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Sinclair loses on LMA ruling

The fate of four Sinclair Broadcasting local marketing agreements remains under a cloud following a court ruling last week.

The federal appeals court in Washington refused Sinclair's request to rehear an April court decision allowing the FCC to count a local marketing agreement (LMA) toward a broadcaster's local-ownership tally. The court also upheld the FCC's decision to deny grandfathering rights to LMAs established after Nov. 5, 1996.

Thus, Sinclair may have to unwind LMAs in Columbus and Dayton, Ohio; Charleston, S.C.; and Charleston, W.Va.

LMAs allow a company to own one station in a market and operate another under a contract with that station's owner. They have been long criticized as an attempt to skirt local-ownership restrictions. Ownership of two stations in a market was banned until 1999, when the FCC approved duopolies in larger markets.

The appeals court's April decision was, by and large, a victory for broadcasters because the FCC was ordered to rewrite duopoly restrictions the industry opposed. But the victory was only a partial one for Sinclair, because the court refused to vacate the restrictions during the FCC's rewrite. With the rules still in place, companies could be forced to come into compliance with the so-called eight-voice standard.

That restriction forbids broadcasters from owning or controlling two stations in a market with fewer than eight separately owned stations. But the court ordered the FCC to rewrite that rule after finding that it did not explain why television was the only medium counted in the voice test.

"We knew that asking a court to reconsider its original decision is generally an uphill battle," Sinclair CEO David Smith said in a prepared statement. "We remain gratified that the court initially ruled in our favor in finding that the FCC's duopoly rules were arbitrary and capricious."

At the moment, Sinclair is free to keep the four LMAs, thanks to a court stay barring divestiture pending the outcome of the case. Sinclair says the partnerships are protected from a forced sale until the court approves a new FCC voice test. But FCC officials say the commission has yet to review whether the stay continues once the latest decision becomes effective.

The FCC is considering new local-ownership limits for TV as part of a larger proceeding on a variety of industry ownership restrictions. New rules are expected by next spring.