THE NEW, HUGGABLE FCC

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Nonetheless, some of the staff's dismay leached into the final 74-page resolution. At one point, for example, the report cites a memorandum from an attorney who had managed Murdoch's initial FCC application, which states that Fox's ownership structure is "arguably vulnerable to challenge" and that it is therefore "paramount" to avoid any change that "would potentially invite re-examination" by the commission -- a memo known among commission staff members as the "somewhat smoking gun." The commission resolved that this memo "plainly indicates" uncertainty existed about the ownership structure but that otherwise it offered no proof of a deliberate campaign of deception.

However, the report openly condemned Fox's March 1994 response to a commission query requesting that Murdoch disclose exactly how much of the original TV stations' equity News Corp. owned. Murdoch's lawyers replied that the matter was "immaterial," prompting the FCC to repeat the request. Only then, and for the first time ever, did Fox explicitly disclose that News Corp. owned 99% of the Fox stations. Fox's attorney stated that even though the company had never disclosed this before, the overall level of ownership "has always been recognized." But the commission disagreed and blasted the attorney for trying to prove otherwise.

Thursday's decision, though short of a complete exoneration, nonetheless seems certain to free Murdoch to re-energize his drive to build Fox into an equal of the NBC, CBS and ABC networks. The investigation slowed his progress, coming on the heels of two bold deals that sharply altered the competitive landscape. His successful pre-emptive bid in late 1993 to acquire rights to broadcast National Football League games, and his $500 million investment last year in New World Communications, which brought to Fox a stable of powerful new affiliates, changed the strategic balance among the networks.

Now broadcasters are bracing for another Murdoch strike. Fox's affiliates expect Murdoch to make a run at buying world rights to broadcast the 2000 Summer Olympics in Sydney, Australia. Murdoch recently told TIME that he has a billion dollars in the bank and that he has restructured or eliminated virtually all the short-term debt that nearly crushed News Corp. in 1990. "I don't think there's a question of if there's going to be a big new deal," says one broadcasting executive, "but when."