3rd Circuit’s Cross-Ownership Remand Seeks Better Work in Current Ownership Review

At issue on cross-ownership rules barring in some circumstances a common owner of a daily newspaper and radio or TV station in the same market was a 2006 rulemaking notice on the proceeding that led to the 3-2 FCC vote split on party lines in the last media ownership review. The rulemaking had a single paragraph, No. 32, “directly relevant to revising” the cross-ownership rule, said the ruling by Judges Julio Fuentes and Thomas Ambro. “The FCC relied entirely on the two sentences” in that paragraph as giving ample notice for the order adopted in late 2007 and released in 2008, Ambro wrote for himself and Fuentes. Judge Anthony Scirica, dissenting on the cross-ownership portion, said the FCC first proposed such rules in 2001: The 2008 rule “is not just the product of one isolated rulemaking, but is instead the outcome of an iterative and interactive process."

The majority took issue with a New York Times op-ed by then-FCC Chairman Kevin Martin proposing the cross-ownership rule and his decision to circulate an order two weeks before the 28-day comment period ended. “No party disputes that Chairman Martin’s Op-Ed/Press Release did not satisfy” the notice requirements of the Administrative Procedure Act (APA), Fuentes and Ambro ruled in Prometheus Media Project v. FCC. That group and others challenged the rules for being deregulatory, while many broadcasters sued the FCC for not going far enough. Agency officials noted Thursday that the 3rd Circuit upheld many other rules from the 2008 order. That “affirms the FCC’s authority to promote competition, localism, and diversity,” General Counsel Austin Schlick said in a written statement.

Martin’s proposal wasn’t published in the Federal Register, “the views expressed were those of one person and not the Commission, and the Commission voted days after substantive responses were filed, allowing little opportunity for meaningful consideration of the responses before the final rule was adopted,” the two jurists ruled. The commission failed in its duty to remain “open-minded,” as the APA requires regulators to proceed, Ambro wrote. “This is not the agency engagement the APA contemplates.” Martin didn’t reply to a message seeking comment. The 3rd Circuit previously sent back to the rules enacted under Chairman Michael Powell to the FCC, which in the 2008 review tried to address that remand.

The court upheld radio and TV ownership limits, cross-ownership waivers issued to Gannett and Media General as part of the 2008 order and other ownership rules. In each instance, the 3rd Circuit found the commission had ample reason to act as it did, often keeping existing rules in place, such as caps on the number of radio stations one company can own in a market which were challenged by Clear Channel. None of those companies or other industry petitioners we contacted had any comment. “There have been sweeping changes in the media landscape since most of the broadcast ownership rules were adopted decades ago,” an NAB spokesman said. “NAB believes that modest reform of rules to allow free and local broadcasters to compete successfully in a universe of national pay TV and radio platforms is warranted.”

The notice of inquiry starting the ownership review Congress mandated for 2010 shows how the rulemaking notice the last time around erred, Fuentes and Ambro ruled. The earlier rulemaking is “sparse in comparison” to the May 2010 NOI, Ambro wrote. “The 2010 NOI is much more specific and covers many more issues. It contains pages of questions regarding potential approaches” to the cross-ownership rule, “discusses data motivating the Commission’s questions, and inquiries into various regulatory options,” the jurists continued. It may be several more months before the commission releases the rulemaking notice for the pending review, an agency official said Thursday: All studies the commission paid for as part of the review, being written by academics, aren’t complete, and they still must undergo peer review. Once the research is finalized, the studies and the rulemaking will be released, agency officials have said. The commission last month made public five studies that were complete.

"With an updated record and this supportive decision, the agency should be able to take appropriate steps to ensure that the nation’s media marketplace remains healthy and vibrant,” Schlick said of the current review. Commissioners Michael Copps, who voted against the 2008 rules, and Robert McDowell, for voted for them, each expressed hope for the current review. “Now that we have some closure from the 3rd Circuit, it’s all the more imperative that we get on with our statutory obligations to review the media ownership rules,” McDowell said in an interview. “Any remand can be taken care of in the course of that review, and I would hope that that review would be deregulatory in nature, as Section 202(h)” of the Telecom Act requires, he added.

The ruling “underlines the need for better process and analysis in the forthcoming but overdue” 2010 quadrennial review, Copps said. “It is clear from this decision that those previous Commissions abdicated their responsibility to consider diversity of ownership and diversity of viewpoint when they wrote their flawed rules.” Commissioner Mignon Clyburn said the decision said the FCC didn’t do enough to help new entrants to broadcasting: “As the Court noted, the current Commission has taken steps towards gathering updated studies on ownership diversity,” she said. “I hope this Court decision will serve to encourage all of us at the Commission to take a laser like focus on the necessary and long awaited need for robust ownership studies and thoughtful recommendations."

An order on diversity issued the same day as the media ownership review contained many flaws, some of which were first mentioned by the 3rd Circuit in its first Prometheus ruling, Ambro and Fuentes ruled. “First and foremost, the Diversity Order does not explain how the eligible entity definition adopted would increase broadcast ownership by minorities and women. In the two paragraphs that discuss the definition adopted the Commission refers only to `small businesses,’ and occasionally `new entrants,’ as expected beneficiaries.” It’s “hard to understand” how the decision would create new opportunities for people of color and women, the judges said. “The Commission referenced no data on television ownership by minorities or women and no data regarding commercial radio ownership by women. This is because, as the Commission has since conceded, it has no accurate data to cite."

Sturm worries that next time around, the 3rd Circuit may likewise not be inclined to sign off on media ownership rules, even if the paperwork problems are remedied, he said in an interview. The newspaper association was among the broadcast and newspaper entities that challenged the rules on the grounds they weren’t sufficiently deregulatory. “The majority used a thin procedural argument or decision to once again stave off even the limited deregulation from the newspaper-broadcast cross-ownership rule” first enacted in 1975, he said. “We're back to 1975, which is absolutely ludicrous. The biggest explosion in the history of media has taken place since that time, and yet with competition from every conceivable direction to traditional media, this court cannot see its way through to recognize the changed marketplace that we exist in today, and they keep affirming rules that certainly don’t make sense anymore.” The 3rd Circuit panel “seems remarkably dug into the past,” Sturm said.

"Today’s decision is a sweeping victory for the public interest,” said Policy Director Corie Wright of Free Press, among the groups challenging the rules as too deregulatory. It was “disappointing” that FCC Chairman Julius Genachowski “chose to defend his predecessor’s erroneous action in court,” said Senior Vice President Andrew Schwartzman of the Media Access Project, representing Prometheus. “But now that the Court has directed the FCC to make sure the public is not ignored, we can look forward to having a right to meaningful participation as the FCC looks at these questions again.”