Rupert Murdoch is facing off against the Federal Communications Commission (FCC) as he seeks to take control of two TV stations and three newspapers in New York -- including Newsday -- The New York Times reports. A December 2007 FCC rule allows a company to own just one paper and one television station in the same city in the top 20 markets so long as there are at least eight other independent sources of news and the station is not in the top four. (The stations that News Corp. (NYSE: NWS) controls are the fourth- and sixth-largest in the New York market).

Meanwhile, I am fascinated by the Wall Street Journal's [subscription required] coverage of the departure of its own managing editor, Marcus Brauchli, yesterday. The punch line was that everything is fine because Brauchli was simply doing what the boss wanted. Brauchli's new role? Providing "guidance to senior management in a wide range of areas," including whether Murdoch's Star-TV service in Asia should launch a business-news channel. Sounds like a good fit.

In contrast to the Journal's corporate press release on its page one, The New York Times reported that Brauchli was fired. It noted that a few weeks prior to his departure, Murdoch's henchmen indicated they were unhappy with the pace of change at the Journal. The Times wrote: "At some point, They told him, 'We don't think this is working,' and Brauchli replied that in that case, he should consider leaving."

And now that Brauchli's out, former Times of London editor Robert Thomson will accelerate the transformation of the Journal into a paper with a big hole where valuable business insight used to reside.

If Murdoch succeeds in taking over Newsday in a $580 million deal, he'll control three papers in New York -- he already owns the New York Post and the Journal. So the question is whether FCC Chair Kevin Martin who championed the new rule will grant Murdoch a waiver. And the answer probably depends on whether Martin was really serious about his new rules or whether they were just intended to keep media consolidation away from the hands of those who might oppose Republican candidates.

Democratic Representative Byron Dorgan defended the new FCC rules noting, "free flow of information in this country is not accommodated by having fewer and fewer voices determine what is out there." Will the FCC agree with its recently passed rules to inhibit that flow or will it grant Murdoch a waiver -- acting to enhance Republican power by boosting the control of a reliable Republican party booster?

This will be the ultimate test of whether Murdoch is more powerful than the FCC or whether they're really on the same side.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.