APPELLATE COURT REMANDS MAJOR MEDIA RULE CHANGES

The court in a 218-page decision, remanded FCC’s June 2003 decision to relax regulation of broadcast ownership. The rules would have allowed one company to own 3 TV stations, 8 radio stations and a newspaper in a single market. The court remanded local TV ownership rules, which would give broadcasters greater opportunities to own 2 or 3 stations depending on market size.

The court also sent back to the FCC a new local radio market definition, which would generally prevent larger radio clusters, though it would also give companies, including Clear Channel, new opportunities in some cases. Both rules were sent back to the Commission on the grounds that the evidence and reasoning presented didn’t justify the changes as serving the public interest. “The Commission’s derivation of new cross-media limits, and its modification of the numerical limits on both television and radio station ownership in local markets, all have the same essential flaw: an unjustified assumption that media outlets of the same type make an equal contribution to diversity and competition in local markets,” the judges wrote. The court also maintained a stay that blocks the rules from taking effect until it reviews the Commission’s new order on remand.

The decision provoked rapid reaction from all sides. FCC Chmn. Powell said the decision “perversely may make it dramatically more difficult for the Commission to protect against greater media consolidation. This is deeply troubling and hampers the flexibility of the agency to protect the American public, as this agency is charged to do.” Powell accused the court of putting aside “exhaustive efforts” to set numerical limits on media ownership. “The chaotic result demonstrate the wisdom of Chief Judge [Anthony] Scirica’s nearly 100-page dissent, where he says that the Court has substituted its own policy judgement for that of the FCC and upset the ongoing review of broadcast media regulation mandated by Congress.” Powell said the FCC is “carefully” considering its next steps.

Scirica in his dissent said it wasn’t the role of the judiciary to 2nd-guess the “reasoned policy judgements” of an administrative agency. “The Court has substituted its own policy judgement for that of the FCC and upset the ongoing review of broadcast media regulation.”

Comrs. Copps and Adelstein, who opposed the new FCC media rules, applauded the decision. “The Commission has a second change to do the right thing. We must immediately move forward and redesign our media policy,” Copps said.

Comr. Abernathy, speaking at a luncheon of the Federal Communications Bar Assn. (FCBA), said she wasn’t surprised by the decision, given the length and tone of the oral arguments in the case. She said the Commission would take a careful look at the order, and she said she hoped it wasn’t in conflict with an earlier decision by the D.C. Circuit on the same subject.

Consumer advocacy groups claimed victory. Andrew Schwartzman, pres. of Media Access Project, said the decision was a big win for diversity in the media. “The rules were never supported by public opinion; they can’t drag their feet anymore,” said Mark Cooper of the Consumer Federation of America.

Consumers Union launched a national campaign urging President Bush to shift course on media ownership rules in view of the court’s decision. The group urged the FCC to act swiftly on the court’s remand. “The American people, the Congress, and now the courts have said that competition, localism and democratic dialogue must exist in our nation’s media,” said CU Public Policy Dir. Gene Kimmelman.

The Newspaper Assn. of America (NAA) said it was disappointed with the remand of the rules. But it was “pleased the court found that the FCC’s repeal of the old 1975 across-the-board ban on newspaper ownership of broadcast stations is fully justified,” said NAA Pres. John Sturm.

The FCC can appeal the order to the full 3rd Circuit or directly to the Supreme Court. Even if it decides to focus just on the remand, several attorneys told us, it’s doubtful the FCC would be able to issue new rules in the near future - - highly unlikely before the Presidential election, which could mean changes in the FCC leadership in Jan. “This is not the end of the road, but a step in the process,” FCC Media Bureau Chief Kenneth Ferree told us.

While Ferree said he was disappointed by the judges’ decision, he pointed out that the court was supportive of the FCC’s general legal authority in this area. The court upheld the FCC’s authority to eliminate the current prohibition on new newspaper/broadcast cross-ownership. The court upheld the FCC’s restriction on combinations of top 4 stations, which generally prevents ABC, NBC, CBS and Fox affiliates from being owned by the same company.

The court did find that challenges to the 39% national TV ownership cap and UHF discount to be moot. “Because reducing or eliminating the discount for UHF station audiences would effectively raise the audience reach limit, we cannot entertain challenges to the Commission’s decision to retain the 59% UHF discount,” the judge wrote.

Proponents of the FCC’s media ownership changes in Congress were relatively silent following the court’s ruling. But opponents hailed the ruling as a victory for localism and diversity. Sen. Dorgan (D-N.D.), one of the most outspoken opponents of the FCC rules, said: “This decision ensures that we preserve a diverse media that will serve the public interest, and that the FCC'’s decision-making is more open and inclusive to the public as it moves forward on this issue.” Rep. Hinchey (D-N.Y.), who led a failed effort in the House to overturn the rules, said: “Chairman Powell’s gift to media conglomerates was made without basis in legitimate research. He cannot show that the commission’s decision was made in the public’s best interest. On the contrary, it threatens the ability of the public to have its voice heard and to have access to other diverse voices.”

House Telecom Subcommittee ranking Democrat Markey (Mass.) said he was happy to see the court had overturned “the worst decision in the FCC’s long history” and that the court recognized the public wasn’t properly involved in the decision. “Now that the Commission has the opportunity to start over, I urge the Commission to open up this process to the public in a way that it did not previously,” Markey said. The public needs to be involved from the start because localism, diversity, and competition remain important values to the American people. I also urge the Commission to act mindful of the court’s interpretation of the ‘public interest’ standard… Rather than pursuing sweeping deregulation, therefore, the Commission would be wise to tailor its review in a way that reflects the realities of today’s media marketplace.”

NAB wouldn’t comment Thurs. “We are still reviewing this lengthy and complex decision and will reserve comment until after our board of directors has a chance to meet and discuss all of the ramifications of the opinion,” a spokesman said.