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It will be fascinating to watch this procedure unfold.  When one looks at the panels that the FCC has assembled, you will no doubt see positions being staked out that are at opposite ends of the spectrum.  For instance, on the panel of "public interest groups," you will have the former head of the Media Bureau at the time of the FCC's 2003 Multiple Ownership decision which dramatically loosened ownership restrictions, only to have that relaxation overturned by the Courts, on the same panel as several speakers who seem to oppose consolidation reflexively - no matter where it comes up.  How can both poles of the debate be representative of "the public"?  If I had to guess, I would bet that the public really falls somewhere in between - not all that concerned about most consolidation as long as it does not severely affect their media choices.

As we have written before, in today's media world, there has never been so much choice (see, e.g., our articles here and here).  The effect of competition from the Internet and other new media must be taken into account in this analysis as it has so profoundly affected the current media landscape.  While in 2003, the new media was mentioned as partial justification for the relaxation that was fleetingly adopted, who could have imagined only 6 short years ago, the impact that new media could have on "traditional" media, like the newspaper, once the dominant advertising medium in most local markets and now imperiled in many of those same markets.  As we have written before, it is quite possible at this point in time to imagine the rules against media consolidation with newspapers outliving the newspaper itself.  One hopes that this is not true for other forms of traditional media as well, though recent articles about the FCC potentially moving toward limiting or ending over-the-air television so that the spectrum can be freed for other uses suggest that there are other moves afoot that undermine concerns about the power of big media as regulated by the FCC.  This proceeding is one that all broadcasters should watch carefully, and in which they should participate aggressively, to make sure that your voice is heard when the FCC shapes that rules that will affect media ownership in the next five years - years that may well affect the very survival of many traditional media outlets. 

Some of the fears of the public being left out of the process arose in connection with the ownership review that was completed in the summer of 2003, when the FCC concluded that local television ownership rules could be relaxed, as could the prohibitions against the cross-ownership of radio, TV and/or newspapers in the same market.  Then-Chairman Michael Powell was criticized by many for leading this reform without any serious public input.  After the decision was made, Commissioners Copps and Adelstein led their own public hearings around the country, causing the Chairman to initiate a series of his own public hearings on the performance of broadcasters in serving their communities, which led to the still-unresolved localism proceeding. 

But even with hearings, the Commission isn't assured that there will be no public outcry when it changes its rules.  In late 2007, after the localism hearings and hearings on the changes in the ownership rules, the Commission finally got around to its re-consideration of the 2003 decision, which had been thrown out by the Court of Appeals, .  The 2007 decision, loosening only the cross-ownership rules between television stations and daily newspapers in the largest markets, was met with a hail of protests that the public didn't have a sufficient opportunity to comment on the final rules themselves before the Commissioners voted on them (even though the Chairman did reveal his tentative conclusion a month before it was voted on, giving the public a limited comment period).  Even with all that public input, the decision was met with a Congressional hearing and serious complaints about the process. 

Whether the Commission, whenever it finally gets around to completing the upcoming quadrennial review, will let the public review and comment on any new rules before they are finally adopted remains to be seen.  But, seemingly, no matter what the decision and the process by which it is made, someone will be disappointed and will complain that the process was unfair.  Perhaps that is just the essence of Washington. 

The rules adopted last year allow newspaper-broadcast combinations in markets smaller than the Top 20, if it can be shown that the broadcaster will add substantial new news programming, or that one of the participants is "failed or failing," FCC speak for operating at a financial loss for a sustained period.  But any such showing takes months if not years to get through the FCC, and the recent economic news from both the broadcast and newspaper worlds makes one wonder if a failing property will be able to wait for such a review - or if the cost and delay are even necessary in today's media environment where on-line media seems to be taking a bigger and bigger chunk of the advertising and viewing pie.  I recently heard a reporter from one of the broadcast trade press outlets ask the rhetorical question - "will the FCC's cross-interest rules banning broadcast-newspaper cross ownership outlast the newspaper industry itself."  Unless the FCC changes course and adapts to today's media reality, that may well be the case. 

The cable ownership item has also been hanging around for years, after previous attempts at rule changes were rejected by the courts.  Broadcast local ownership caps, including the rules that prohibit the common ownership of two television stations in the same market ("TV duopoly") unless there are eight independent television owners (and forbidding any combination of any of stations in the top 4 in audience ratings in a market), have also been thrown out by the Courts as being insufficiently justified, yet these rules were not mentioned in the Chairman's proposal as to the resolution of this proceeding.  See our memo here for a discussion of other broadcast ownership issues not discussed in the Chairman's proposals.  We will see if these issues are discussed in the final order in this adopted in this proceeding.

Finally, the Commission will consider an issue that only recently has jumped into play - the initiation of a proceeding to determine if the FCC's sponsorship identification rules are sufficient to deal with product placement in broadcast programming.  With the recent proliferation of TiVos and other digital video recorders ("DVRs"), some broadcast programmers have taken to including products in the body of programs so that they will still be seen even if the viewer fast-forwards through the true commercial message.  While we will not know the specifics of the FCC proposal until the meeting next week, we can expect that the Commission will want to consider tougher disclosure requirements to let the public know who is trying to persuade them to buy a product.

