Opening Salvos in 2014 QR Case Challenge FCC Action on Ownership, Incubators, Diversity

Though the FCC lost the prior three Prometheus quadrennial review cases, broadcast industry officials said changes to the media marketplace should give the agency a stronger case this time around. Early in 2018, the 3rd Circuit denied a stay request against the FCC’s media ownership recon order eliminating the eight-voices test, which some broadcast attorneys said is a positive sign. The case still creates uncertainty on the agency’s ownership rules that could affect deal-making in 2019, broadcast attorneys said. The agency may not complete the 2018 quadrennial review until the case is resolved, and oral argument in the matter isn’t expected until the spring. The agency and broadcasters can’t move forward without knowing what the 3rd Circuit will do, a broadcast attorney said. The FCC and NAB didn’t comment.

The brief filed by the group of small and mid-market broadcasters focuses on the FCC’s media ownership recon order and the top-four rule. The FCC didn’t adequately show why the competition broadcasters face from other media sources justified eliminating the eight-voices test but leaving the top-four rule, said the broadcasters, which include Quincy Media and Morgan Murphy Media. “Since the FCC did not specify standards for approving ownership of two Top Four stations, potential sellers do not want to take the risk of long delays before the FCC acts on a potential combination, or rejects the assignment altogether,” said Quincy CEO Ralph Oakley in a declaration filed with the brief. By prohibiting common ownership of the top-four stations in a market, the rule “effectively bans any common ownership in markets with five or fewer TV stations,” the broadcaster brief said.

The FCC also hasn’t adequately explained why the rule cuts off ownership at the top four instead of two, the broadcaster brief said. The brief said the agency’s case-by-case procedure for allowing top-four combos is unclear, and notes the lone application for a new combination under the procedure -- by Gray Television in Sioux Falls, South Dakota -- has been stalled for months. The “lengthy delay” confirms “fears” that “the FCC’s standard-less case-by-case approach would not provide any effective relief,” the brief said. The agency should be required to vacate the top-four prohibition or establish a presumption in favor of such combos in small and mid-size markets, the broadcaster brief said

MMTC and NABOB’s brief is narrowly focused on the broadcast incubator program teed-up by the media ownership recon order and on FCC inaction on a diversity procurement rule for broadcasters. The FCC didn’t provide adequate notice of how it would define a “comparable market” in the incubator rule, MMTC and NABOB said. The incubator NPRM referenced “similarly sized” markets, but the order grouped markets based on how many full-power radio stations they contain, a shift not anticipated by commenters at the time, MMTC and NABOB said. None of the NPRM comments discussed using the comparable markets definition that ended up in the order, the brief said. “This difference has important consequences for the incubator program because the number of radio stations in a market does not correlate with the size of the market,” MMTC and NABOB said. The order’s definition removes any incentive to create incubator programs in large markets, the brief said.

The FCC “punted” on requiring procurement diversity in broadcasting despite saying in the 2014 quadrennial review it was exploring the idea, the MMTC and NABOB brief said. “Apparently, no exploration or evaluation was done since that time, as evidenced by the recent issuance of yet another call for comments on whether and how the cable procurement requirements can be extended to broadcasting,” said the brief, referring to the proposal’s recent incorporation into the 2018 quadrennial review NPRM. “It does nothing concrete to further the FCC’s statutory obligation to promote diversity,” the brief said. The 3rd Circuit should vacate the FCC definition of a comparable market, remand the incubator order to the FCC, and set a timeline for the FCC to vote on a regulation promoting diversity in broadcast procurement, it said.

The FCC’s decision-making is “marred by long-standing data defects and continued failure to conduct appropriate studies,” said anti-consolidation groups including Free Press, Common Cause and the Communications Workers of America in their brief Friday. The brief primarily focuses on the FCC’s insufficient efforts at gathering data on diversity and following prior 3rd Circuit remands. All of the FCC’s previous quadrennial review orders and the media ownership recon order "lacked substantial evidence because they conducted a simplistic, invalid numerical analysis,” the groups said. The agency’s current definition of an eligible entity “will assist four people who are not women or ethnic minorities for each person who is,” the brief said. The court should vacate the media ownership recon order, and reverse and remand the 2014 QR order and the incubator order for not being based on sufficient analysis, it said. “The Court should hold that the FCC may not take action to repeal or modify any ownership rule until after it completes studies that assess the impact of any proposed change on race/gender diversity,” the groups said. The FCC’s response is due Feb. 14.