U.S. Court orders FCC to reconsider TV ownership cap

2/26/2002

Washington, DC, - A decision by the U.S. Court of Appeals last week could lead to a reduction, or even an end to limits on the ownership of television stations. The court ordered the Federal Communications Commission (FCC) to reconsider the rules against television broadcasters owning stations that reach more than 35 percent of the national audience reports Broadcast Newsroom.

The three-judge panel stated that the National Television Station Ownership Rule is not unconstitutional, but is "arbitrary and capricious," because the FCC does not have adequate reasoning to back up the Rule. The decision, written by Chief Judge Douglas Ginsburg, said the FCC hadn't put forth a "single valid reason" why the ownership cap is needed to protect competition, or encourage diversity.

On the other hand, the court let the rule stand, concluding that "we cannot say it is unlikely the commission will be able to justify a future decision to retain the rule."

National Association of Broadcasters president and CEO Edward O. Fritts says they will "convince" the FCC to preserve the cap.

"The 35% television ownership cap has been critically important in preserving the network-affiliate relationship that has made the U.S. system of free, over-the-air broadcasting the envy of the world. This rule has been instrumental in promoting localism and diversity. NAB will continue to build a solid record to convince the FCC, Congress, and the courts to preserve the 35% cap," explains Fritts.

"We're also disappointed the court vacated the cable/broadcast cross-ownership rules, particularly given the absence of cable DTV carriage rules."

Earlier this year, the same appeals court ruled that Viacom did not have to sell some of its assets to comply with the FCC cap, when it approved the Viacom purchase of CBS. Viacom now reaches about 41 percent of the national television audience.

Due to their recent acquisition of Chris-Craft Industries, Fox Television also reaches about 41 percent of the national audience. The FCC postponed compliance with the limit, due to pending court actions. Analysts predict the FCC will either relax or repeal the limit, opening the door to new mergers, and allowing Viacom and Fox to keep all of their broadcast assets.

Ownership regulations date back to the 1940s. At that time, rules prohibited common ownership of more than three stations. In 1984, it was changed to twelve stations, and a limit of 25 percent of the national audience. In 1995, The FCC gave the networks freedom to own and profit from their broadcasted programs. The 1996 Telecommunications Act eliminated the common station ownership limit, and raised the national reach limit to 35 percent. The Act also required the FCC to review the limit every two years.

This latest court action is in response to a May, 2000 split decision, in which the FCC retained the ownership limits, to preserve diversity and competition. The current FCC chairman, Michael E. Powell, cast one of the dissenting votes. Powell, a free-market and deregulation advocate, has urged modification or repeal of the limits. Network executives are confident that Powell will at least push the limit up to owning stations that reach 50 percent of the country. Mr. Powell commented recently that it is "really hard now" to keep the Ownership Rule on the books.

The court order is the latest action in the ongoing battle between media conglomerates and consumer advocates. The National Association of Broadcasters also supports the ownership limits. Edward Fritts, head of the NAB, feels the ownership cap is "critically important" in preserving the network-affiliate relationship, and "in promoting localism and diversity." Station owners argue that the networks are already too powerful, and letting them own more stations would lessen the power of local broadcasters to resist network mandated policies. They are particularly concerned about how this would affect news coverage.

Viacom, Fox Television, and NBC protested the FCC's review process, claiming the rules violate free speech rights under the U.S. Constitution. "We believe strongly that the FCC should eliminate its archaic restrictions on broadcast ownership -- rules that date back to the 1940s and are clearly an anachronism in today's world of ever-expanding media choices," Viacom stated.

The court did reverse the rule that prevented a company from owning a broadcast television station and a cable system in the same market. The FCC had argued that a cable company that also owns a broadcast station could discriminate against other broadcasters. The court said the FCC hadn't shown a "substantial enough probability of discrimination to deem reasonable a prophylactic rule as broad as the cross-ownership ban."

The reversal of the local cable/broadcast ban paves the way for the creation of large cable/broadcast companies. Consumer advocates are concerned that media diversity will be a thing of the past, if one media company is able to control several TV and radio stations, the cable system and a newspaper in a community.


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