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Court Reverses Ownership Rules

In a big victory for media-consolidation critics, a Philadelphia appeals court in a 2-1 decision has sent most of the Federal Communications Commission's new, more deregulatory, ownership rules back to the commission to try again.

Among the court findings were that the FCC was not required to loosen the rules, but could have tightened them as well.
Chairman Michael Powell had argued that Congress and the D.C. Circuit court in an earlier challenge to its rules had effectively instructed the FCC to get rid of whatever rules it could not sufficiently justify. Grabbing onto that, some broadcasters had argued to the court that the FCC hadn't deregulated enough. The court disagreed.
While the court said the FCC had the authority to make the changes it did, including allowing more stations per market and permitting newspapers and TV stations and TV and radio stations in the same market to be jointly owned, it also found that the FCC's method of arriving at those deregulatory moves--the so-called diversity index--was flawed.
As a result, the court continued to stay those rule changes and told the FCC to rejustify them. The court retained its jurisdiction over the case, meaning when the FCC has a new set of justifications, it must bring it back to the same court, in fact to the same panel of the same court, given the number of recusals from the case on the full court.
Since there will be no chance for an en banc (full court) appeal, The Supreme Court would appear to be the next stop if the commission wants to appeal.
A clearly frustrated FCC Chairman Michael Powell said the result of the decision, "perversely," could be to make it "dramatically more difficult for the Commission to protect against greater media consolidation."
How so? "It sets near impossible standards for justifying bright-line ownership limits," he said. "The fear is realized in the opinion itself.  The court rejected the Commission’s effort to limit further radio consolidation. 
It also upheld the elimination of the newspaper cross-ownership rule, while rejecting our efforts to place reasonable limits on those combinations.  This is deeply troubling and hampers the flexibility of the agency to protect the American public, as this agency is charged to do."
Powell pointed out that it was the second time a court has set aside FCC numerical limits (the D.C. Circuit in an earlier appeal of its rules), saying the result has been chaos and  "a clouded and confused state of media law."
In good news for networks, the court did not deal with the 39% cap on a station group's national audience reach, which most directly afects the nets, since that was not an FCC rule but a compromise law passed by Congress late last year. It also did not deal with the challenge to the FCC's 50% discount on a UHF station's audience, saying that was tied to the cap and thus also moot.
The court upheld the FCC's new local radio rules, which actually tightened up ownership, including upholding the counting of joint sales agreements between stations toward ownership accountings. But those rules are stayed, too, which Powell said would have the effect of spurring more consolidation.
"We are regarding this as a near total win for our clients and the public interest," said Media Access Project Associate Director Harold Feld. MAP represented the winning side in the case. "The Third Circuit has found that what Congress intended was to protect democracy and competition, not encourage rampant consolidation."
The NAB wasn’t commenting.  “"We are still reviewing this lengthy and complex decision,” it said in a statement, “and will reserve comment until after our Board of Directors has a chance to meet and discuss all of the ramifications of the opinion."
Tribune’s Shaun Sheehan was feeling “pretty good,” however, given that the court agreed with it and the FCC majority that an absolute ban on broadcast-newpaper crossownership is unjustified. Tribune bought Times Mirror in 2000 banking that the ban would go away.
The Network Affiliated Stations Alliance was also happy about the newspaper-broadcast crossownership decision, but not so sanguine about the rest:
"While the Court rightly upheld the FCC's decision to relax certain of the local ownership rules such as the ban on newspaper/TV combinations,” ,” said NASA Chair Alan Frank of Post-Newsweek, “we are disappointed that the Court failed to give greater relief to small broadcasters whose ability to survive in today's environment is hampered by the 'top-four' local television ownership restriction.
Democratic FCC Commmissioners and frequent Big Media critics Michael Copps and Jonathan Adelstein were celebrating what they saw as a big win and a big vindication. " The court largely undid what would have been the most destructive rollback of media ownership protections in the history of American broadcasting," said Adelstein. Copps quickly called for the FCC to change direction.
"First, we should issue a notice confirming that until new rules are adopted, we will continue to apply the limits that were in effect prior to the June 2, 2003 decision. 
"Second, I call upon the Commission to schedule a series of hearings across the country designed to give citizens true access to the decision makers at the Agency, and seek to gain a better understanding of the impact of media concentration on our communities.  These hearings should begin immediately, and certainly no later than 30 days from now. 
"Third, we need independent research studies on media concentration in a variety of markets so that we can make a decision that has a more solid foundation.  Clearly, the court found that the FCC’s previous studies were inadequate and lacked credibility. "
Copps told B&C that he thought new rules could be crafted by the end of the year.