FCC Releases Rules Maintaining Media Ownership Limits

Keep up with the latest developments and legal issues in the telecommunications and emerging technology sectors, with exclusive access to a comprehensive collection of telecommunications law news,...

By Kyle Daly

Aug. 25 — The Federal Communications Commission Aug. 25 released media ownership rules largely retaining its existing limits, including a ban on owning both a daily newspaper and a broadcast station serving the same geographical market.

The FCC approved the rules on a 3-2 party-line vote earlier this month. They maintain long-standing commission rules, such as a prohibition on mergers among the top four national television networks and the newspaper-broadcast cross-ownership ban — but the agency added an exception for failing media properties that would go out of business without cross-ownership (2016 TLN, 9/1/16).

The adoption of the rules concluded a FCC review of media ownership limits that was years overdue. The U.S. Court of Appeals for the Third Circuit in May vacated a 2014 order limiting broadcast sharing agreements because the FCC hadn't completed the congressionally-mandated quadrennial review of the rules in roughly a decade (2016 TLN 5, 6/1/16).

The agency said in the order adopting the rules released Aug. 25 that, while the internet has “changed the ways in which many consumers access entertainment, news, and information programming,” retaining existing rules, “with some minor modifications,” is the best way to preserve diversity and localism in the media industry. The FCC also said it intends to evaluate the state of the broadcast industry following the incentive spectrum auction currently under way (2016 TLN, 9/1/16). The industry likely will be reshaped in the wake of the auction, with some broadcast stations deciding to go off the air and some others that stay on the air benefitting from an infusion of auction revenue. The FCC said it expects the results of the auction to “feature prominently in future media ownership reviews.”

With the review complete, the FCC readopted the 2014 order as part of the new rules. That provision treats substantial joint sales agreements (JSAs)—agreements under which one broadcast station can sell advertising on behalf of another station in the same market—as representing ownership interests and therefore subject to ownership caps.

The FCC did, in accordance with language Congress put into a spending measure last year, grandfather JSAs that were in place before the 2014 order. Like the provision added to the spending bill, the grandfather clause is in effect through 2025.

The rules also adopt an official definition for shared services agreements, under which broadcast stations in a single market share assets such as news facilities and traffic helicopters, but would not count them toward previous ownership limits; and they adopt a revenue-based definition of an “eligible entity,” the term the agency uses for companies and individuals that qualify for FCC initiatives intended to enhance diversity in the media industry. The Third Circuit, in its JSA ruling (Prometheus Radio Project et al. v. Federal Communications Comm., 3d Cir., Nos. 15-3863, 15-3864, 15-3865, 15-3866, 5/25/16) , ordered the FCC to clarify the eligible entity definition.

Republicans Dissent

Republican Commissioners Ajit Pai and Michael O'Rielly wrote emphatic dissents to the order. Pai said the agency did “nothing but stick in its head in the sand” by declining to make substantial updates to its ownership rules. He said the move defied the intent of both the congressional mandate to update ownership rules to reflect changes in the market and the Third Circuit's order that the FCC take action on “stalled efforts to promote diversity in the broadcast industry.” Pai said the FCC's decision would discourage investment in the ailing newspaper industry.

O'Rielly said the review failed to fully account for competition to broadcasters and newspapers from digital and social media.

Pai also said a bipartisan majority of commissioners had been willing to drop the cross-ownership ban but that he was told this would only happen if commissioners were unanimous. One commissioner disagreed with dropping the ban, Pai said.

A Republican FCC staffer told Bloomberg BNA that FCC Chairman Tom Wheeler's office offered up that condition in July but that one of the Democratic commissioners was the voice of dissent. An agency spokesperson declined to comment on that claim.

Democratic commissioner Mignon Clyburn was the sole commissioner concurring with the order to release a statement on its adoption. She said any rule that “threatens or jeopardizes 'live and vital localism' should never see the light of day” and defended the decision to uphold the cross-ownership ban, saying the exception for failing businesses “can actually prevent [local] voices from vanishing by allowing for an injection of new investment capital into the particular news outlet.”

Other Objections

House Judiciary Committee Chairman Bob Goodlatte (R-Va.) weighed in following the release, saying the order represented the FCC's “recent tradition of advancing unnecessary and burdensome regulations on a partisan basis while ignoring new technologies and market realities, with the likely outcome of harming competition.”

The National Association of Broadcasters wrote a letter Aug. 25 to the FCC saying it found the FCC's justification for not taking more drastic action “to put it mildly, underwhelming.” The group attached the results of a Freedom of Information Act request it had made seeking the evidence the FCC used to support the order. Records the agency released included studies and news stories on how Americans are consuming news and on consolidation within the media industry, among other documents.

An NAB spokesman told Bloomberg BNA the group's board of directors will meet soon to decide whether to challenge the FCC order in court.

The Multicultural Media, Telecom and Internet Council also voiced its disappointment with the FCC for declining to use the ownership review to extend to broadcasters agency rules, currently exclusive to pay-TV providers, requiring them to disclose efforts to avoid discrimination in hiring. MMTC said it too will decide shortly whether to seek judicial review of the order.

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

For More Information

The FCC order is available at: http://src.bna.com/h2A

The NAB letter is available at: http://src.bna.com/h30

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Tech & Telecom on Bloomberg Law