WATPA: FW: FCC Calls for Major Review of Media Ownership Rules

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From: Norm Jacknis (norm@jacknis.com)
Date: Wed Sep 18 2002 - 22:45:07 EDT

On September 12, the Federal Communications Commission adopted a
notice of proposed rulemaking as part of its biennial review of
media ownership rules mandated under the 1996 Telecommunications
Act to determine whether the marketplace is sufficiently ensuring
the goals of local responsiveness, diversity, and competition with
respect to local media, or if existing rules need to be maintained
or modified, in order to promote these goals.

The NPRM is significant because it involves the wholesale review
of all major applicable rules involving broadcast media ownership,
coinciding with the study of those rules by a special FCC Media
Ownership Working Group. Comments will be due 60 days after the
studies are completed and released to the public.

Established as a referee to allocate specific portions of the
spectrum for current and future applications and services in a
manner as efficient and non-disruptive a manner as possible, the
FCC is to use a balance as a guiding principle in its deliberations
between promoting growth and competition while acting as a steward
for the public interest, making sure that services address a variety
of perspectives, public affairs needs, and local and community
obligations in return for use of the public communications spectrum.

Because of the chaos that might occur in an unregulated medium, the
FCC grants a limited number of players exclusive rights to provide
content, in exchange for promises to operate under rules that allow
other independent operators to exist and provide a wide range of other
perspectives and voices. Americans, for the most part, have numerous
options for news and entertainment sources, as well as the means
through which it is received, but have also expressed longstanding
concern regarding increased control of media content and distribution
by an increasingly select number of firms. Owners of different media
have, therefore, always been treated, according to different ownership
standards under FCC rules.

Technological innovation, marketplace realities, and legal and policy
decisions have made it difficult to rely upon past rules for guidance
on what is permissible. The rise, fall, consolidation, and
partnerships among publishing, radio and television broadcasters,
cable, telecommunications (including wireless and satellite), and
Internet-based entities have served to perpetually reshape the media
marketplace since both the 1996 Telecommunications Act and the
establishment of the FCC itself in 1934.

FCC Commissioner Kevin Martin, in a separate comment issued the same
day as the NPRM, stated that newspapers, for example, have been held
to the same set of media ownership rules being addressed under the
NPRM since their adoption in 1970. But as Commissioner Martin noted,
the FCC has also, in recent years, moved to relax the decades-old
limits on TV/radio cross-ownership and local television duopolies
(which permits one entity to own two stations in the same market as
long as one of the two stations is not one of the top four stations,
and at least eight independently owned and operated broadcast
television stations remain viable); caps on national and local radio
station ownership; and bans on cable/network television
cross-ownership, and dual networks (which prohibits one entity from
owning two networks).

The courts have also moved in the direction of supporting challenges
to FCC rules on ownership limits. On February 19, 2002, the U.S.
District Appeals Court (DC Circuit), In the case of Fox Television
Stations v. FCC, blasted the federal rules capping ownership of
multiple television stations by a national entity at no more than a
combined 35% of the national viewing audience, as well as the
television duopoly rule, ordering the FCC to review the former.

The FCC had waived the ownership cap for Fox Television in 2001 in its
pursuit of Chris-Craft Industries, and Viacom in its 2000 merger with
CBS Broadcasting, creating audiences 40% and 41% respectively. The cap
was then reapplied to Viacom with a deadline of 12 months to meet its
obligations, and the same limitation hampered the Fox purchase.

The multiple station limit was originally implemented in 1941 to
prevent one broadcasting entity from owning more than three stations
nationally, to a more complicated arrangement by the mid-1980s setting
a limit of both a combined 25 percent of the national audience and a
limit of 12 television TV stations per owner. Congress blocked an FCC
attempt to scrap the rule in 1984, amending it through the 1996
Telecommunications Act by dropping the 12-station limit, and
expanding the total national audience reach at 35%.

In the same ruling, the court vacated a cable-broadcast ownership rule
in a matter involving Time Warner Entertainment. The rule had prevented
cable television systems from carrying a broadcast station signal if
there was cable-owned station in the same market, in an attempt to
prevent cable systems from showing bias against signals from other
broadcast stations.

It also had the effect, however, of blocking cable systems from
purchasing or consolidating their communications in desired markets
where they already had operations. Time Warner Entertainment had argued
that the rule was both "arbitrary and capricious" and a violation of
First Amendment freedom of speech guarantees. The court agreed as to
the arbitrary and capricious nature of the FCC's rule, but not on the
First Amendment violation claims, instead finding that the FCC could
reintroduce rulemaking in this area if it could find more solid ground
for doing so.

The resulting set of rules governing media ownership have undoubtedly
benefited a number of players during market shakeouts and economic
downturns, and increased their size and scope of media offerings to a
large degree, but possibly at the expense of other small firms. Such
developments cannot be viewed exclusively under a strictly "marketplace
versus public policy" framework, given the increasingly complex set of
partnership arrangements and ventures across different forms of
communications present and in development.

That the NPRM coincides with the wholesale simultaneous review of no
less than ten major media ownership rules should demonstrate the
importance and priority the FCC is giving the matter. But that the
NPRM was issued before the empirical study is even complete (though
it will be made available to the public for review during the comment
period), suggests that certain key policy deliberations, such as
permanent removal of ownership caps, are done deals in the face of
market realities of convergence and consolidation before the public
has its say.

The dangers of an overly consolidated media and information landscape,
where disparate levels of competition exist among broadcasters, cable
systems, and telecommunications firms at the local to national level
can only be proved through studies that justify regulations which have
prevented the harms in the first place. The potential removal of those
rules without substantive analysis that takes into account the spirit
under which they were enacted, in addition to broader public, consumer,
industry, and public interest realities only makes it more likely that
potential concerns become reality, and that future regulatory action
will be needed.

9/12/02 Adoption of Notice of Proposed Rulemaking

FCC Media Ownership Working Group

Separate Statement of FCC Commissioner Kevin J. Martin
Re: 2002 Biennial Regulatory Review of FCC Broadcast Ownership Rules
http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-226188A3.txt (text)
http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-226188A3.doc (word)
http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-226188A3.pdf (pdf)

Fox Television Stations v. FCC
U.S. District Appeals Court (DC Circuit) 2/19/02 ruling

Ryan Turner
OMB Watch

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