This proceeding is examining all of the FCC's ownership rules, and specifically proposes abolition of the radio-television cross-ownership rule and liberalization of the rules limiting the common ownership of broadcast stations and daily newspapers.  The FCC has also indicated that it is looking closely at television shared services agreements, and at circumstances in which waivers of other local ownership rules might be appropriate.  For more information about the specific proposals advanced by the FCC, see our summary of this proceeding here. 

This proceeding combines several on-going proceedings.  The Commission started its required Quadrennial Review of the ownership rules over two years ago with a series of public hearings, and a Notice of Inquiry.  The Commission also is dealing with the clean-up of its last review of the ownership rules, which was embodied in a controversial decision reached late in 2007 (see our summaries here and here).  The Third Circuit Court of Appeals threw out significant parts of that decision, finding that the FCC's relaxation of the newspaper-television rules had not been the subject of adequate notice to the public, and that the FCC had ignored its obligations to take steps to promote minority ownership of the media.  Some parties seeking repeal of the newspaper-television cross-ownership rules have asked the Supreme Court to review the Third Circuit decision - but this NPRM looks to reexamine many of these issues in the event that the Supreme Court doesn't otherwise preempt their decision.    Below we'll take a look at specific questions raised by the NPRM.

• Whether, in a digital world, it should look at ownership on a DMA basis, rather than relying on Grade B contours that really were an analog concept.  This would be similar to what the FCC does in radio - looking at how many stations are owned and how many voices are in a market based on Arbitron-defined markets
• Should there be waivers of the prohibitions on combinations of stations in smaller markets, where stations might not otherwise be able to support themselves, or support news programming, if they were independently owned?  What standards should govern such waivers?  Do combining stations need to be failing, or does there simply need to be some other public interest benefit of the combination?
• Is the prohibition against the Top 4 stations combining sufficient to preserve diversity in a market, or should a Top 5 or Top 6 rule be adopted?
• Should the sale of an affiliation be regulated, so that a Top 4 station owning a second lower ranked station could not buy the affiliation agreement of another Top 4 station - taking advantage of the FCC's policy of evaluating Top 4 status only in connection with the sale of a license (a reaction to the Honolulu case where a sale of an affiliation took place - see our article here)
• Do digital multicasting, new technologies, and other competition in the video marketplace affect the FCC's tentative conclusions?

Local Radio Ownership:  The current rules place limits on the number of stations that can be owned in each market based on the number of competitors who are in that market.  In the smallest market, one owner can have interests in two stations - one AM and one FM.  In the largest (markets with 45 or more radio stations), one owner can hold up to 8 stations, no more than 5 of which can be AMs or FMs.  The FCC proposes to keep these rules in place, but asks questions including:

• A number of broadcast groups suggest that limits not have the AM and FM subcaps - so that one owner could hold up to 8 AMs or 8 FMs in a single market.  While the FCC tentatively rejects those proposals, the Commission asks for more comments, including whether just allowing 8 AMs under common ownership might be a good idea
• Do Internet radio, satellite radio and other technologies pose a sufficient competitive force in local markets that they should be considered in an ownership analysis?
• Does digital HD radio, with multicasting opportunities, in any way affect the need for the rules, or minimize the need for liberalization of the rules?
• In the largest of markets, should one owner be allowed to hold more than 8 stations - i.e. should the FCC set up tiers where there one owner could own more stations - say allowing ownership of 10 stations in a market of more than 55 stations?
• In what circumstances should waivers of these limits be permitted?

Newspaper/Broadcast Cross-Ownership: The current rules prohibit a newspaper operator from owning a radio or TV station in the same area the newspaper serves.  In 2007, the FCC proposed relaxing that prohibition in the Top 20 markets, and also provided for waivers in smaller markets.  The Third Circuit overturned this decision based on the lack of public comment.  The FCC now proposes that a rule similar to the 2007 decision be adopted, but asks for comments as to exactly what standards should be used to evaluate proposed combinations.  The tentative conclusion is that, in the Top 20 markets, radio/newspaper ownership should be allowed, and newspaper/TV combinations be allowed if the TV station is not a Top 4 station and there are at least 8 voices in the market (one would think that the 8 voices test would be met in every Top 20 market).  But the FCC asks a number of questions including:

• Should the rules be addressed on a DMA basis, rather than on a Grade A contour methodology as is currently the case for TV/newspaper combinations?
• Should cross-ownership be based on tiers established by the number of media voices in a market?  Are the Top 20 markets significantly different than smaller markets?
• Are there circumstances where a waiver should be granted to permit combinations in smaller markets?
• Should additional factors be evaluated in permitting combinations in Top 20 markets? 

Radio-Television Cross-Ownership:  The current rules permit same-market combinations of radio and TV stations based on the number of other voices in a market, but the ownership of a TV station will set for that owner an ownership limit for radio stations lower than that which would normally apply for radio ownership in that market.  The FCC proposes to do away with any restrictions on radio and television ownership - allowing one owner to have the maximum number of each type of station that would be permitted in that market.  This is based on a finding that radio and television stations are not viewed as substantial substitutes by either advertisers or consumers.  The FCC asks for comments on this conclusion.

Dual Network Rule:  The rule currently prohibits the combination of any of the Top 4 commercial networks (ABC, NBC, CBS and Fox).  The FCC concluded that these networks still serve a much larger audience than any cable network or any other broadcast network, and are very important to both advertisers and viewers.  Based on the important role that the networks play, the Commission proposed retaining the rule.  It asks for comments on this conclusion.

