ANALYSTS, OTHERS DEBATE WHETHER MORE OWNERSHIP COMMENT IS NEEDED

It’s not just the letter from Sens. Snowe (R-Me.), Allard (R-Colo.) and Collins (R-Me.) (CD March 21 p8) that has people talking, but also the requirements of the Administrative Procedure Act. That Act essentially says that if the Commission comes up with a rule or a basis for a rule or a specific element of a rule without having given some advance notice of it in its initial Notice of Proposed Rulemaking (NPRM), there’s a legal requirement that the public be given an opportunity to comment. That could hold up the actual implementation of new broadcast ownership rules, which are largely expected to be at least “partially liberalized” -- a phrase Chmn. Powell has used (CD March 5 p3).

Meanwhile, in a March 21 letter to FCC Chmn. Powell, Senate Commerce Technology Subcommittee Chmn. Brownback (R- Kan.) asked for more information on Powell’s concerns about the frequency of the media ownership Biennial Review. Brownback said the frequency of media ownership review could be addressed as part of the Senate Commerce Committee’s proposed reform of the FCC, which Committee Chmn. McCain (R- Ariz.) said would be part of the panel’s agenda this session. “Please provide me with examples of how the existing statutory requirements to review media ownership regulations every 2 years have served to create uncertainty in the marketplace,” Brownback wrote. “Should Congress concur with your assessment, should we respond by eliminating the statutory requirement, provide greater flexibility to the Commission in determining where to begin such a review, or simply extend it by a number of years? Should any such reform be limited to media ownership, or extended to the entire Biennial Review requirement?” Brownback also urged the FCC to quickly complete its current media ownership review.

A day after the letter from Snowe, Allard and Collins asking that Congress and the public have their say in the matter, Legg Mason analyst Blair Levin warned investors that if new comments were sought, “it will delay a final decision…, altering market expectations about the onset of resulting consolidation.” While Levin said he thought it was unlikely the Commission would seek a new round of comments, he said the question of the agency’s legal requirements was being raised by Commission staff. In the past, the FCC has been challenged for not having sought comment on a variety of issues, and has lost in the courts, so it isn’t taking the issue lightly, agency sources said. For example, in Jan., the U.S. Appeals Court, D.C., said the lack of notice was the basis for its remand of the FCC’s payphone rules.

Several industry sources specifically pointed to the so- called diversity index or algorithm that Media Bureau Chief Kenneth Ferree has said is being developed by the staff as a way to measure consolidation in local markets. Although the idea was discussed in the NPRM, the details weren’t. Levin said the formula that the Commission would use “has not been publicly revealed.”

However, Levin and several other industry analysts stressed that there would be no need for a Further Notice of Proposed Rulemaking (FNPRM) if the rules the Commission came out with in the spring were a “logical outgrowth” of the original notice.

Ferree, in a statement, said the FCC was “very clear in the NPRM that it was interested in thinking about diversity in a more accurate way than the Commission had in the past. The concept of a diversity index is simply a more sophisticated way to analyze data that is in our record, it doesn’t tell you what the rule should be.” In other words, the public has been given ample notice of the index, so no further comment is necessary, he suggested. Ferree also bemoaned the fact that there had been “a lot of premature speculation” about the outcome of the FCC’s broadcast ownership proceeding.

Media Access Project Pres. Andrew Schwartzman, meanwhile, said that, just as a matter of prudence, it would be safer for the FCC to issue a further notice because doing so would give the staff an opportunity to vet challenges to the rules and ultimately make them less vulnerable to court challenge. “It’s rarely a bad idea to solicit further public comment on something that is complex and has a dramatic effect on large numbers of people, and an index that is potentially going to restructure broadcast media and affect the public’s right to receive information in the future undoubtedly could benefit from further public comment,” Schwartzman said. He said he didn’t believe Powell would want to risk a “needless reversal” in court. Asked about Powell’s spring deadline, Schwartzman suggested the Commission could come out with a tentative rule and put that out for public comment. “There are a number of ways you could finesse that,” he said.

Levin stressed that the question was a procedural issue that “should affect timing more than the result” and that Powell might be anxious enough to finish the rules that he could try to prevail upon the other commissioners to forgo an additional comment period. “The bottom line is that for those who are pinning their hopes on a clear FCC decision in May, and the expected transactions to follow shortly thereafter, we think there is added material risk that the date of the final decision could be delayed,” Levin wrote to investors.

“Until you know more about what it is they [FCC staff members] are talking about, it’s hard to know how this would fit into the case law,” said NAB Gen. Counsel Jack Goodman: “It’s an interesting legal question.” Several other broadcast industry lawyers who didn’t want their names used said they thought the question of whether more comment was needed would depend on how specific the Commission was with its rules and whether there already was some indication of them in the notice. Given Powell’s spring deadline, they thought the Commission would be careful to craft the rules in a way that would avoid the necessity for more comment.