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Rule Battle Rages as Media Values Tank

Lawyers representing broadcasters and newspapers, as well as their opposite numbers in the anti-media-consolidation community, were preparing to ask a federal court last week to move challenges to the FCC's loosening of the newspaper-broadcast cross-ownership ban to other courts, hoping for a better outcome.

But for all of them, that outcome is months if not years away, while newspapers continue to bleed red ink and stations look for ways to cut costs and boost revenues.

Those measures, which broadcasters have argued are vital to their survival, would have included buying stations or converting LMAs (local marketing agreements) into station ownership in smaller markets if the FCC's 2003 media ownership rule revise had not been blocked by the courts. They also would have allowed more newspapers and TV stations to join forces if the FCC's second try at a rule revise last December had not been immediately taken to court by virtually everyone involved.

That included, ironically, broadcasters themselves, who argued that the FCC's relief was inadequate.

As it is, the fate of the FCC's decision to loosen the ban on newspaper broadcast cross-ownership, a far more modest proposal than the 2003 package of deregulatory proposals, is likely to remain in limbo until at least sometime next year, or it could be thrown out entirely if some in Congress have their way.

At presstime, broadcasters were preparing to ask the Ninth Circuit Court of Appeals—petitions were due July 18—to give the case over to the U.S. Court of Appeals for the D.C. Circuit. The D.C. court has primary jurisdiction over FCC appeals and has provided some broadcaster-friendly decisions in the past, though a decision last week was not so friendly to Sinclair Broadcasting.

That company, which has had station transactions held up for years by the moving target that is media ownership rules, had asked the court to require the FCC to obey the court's 2002 directive to either better justify or not enforce its “eight voices” test for local TV station ownership caps. But the court said that call was now the province of the Ninth Circuit. Sinclair General Counsel Barry Faber told B&C last week that Sinclair was challenging that decision.

On the other side of the issue, The Media Access Project (MAP), which represents groups opposing any more deregulation, was asking the case to be moved to the Third Circuit, the court that blocked the FCC's 2003 deregulatory rule changes.

Either way, the court won't even decide whether or not to move the case until the fall, says MAP President Andrew Schwartzman, and oral arguments won't likely come until early next year. In the interim, Schwartzman says, “There will be a lot of billable hours and no decision.”

Elsewhere, there are separate initiatives in the House and Senate to block the rules outright. The Senate has already passed a resolution of disapproval that would nullify the rule change. A House version has been introduced, plus an amendment was added to an appropriations bill in the House that would not allow any funds to be spent by the FCC to implement the rule change.

So, depending on whom you ask, the FCC's loosening of the cross-ownership ban either has taken effect or is still awaiting a sign-off from the Third Circuit, which remanded the old rules. But even if the rule did survive those legal challenges, it is not enough, say newspaper owners who want to be in the broadcasting business.

The Newspaper Association of America (NAA) has pushed for lifting the cross-ownership ban entirely, as have broadcasters. “The newspaper business is very difficult right now,” says NAA President John Sturm. The ban is “dead wrong and it ought to go away,” he says, adding that the current regulatory limbo is “one more thing that makes life more difficult for newspapers at a time when life is very difficult for newspapers already.”

How difficult? Sturm says that from their peak share values, the stock values of public newspapers have fallen as follows: GateHouse Media, down 92%; Lee Enterprises, 84%; McClatchy, 82%; Media General, 69%; Gannett, 68%; Journal Communications, 65%; New York Times, 44%; Washington Post, 34%. “That is what is happening, and regulators don't get it,” Sturm says.

“Restrictions like this have a consequence,” he adds.

The National Association of Broadcasters certainly agrees. “In these tough times,” says spokesman Dennis Wharton, “we don't need one more incentive, i.e., regulatory uncertainty, for Wall Street to move its money elsewhere.”