NRB Magazine - FCC Opens Comprehensive Media Ownership Proceeding
by NRB General Counsel Richard E. Wiley, with assistance from Rosemary C. Harold

     The FCC recently launched its long-awaited “omnibus” media ownership proceeding. The new rulemaking likely will trigger the most significant regulatory changes affecting owners of broadcast stations and other media outlets since passage of the Telecommunications Act of 1996. It also marks the first time the FCC has attempted to harmonize and justify its ownership restraints in one comprehensive proceeding. Observers expect that the resulting rules will shape the media ownership landscape for years.
     The omnibus proceeding, which addresses only rules imposed on commercial broadcast stations, is an outgrowth of the 1996 Act. Although that legislation relaxed many ownership rules (triggering intense consolidation), certain restrictions were not immediately affected. However, the 1996 Act also directed the FCC to review all of its media ownership rules every two years to determine those that are no longer “necessary in the public interest.”
     The agency has been struggling with that mandate. This year, a federal appellate court in Washington, DC, reversed several FCC biennial review decisions that preserved certain broadcast and cable restriction, sharply criticizing the FCC for developing varied approaches for evaluating media competition and diversity that differed depending upon the rule at issue. In response, the FCC opened the omnibus proceeding to devise a consistent rationale for whatever media ownership rules the agency may still consider necessary. The FCC seeks comment on the following:

The local television rule. The so-called “duopoly” rule allows for common ownership of two TV stations in the same market in limited circumstances. First, the combination may not involve two of the top four highest-rated stations (usually major network affiliates) in the locale. Second, at least eight independently owned full-power stations must remain after the merger. In April 2002 the court remanded the matter to the agency for further consideration. The court found fault particularly with the FCC’s use of a voices test that counts only TV stations while the FCC counts other types of media voices when applying other rules.

The local radio/television cross-ownership rule. This restriction allows a party to own one TV station (or two TV stations if permitted by the TV duopoly rule) and a varying number of radio stations in the same local market, depending on the number of independently owned media voices that would remain in a given market post-combination. The voices test for this rule counts not only TV and radio stations but also cable systems and daily newspapers.

The local radio ownership rule. The 1996 Act relaxed limits on multiple radio station ownership in a single market. The current restraint increases with the size of the market; in the largest markets, one owner may control as many as eight stations, as long as no more than five are on one band. The FCC opened a rulemaking two years ago to consider modifying its method for defining a local radio market. The pending proceeding is being folded into the omnibus rulemaking.

The national television ownership cap. The current restriction sets no absolute limit on the number of stations one entity may own, but a single owner may not own stations that collectively reach more than 35 percent of TV households nationwide. Several broadcast networks challenged the restraint, and a court in February 2002 ruled that the FCC failed to provide “a single valid reason” for why the rule was necessary, remanding it to the FCC for further consideration.

The dual network rule. This restraint prevents a merger only among any of the “top four” national networks: ABC, CBS, Fox, or NBC. Common ownership of smaller networks, or one of the top four and a smaller network, is permissible.

The newspaper/broadcast cross-ownership ban. The rule generally prohibits one entity from owning both a commercial broadcast station and a daily newspaper in the same community. This regulation is the subject of a long-pending rulemaking but will be reviewed in conjunction with the omnibus proceeding.

The comment cycle is slated to close January 2, 2003. A full copy of the rulemaking notice is available at http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-02-249A1.pdf

NRB General Counsel Richard E. Wiley is a former FCC chairman. He is a senior partner in the law firm of Wiley, Rein & Fielding. Rosemary C. Harold is a partner in the firm.