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Judges ready to kill ownership cap

Federal judges Friday gave strong indication they will junk FCC rules capping national broadcast ownership reach and restricting cable/broadcast cross-ownership, unless regulators provide better reasons to maintain those rules.

It's unclear whether limits would remain while that review proceeds. The judges' comments were made during oral argument in a case against the limits filed in the federal appeals court in Washington by Fox, NBC, CBS and Time Warner.

"The agency is being pushed hard" by Congress to deregulate, Judge Harry Edwards told FCC attorney Grey Pash in a line of questioning that suggested the FCC's stated rationale for the rules was a tenuous one.

The most likely scenario, predicted several observers, is for the court to keep the rules in place but give the FCC a tight deadline, perhaps 90 days, to justify their continuation.

At issue is whether the FCC's 2000 decision to maintain the limits was adequate, given that Congress ordered the FCC to review all its ownership regulations every two years beginning in 1998. The congressional mandate clearly implied that restrictions that could not be justified were to be relaxed or even eliminated.

If either limit is vacated, the TV industry could face a new tide of mergers that would allow the major networks to gobble up more station groups and tear down the FCC's longstanding barriers to cross-ownership of local media.

The judges took shots at the law, calling the two-year review obligation a "silly" and "bizarre" mandate too burdensome for the FCC to fulfill. But, "there are a lot of laws I think are stupid," quipped Judge David Sentelle.

While it's hard to predict the outcome of a case based on judges' comments, the courtroom was packed with Washington's top telecommunications figures, who wanted to hear the argument themselves rather than receive the customary second-hand briefing from their junior associates. On hand were former FCC Commissioner Susan Ness, former agency General Counsel Christopher Wright, analysts Victor Miller of Bear Stearns and Blair Levin of Legg Mason and Disney/ABC lobbyist Preston Padden, whose company isn't a party to the suit. Also present was David Smith, chief executive of Sinclair Broadcasting, whose challenge to the FCC limits on TV duopolies will be heard by the same court in January.

Defending the rules in court were lawyers for the National Association of Broadcasters and the Network Affiliated Stations Alliance, a coalition of TV station groups. Public advocacy groups are also urging the court to retain the limits. NAB/NASA lawyers argue that letting the networks grow beyond the cap would give them enough economic leverage to strip control of stations from their owners.

Both Fox and CBS reach 42% of TV households and are under orders to sell enough stations to get under the 35% cap, pending resolution of this case. Others bumping against the cap include Paxson Communications at 33% and Tribune Broadcasting at 28%.

Both broadcasters and the cable industry officials argue the limits violate their free speech rights by restricting the number of Americans they can reach directly and say the rule should be vacated immediately.

"I don't think it's a satisfactory outcome for the FCC to kick this around indefinitely when our First Amendment rights are being violated today," said Edward Warren, the networks' attorney.

The FCC's Pash insisted the FCC's 1998 biennial review fulfilled the agency's obligations, despite the fact there was never a separate request for public comment on either of the limits.

The judge's comments left many supporters of the rules demoralized. "The commission has got its work cut out for it," said Ness, who voted to retain the limits when she was a commissioner. "It would be hard to find an individual in this country who says they cannot hear the voice of NBC or CBS in their market."

Media Access Project Associate Director Harold Feld urged the judges to make a viewers right to receive a diversity of media voices paramount. - Bill McConnell