FCC Moves Keep Deals in Limbo

Dec 20, 2004  •  Post A Comment

Legal wrangling over Federal Communications Commission media ownership regulations is unlikely to be resolved for at least another year, according to industry observers, and uncertainty about the rules will keep major industry deal-making on hold.

“Nothing is near-term, that’s for sure,” said one leading industry attorney.

There’s little prospect for short-term regulatory relief after the U.S. Court of Appeals in Philadelphia in June threw out most of the FCC’s controversial effort to loosen rules limiting broadcasters’ ability to buy other stations and newspapers in their markets.

Six months after the Philadelphia court’s decision, the FCC has yet to announce whether it will appeal to the Supreme Court or try to fix the regulations to the appellate court’s druthers, the agency’s two major alternatives for action. Either way the agency moves, sources said, final resolution is expected to be more than a year away, while a court stay of agency deregulation remains in place.

Of the FCC’s two alternatives, a Supreme Court appeal offers the bigger potential bonanza for the industry, assuming high court affirmation of the agency’s original deregulation.

Media General and a coalition of major TV owners-NBC Universal, News Corp. and Viacom-have made clear in filings with the high court that they are also giving serious consideration to an attack on the Red Lion decision as part of their challenge to the appellate court’s decision.

In its 1969 Red Lion decision, the high court established the legal rationale for subjecting broadcasters to media ownership regulation and other special rules. If Red Lion is torpedoed, all media ownership restrictions and other agency broadcast regulations will be in jeopardy.

Of course, there’s no guarantee that the Supreme Court would ax Red Lion, even if it agrees to hear an appeal. As of late last week the deadline for appeals at the Supreme Court was Jan. 3. But sources said the FCC and Justice Department were expected to ask for another 30-day extension of the deadline (the high court has already granted one 30-day filing extension) to consider whether they should challenge.

If the high court refuses to grant industry appeals, the FCC will have to decide whether to try to rejigger its deregulation to meet the appellate court’s criticisms, or simply leave the regulations alone until the law requires the agency to begin another review of the media ownership rules in 2006.

Some industry insiders predict that the agency will opt for the latter course, particularly considering the shellacking that Republican FCC Chairman Michael Powell took for his original deregulatory initiative.

“I doubt Michael Powell will have the stomach to take up the ownership rules a second time, given how controversial they were the first time around,” said an industry source.

At least some companies with interests in newspapers and broadcast stations are expected to urge the FCC to kill one of the regulations caught in the agency mix that bars broadcasters from acquiring daily newspapers in their markets. The Philadelphia court appeared to endorse an agency argument for relaxing that regulation.

“Simple justice demands that the newspaper rule move separately,” said Shaun Sheehan, Tribune VP, Washington. “Broadcast shares are declining; newspaper circulation is down. If the case was strong for the free media in 2004, it’s even stronger in 2005.”

One major media ownership regulation relaxed this year had previously barred broadcasters from owning TV stations reaching more than 35 percent of the nation’s TV homes.

In its June 2003 ruling the FCC’s Republican majority voted to raise the cap to 45 percent. But affiliates and the National Association of Broadcasters fought the deregulation in the interests of limiting network power.

Under a compromise brokered by the White House and Sen. Ted Stevens, R-Alaska, the cap was moved to 39 percent and set in legislative concrete.

Besides dramatically easing the prohibitions on newspaper-broadcast cross-ownership, the Republican-controlled FCC’s 2003 decision raised the caps on the number of radio and TV stations a broadcaster could own in a single market.

But in its June decision, the Philadelphia court remanded much of deregulation to the FCC, contending that some of the FCC’s deregulatory rationale “requires us to abandon both logic and reality.”

An unprecedented public furor over the agency’s move-originally stirred up by FCC Democrat Michael Copps, who vehemently opposed the deregulation-also roused substantial controversy on Capitol Hill.

But efforts to block the deregulation with legislation were derailed by House Republican leaders and the White House.

Leading the charge against the deregulation in the Senate this year was Sen. Byron Dorgan, D-N.D., who, according to a spokesman, will try to legislate again.

“There were majorities in both chambers to restore meaningful ownership rules this year,” said Barry Piatt, a spokesman for Sen. Dorgan. “It was only stopped by backroom parliamentary maneuvers by a handful of Republican leaders. Sen. Dorgan certainly continues to plan to pursue this issue in behalf of the American people and the majorities of the House and Senate.”