.

"The only other way a license can be lifted is by revocation, which is a years-long process in which the FCC has an extremely high burden of proof," said Schwartzman, long-time policy director of the recently closed public interest law firm Media Access Project.

Murdoch and his $50 billion global media empire have been mired in the explosive phone hacking and bribery scandal since last summer, when evidence emerged that the now-shuttered News of the World tabloid hacked into voicemails of a missing British schoolgirl. News Corp and its 81-year-old chief executive are the subject of multiple British inquiries.

The FBI last summer opened its own investigation into possible phone hacking or other illegal reporting activities in the United States. Private lawyers have pursued their own inquiry into whether News of the World hacked the phones of 9/11 victims.

To date, however, the FBI inquiry has found no evidence such practices were employed by journalists in the United States, a law enforcement source said.

"My guess is what happened in London, stays in London," said former FCC Chairman Reed Hundt.

The FCC and News Corp declined to comment for this story.

POLITICS

Citizens for Responsibility and Ethics in Washington (CREW) last week sent a letter to FCC Chairman Julius Genachowski asking the FCC to revoke News Corp's U.S. licenses. It also sent letters to the House and Senate Commerce Committees asking for hearings into whether Rupert and his son James Murdoch meet the FCC's character standards.

Medley Global Advisors analyst Jeffrey Silva said that any attempts by the FCC to threaten the Fox network could be entering dangerous political territory, especially during a presidential election year, as Fox is associated with conservative political expression in the United States.

"The idea that a Democratic administration, a Democratic Justice Department, a Democratic FCC would go down the road of license revocation proceedings against Fox, especially during an election year, would cause a firestorm," Silva said.

"The backlash would be that Democrats would be portrayed as trying to censor conservative political expression," he added.

Barring massive, overwhelming proof of wrongdoing and illegal activity within the United States that can be directly tied to high-level personnel at Fox stations, Silva said Fox's broadcast licenses were not in any near term jeopardy.

Murdoch is no stranger to tussles with the FCC. He battled the agency in the mid-1990s over whether his TV stations were actually foreign-owned.

The Australian-born Murdoch took U.S. citizenship in 1985 to meet FCC rules requiring U.S. broadcasters be controlled by U.S. nationals. But the rules also stipulate that only 25 percent of a U.S. TV station can be owned by foreign investors.

The official inquiry was led by Hundt, who was chairman of the FCC and who employed current FCC Chairman Julius Genachowski as counsel at the time.

"The FCC concluded that Fox had technically violated the foreign ownership rules but because they brought new competition to the entrenched big three networks - ABC, CBS, NBC - they weren't going to take their licenses away," said an industry source familiar with the matter.

The last time the FCC pulled a license was when it stripped RKO General of its licenses in 1987, a battle that took 20 years to play out.

The FCC ruled that the broadcaster had shown a "lack of candor" in not disclosing details of a federal investigation into bribery and anticompetitive reciprocal trade practices committed by its parent company General Tire in the 1960s.

(Reporting By Yinka Adegoke in New York and Jasmin Melvin in Washington D.C.; Editing by Tim Dobbyn)

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