Quadrennial Review Expected to Focus on Subcaps, Duopoly Rules, May Start in December

Complicating the process is the pending case in the U.S. Court of Appeals for the 3rd Circuit, which combines challenges from anticonsolidation groups and broadcasters of the 2014 QR, the subsequent reconsideration order from that quadrennial that eliminated many broadcast ownership rules, and the recent incubator order. A proposed briefing schedule would have final briefs due March 29, and the case’s outcome could affect many of the rules likely to be a focus of the 2018 agency review (see 1811010041).

With that case looming, the agency might seek to initially keep the review broad to allow an eventual order to respond to what the court does, said broadcast attorneys. That could lead to an initial proposal that's largely “pro forma,” said Cheryl Leanza of the United Church of Christ Office of Communication -- one of the petitioners opposing the FCC in the case. Other lawyers said it's unlikely the ongoing case would have much effect on the initial proposal. Previous QRs lost in the 3rd Circuit.

Firming up criteria for approval of top-four duopolies is “one of the most productive things the FCC could do” in this 2018 examination, said Pillsbury Winthrop's Scott Flick. The FCC has yet to approve a top-four combination, though Gray has had such a combination pending in Sioux Falls, South Dakota, for months (see 1806080055). With no certainty of what the agency is looking for, broadcasters are hesitant to propose such combinations and endanger or hold up their deals. That aspect of relaxing broadcast ownership rules “has landed with a thud,” Flick said. Broadcasters challenging the top-four policy make up one group of petitioners in the combined 3rd Circuit case. The agency should create “a clear bright-line test,” Flick said. FCC officials have been citing the 2018 review as the place to firm up the top-four rules since issuing the recon order that initially relaxed the prohibition.

Many expect the QR to include new rules on AM/FM subcaps that closely resemble NAB's plan (see 1806180056). Many say lack of industry consensus could be an issue for a final order. The most visible opponent of the plan is iHeartCommunications, but other oppose some aspects of the proposal. The association has a wide range of supporters, an industry official said. “NAB's is really the only substantive proposal,” said Fletcher Heald's Frank Montero. Removing subcaps for AMs has broad industry support, but loosening ownership limits on FMs is more controversial.

Henson Media CEO Ed Henson is concerned allowing unchecked growth could hurt radio’s ability to remain locally focused. Lack of industry consensus doesn’t prevent the FCC from acting, but general industry accord can make the agency’s path clearer, said Womble Bond's John Garziglia.

One radio CEO backed NAB's local-radio ownership suggestions, meeting Commissioners Brendan Carr and Jessica Rosenworcel, showed filings posted Friday to docket 18-119. Beasley Media CEO Caroline Beasley told the FCC members the proposal would "modernize" local caps in larger markets and give "additional relief" in smaller ones. Stations "face intense competition for both listeners and advertising revenues from satellite radio, Pandora, Google, Facebook, Spotify and many other radio alternatives that operate free of any comparable regulatory limits," the broadcaster said.

Enigmatic

Lawyers aren't sure what else the QR will tackle after past deregulation. “It’s an enigma,” said Multicultural Media, Telecom and Internet Council Senior Adviser David Honig. MMTC is also a respondent in the 3rd Circuit case.

The commission didn’t comment Friday.

“We still don’t know what will come out of the quadrennial review,” said Sinclair CEO Chris Ripley last week (see 1811070056).

Commissioner Mike O’Reilly told us he’d like the review to seek comment on allowing triopolies. O’Rielly has also said the review will examine how the market and competitors for broadcasters are defined.

Lawyers for station owners expect the December release to seek comment on that matter. The national broadcast audience reach cap isn’t subject to the QR process, says the FCC website. Action on potentially raising the cap of what portion of the country a TV-station owner can reach from 39 percent could occur next year (see 1811010041).

Commissioners next meet Thursday, for what Chairman Ajit Pai is calling space month. Their final gathering for 2018 is Dec. 12.