FCC Plan to Relax Media Ownership Limits Likely to Be Challenged

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By Kyle Daly

An ambitious Federal Communications Commission plan to kill a raft of limits on media companies’ reach is likely to wind up in court.

The agency intends to vote Nov. 16 to eliminate two cross-ownership bans that prohibit the same company from owning any combination of a TV station, radio station, or newspaper in a single market. The plan would also lift a ban on a company owning more than one TV broadcaster if there are fewer than eight independently owned stations in a given market, and would ease a prohibition on one company owning more than one top-four station in a single market. The FCC would, instead, review any local duopolies on a case-by-case basis.

Senior agency officials outlined the plan to make those and other changes Oct. 26, a day after Chairman Ajit Pai announced it in a House oversight hearing. The agency is likely to approve the plan, probably on a party-line vote.

The planned changes come as Pai faces Democratic scrutiny over actions critics say favor media consolidation by a handful of powerful players, particularly conservative broadcast giant Sinclair Broadcast Group Inc. The FCC is currently reviewing Sinclair’s proposed $3.9 billion acquisition of Tribune Media Co. Public interest groups will probably challenge the action in court, likely in the U.S. Court of Appeals for the Third Circuit. That court has thwarted past FCC attempts to loosen ownership limits.

A court challenge is “inevitable in this case, and likely to go to the Third Circuit,” Bloomberg Intelligence analyst Matthew Schettenhelm said. The Philadelphia-based court has heard media ownership cases since Republican FCC Chairman Michael Powell in 2003 unsuccessfully sought to relax a number of ownership limits, including the same cross-ownership and duopoly restrictions Pai intends to ease.

Pai has said the changes he envisions are intended to help traditional local news outlets better adapt to a media landscape dominated by digital and social media.

“We want to modernize our rules in order to better reflect today’s marketplace and clear a path for more competition, innovation, and investment in the media sector,” he said in an Oct. 26 statement.

Matt Wood, policy director at the public-interest group Free Press, told Bloomberg Law that his group will likely be a party to a court challenge. Free Press hopes the Third Circuit will reject Pai’s rule changes on the basis that they would harm localism, competition, and diversity in the broadcast industry, Wood said. In cases dating back nearly 15 years, the court has repeatedly turned back ownership rule changes, saying they didn’t adequately take diversity into account.

Other Changes Slated

The rule changes, if approved, would take effect 30 days after being published in Federal Register. That would probably place the effective date in early 2018, unless the Third Circuit or another court stops the order from going into force.

The agency also is aiming to reverse a 2016 decision by the Democrat-controlled FCC to treat many joint sales agreements (JSAs) among TV stations as amounting to an ownership stake. Under JSAs, larger stations handle ad sales on behalf of smaller stations. Critics of such arrangements say they allow big broadcasters to skirt ownership limits by effectively running operations for smaller stations without technically owning them.

The 2016 decision on JSAs came as part of the FCC’s congressionally mandated quadrennial review of media ownership rules, after a federal appeals court struck down a similar 2014 decision because the FCC enacted it without conducting either its 2010 or 2014 review. Pai is able to skip a public comment period on the plans set for the Nov. 16 vote because they’re being treated as a reconsideration of the 2016 order that reinstated the JSA rules.

Pai also plans to launch a process to review and potentially change a nationwide audience cap on station ownership before the year’s end, a senior FCC official said on an Oct. 26 call with reporters. Pai pledged to do so earlier this year, upon restoring a discount in the formula for calculating station ownership against a nationwide audience cap.

The agency still plans to conduct its quadrennial review of other media ownership rules in 2018 as scheduled, the official said. That will likely come relatively late in the year and deal with issues like local ownership of radio stations not directly addressed in the Nov. 16 vote, according to the official.

To contact the reporter on this story: Kyle Daly in Washington at kdaly@bna.com

To contact the editor responsible for this story: Keith Perine at kperine@bna.com

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