Will the NAB’s Victory in Prometheus Radio Project Stand?
A quarter century ago, in anticipation of the growing competition TV and radio stations were beginning to face from new digital media, Congress in the Telecommunications Act of 1996 ordered the FCC to conduct regular biennial reviews of its local media ownership rules. It directed the FCC in these reviews to eliminate or relax any rules that were no longer “necessary in the public interest” due to rising competition. In the 25 years since then, the FCC has made several efforts to comply with this congressional mandate, only to have those efforts repeatedly frustrated by two or three judges on a panel of the U.S. Court of Appeals for the Third Circuit, sitting in Philadelphia.
The FCC’s most recent effort to relax these regulatory shackles on the broadcast TV and radio industries was in 2017 when the FCC, under its former chairman Ajit Pai, released a comprehensive set of deregulatory reforms to loosen its local media ownership rules. The FCC concluded that three of those rules no longer served the public interest due to the competition broadcast radio and TV now face from digital media. It therefore repealed two of those rules prohibiting newspaper/broadcast and radio/television cross-ownership. It also modified its Local Television Ownership Rule to eliminate its 8-voices test, which prohibited any broadcaster owning two or more full-power TV stations in the same local market unless there were at least eight independently owned stations in that market. The FCC retained its prohibition on a single company holding the FCC licenses to more than one of the top 4 stations in any DMA, but put in place a procedure by which licensees could seek a waiver of that prohibition where local circumstances warranted it.
On a petition for review filed by the Prometheus Radio Project, an advocate for a group of low power broadcasters, the Third Circuit – as it had on two prior occasions – vacated the FCC’s order, thus reinstating outdated limitations on local media ownership that were first adopted in the 1960s and 1970s, long before the advent of digital media. The court did not dispute the FCC’s conclusion that these rules no longer promoted the public interest in competition, localism, and viewpoint diversity. Instead, the court held that the FCC had not adequately considered the impact the rule changes would have on minority and female ownership.
The FCC and the National Association of Broadcasters both sought Supreme Court review of the Third Circuit’s order. The Supreme Court agreed to hear the case and heard arguments in January. In April, the Court, in a 9-0 decision, reversed the Third Circuit and reinstated the FCC order repealing its two cross-ownership rules and relaxing its Local TV Ownership Rule. See FCC v. Prometheus Radio Project, Slip Op. (2021). In an opinion by Justice Brett Kavanaugh, the Court held that the FCC had given any parties opposing the rule changes ample opportunity to comment on the impact of the proposed changes on minority and female ownership. It held, therefore, that the FCC’s conclusion that its rule changes would have minimal impact on race and gender diversity of ownership was not an abuse of its discretion given the failure of Prometheus Radio and other commenters opposing the rule changes to produce convincing evidence to show that it would. (Slip Op. at 12.)
Now that the Supreme Court has ruled, the question is whether the FCC, under its new leadership, will adhere to the regulatory reforms to its local media ownership rule adopted under the prior administration or will instead take a step backwards by trying to reinstate the more restrictive ownership rules it had left in place during the Obama Administration. As a commissioner, the new FCC acting chairwoman, Jessica Rosenworcel, dissented from the FCC’s 2017 order relaxing those rules. In her dissent, she wrote in nearly apocalyptic terms about the consequences of the FCC’s action:
Today . . . [i]nstead of engaging in thoughtful reform—which we should do—this agency sets its most basic values on fire. They are gone. As a result of this decision, wherever you live the FCC is giving the green light for a single company to own the newspaper and multiple television and radio stations in your community. I am hard pressed to see any commitment to diversity, localism, or competition in that result.
Given the abundance of competing voices now available to residents in every community nationwide and the Commission’s retention of a presumptive ban on any broadcaster owning more than one of the top four TV stations in a market, Commissioner Rosenworcel’s concerns seem highly exaggerated.
Now that she is the FCC’s Acting Chairwoman, her overwrought concerns about the likely effects of these regulatory reforms are troubling.
Local newspapers and broadcast TV stations have long been our most important sources of local news in every community in the country. As a majority of the Commissioners recognized in 2017, local newspapers and TV stations now face an existential threat due to the growing competition they face from digital giants, a threat that is even more pressing today than it was three years ago when Commissioner Rosenworcel penned her dissent.
There is a growing bipartisan recognition that more needs to be done to rein in the power of these digital giants, but there is also concern about the First Amendment implications of doing that through increased regulation. The better remedy, as a majority of the Commission recognized in 2021, is to allow local TV stations and newspapers to combine in order to gain the economies of scale and scope they need to compete more effectively against these digital giants. We have to hope, therefore, that as the acting chairwoman, Commissioner Rosenworcel will reconsider her earlier views, and will not try to undo these long-needed regulatory reforms.
Guest blog authors William Kolasky and Philip A. Giordano are partners in the Washington, DC office of Hughes Hubbard & Reed LLP. Both Kolasky's and Giordano's areas of focus include antitrust & competition and litigation.
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Philip A. Giordano is a partner based in Hughes Hubbard’s Washington office. Giordano practices in all areas of antitrust law, including transactional matters before the Federal Trade Commission (FTC) and Department of Justice (DOJ), government civil and criminal investigations, complex civil litigation, criminal defense and client counseling.
By Jens Koerner