With all of these crucially important and very controversial items on the agenda, the meeting will be one worth watching.  And, with the Commission's recent track record of starting controversial meetings hours after their scheduled time (the last meeting starting after 9 PM), interested parties may want to bring a sleeping bag and some provisions in case the Commission again gets a late start on its work.

The one dissent to the approval of the transaction came from Commissioner Copps, who objected to the fact the Commission has not fully evaluated the impact of private equity ownership on the public interest.  Commissioner Copps echoed comments he has made on private equity previously (see our post on those comments here, and on questions asked by Congress on those issues, here), asking questions about whether the Commission had sufficient information about who really made decisions about the operation of the Buying company (the applicant had identified a three member board as making all decisions for the company)  - and suggesting that the Commission conduct a proceeding to determine if private equity was a good or bad thing - whether it freed companies from the problems of public companies having to answer to shareholder whims and analysts expectations on a quarterly basis, or whether the debt load in acquiring the stations would be such that it would require these companies to strip the companies of many of their expenses including those necessary to produce public interest programming.  Of course, this is probably an unanswerable question, as there are no doubt cases where either or both of these scenarios are true, and the same is probably true with any buyer of a broadcast station, no matter where their financing originates.  But, perhaps most importantly, it sheds light on where the Commission might head if there is a change of administration in a year and Commissioner Copps plays even a greater role in FCC decisionmaking.

The approval of the Tribune sale provides perhaps an even better preview of what a change in administration could mean to the FCC.  The sale of the company from its current public shareholders to a company owned by an Employee Stock Ownership Plan (ESOP) and controlled by a single outside investor, Sam Zell, was approved by a three to two vote, along political party lines.  The approval included a permanent waiver for Tribune's ownership of an AM, TV and daily newspaper in Chicago - the majority of the Commissioners finding that the fact that this combination existed since each of the broadcast stations commenced operations, and the myriad of other media voices in Chicago, justified the permanent waiver.  Tribune's other newspaper-television cross-ownership situations were given temporary waivers.  Obviously, as the other waivers included newspaper-broadcast combinations in New York, Los Angeles and Miami, all markets with no scarcity of media outlets, that was not the deciding factor for the difference in treatment.  Perhaps it was the longevity of the waivers, which illustrate exactly what is prohibited by the current newspaper-broadcast cross-ownership rule.  The rule does not prohibit a broadcast company from acquiring a newspaper in the same market in which it has a television station - as Tribune did in these markets (because the FCC has no jurisdiction over the purchase and sale of newspaper companies).  So broadcasters are free to buy a newspaper in their market.  However, in doing so, they take a major risk as the rule prohibits the grant of any FCC application where such a combination would exist.  Thus, in connection with the broadcaster's next license renewal application, or in connection with an application for sale of the broadcast company (both license renewals of these stations and the sale of the Company were before the Commission in the Tribune case), the application of the rule's prohibition is triggered - requiring the consideration of the waivers.

The treatment of the temporary waivers was somewhat unusual, with multiple conditions on the length of the waivers - which was one of the issues to which the dissenting Commissioners objected.  The length of the waivers is first dependent on when the FCC rules on its multiple ownership proceeding.  If new ownership rules are adopted before January 1, 2008, then Tribune's temporary waivers would be for two years (at least for those markets for which a waiver would still be necessary - which would seemingly be only Hartford if the Chairman's proposals, summarized here, are adopted).  On the other hand, if the rules are not adopted by January 1, Tribune would have to come into compliance in 6 months (perhaps putting pressure on Congress to not take steps to block the rule change from occurring at the December 18 meeting).  However, the Commission also held that, should Tribune decide to appeal the Commission's decision (which one would expect), the waiver would last two years or until 6 months after the end of the appeal - whichever date is later.  As it appears that one way or another, the waivers are for at least two years, why didn't the FCC just say so?

One interesting objection dealt with in the decision was that raised by the Teamsters' Union.  The Union argued that the Commission should not permit the transfer of Tribune ownership to the ESOP unless the employees of the company, who would effectively be the majority owners of the company, have some say in its day-to-day management.  As proposed to the FCC, Sam Zell would make management decisions for the Company.  The Commission denied the objection, citing Section 310(d) of the Communications Act which requires that the Commission evaluate the buyer of a station who has struck a deal with the seller for that buyer's basic FCC qualifications.  The statute precludes the Commission from denying a sale because it believes that there might be some "better" buyer who theoretically exists.  Thus, the Commission felt that it was legally barred by second-guessing the corporate structure of the buyer, as long as that structure did not violate any rules of the Commission.

In this case, both Democrats dissented, arguing that the Commission's multi-tiered contingent waivers did not go far enough in forcing the break-up of existing media consolidations.  The Democrats would not even have allowed the Chicago combination to stay in place. 

These cases clearly demonstrate the divisions in the Commission on the question of broadcast ownership.  Initially, in neither case did the Commission seem too concerned about local TV duopolies in markets where there are at least eight owners - not a point of contention in either case.  But in expanding on the application of existing ownership rules, the Democratic Commissioners seemed to draw a line in the sand.   Clearly, if there is a change in administration, we may have a far different FCC, with far different priorities, seemingly one which would favor diversity in media ownership over industry ownership stability. In a little over a year from now, we will see how these divisions play out, and what a new FCC will have in store for broadcasters.