Shared Services Agreements:  Given the controversy in Hawaii (summarized here) and the issues that have been raised by public interest groups suggesting that shared services agreements and similar arrangements evade the FCC ownership prohibitions, the FCC has asked if these kinds of agreements should be made "attributable", i.e. if they should count as if they are an ownership interest subject to the ownership rules.  Comments are sought on a number of questions including:

• What are the benefits of such agreements, and the perceived detriments?
• How should SSAs be defined, if a rule against them is adopted?
• Should the FCC not even try to define an SSA, but instead adopt a broader rule that encompasses any kind of significant relationship with a competing station?  (This would seem to imply a return to an old FCC "cross-interest" policy that prohibited substantial interests in competing stations, a policy that was abandoned decades ago as the FCC felt that bright line tests set by the ownership rules should determine what is permitted and what is not)
• The FCC also notes that it has had an open proceeding on the attribution of TV Joint Sales Agreement - radio JSAs having been made attributable years ago, though it gives no indication of when that proceeding will be resolved.

Diversity:  In connection with each of these rules, the FCC asked for comments on the impact that its proposals would have on the ownership of broadcast stations by members of minority communities, and whether other changes in each of these rules would somehow better serve its interest in encouraging diversity in ownership of the media.

Other Issues:  The FCC also summarized a number of studies that it conducted on media ownership and its effect on news, diversity of viewpoints, localism and minority ownership.  The FCC asks for comments on the findings of these studies.

This is a very important proceeding that will be sure to generate much controversy, and much discussion.  When will it be resolved?  My observations are that these proceedings always take much longer than anyone expects.  Moreover, given their potential to be quite controversial, they are not usually decided before a big election, like that coming up in November.  My prediction - don't look for a decision for another year (maybe during the December holidays next year?).  Be ready to file your comments when the date is announced, and participate in the upcoming debate. 

The discussion of the newspaper-broadcast cross-ownership rules was entirely procedural.  While certain public interest groups had argued that the 2007 revision to the cross ownership rules allowed too many broadcast-newspaper combinations, a number of media companies argued that it allowed too few.  The Court didn't address either contention, instead focusing on the process by which the FCC adopted the rules.  When the Court addressed the 2003 rule changes, it sent that decision back to the Commission questioning the basis for the "diversity index" that the FCC had adopted to measure when transactions resulted in too much concentration in a market, and specifically instructed the FCC to give the public notice and an opportunity to comment on the specifics of any new proposal that was adopted.  The Court felt that there were too many obvious flaws in the diversity index which could have been discovered if the public had been given a chance to review its details before it was adopted.  In asking for comments following the Court's remand, the recent decision concluded that the FCC had given the public only a cursory description of the issues that it would consider on remand with respect to the cross-ownership issue when the FCC issued its request for public comment.  The substance of the Commission's policies which were adopted, setting out presumptions in favor of cross-ownership in larger markets and against it in smaller markets, was not suggested in the request for public comment, but instead was first floated in a newspaper Op-Ed by then FCC Chair Kevin Martin.  While the FCC asked for comment on that proposal, parties were given less than a month to file comments, and a draft decision embodying the proposal was already circulating at the FCC before the comment period had even ended. This process prompted much outcry at the contentious FCC meeting at which these rules were adopted (see our summary here).  The Court looked at this process, and determined that the public had not been given an adequate opportunity to address the specifics of the FCC proposal, and had given the appearance of having pre-judged the outcome of the case.  Thus, this week's decision sent the FCC's 2007 order back to the FCC to seek more public comment, and to develop rules based on those comments. 

On the diversity issue, the Court focused on substance - specifically the FCC's decision to base qualifications for a number of diversity preferences on an applicant being a Qualified Small Business under the rules of the Small Business Administration. The Court felt that the FCC's objectives should have focused more on increasing diversity by adding women and minorities to the ownership of broadcast stations, not on small businesses. The evidence presented to the Court indicated that minority ownership of small businesses was not significantly higher than current minority ownership of broadcast stations, so relying on the small business definition would not appreciably increase minority ownership. The FCC had not used racial and gender classifications, or those dealing with "socially and economically disadvantaged businesses" ("SDBs"), as the Commission felt that there were no constitutionally acceptable basis for determining who would qualify for such preferences. One of the problems, as the Court stated several times, was that the FCC did not have data on the race and gender of broadcast owners to determine if there was a basis for adopting a preference based on those factors.  To pass constitutional muster, a racial preference has to remedy some past discrimination, and the FCC has to know if there is in fact evidence of discrimination in broadcast ownership to even attempt to meet that test.  The new Ownership Reports, as we reported when they were first adopted, are designed to remedy that lack of information.  Because the rules adopted did not result in the goals that the FCC announced - the increase in the diversity of ownership of the broadcast media - the Court determined that the FCC had to further consider these policies.

Both of these issues are headed back to the FCC for further consideration.  How will this consideration take place?  It will be consolidated into the FCC's current quadrennial review of the ownership rules.  We wrote about the questions that the FCC asked in initiating the proceeding here, and we are waiting for the Commission to come out with some more specific proposals for new rules in a Notice of Proposed Rulemaking.  With the guidance from the Court as to the specificity that it deems necessary in any such NPRM, and with the recent announcement that certain academic studies on ownership issues are available for review, that NPRM will no doubt begin to take shape over the next few months.  So, maybe one day (our guess would be late in 2012), the Commission will reach a decision in its 2010 quadrennial review which answers these questions left over from the 2003 Order (though even then, any order will likely not be final).  Ownership arguments are ones that never seem to be completely resolved, so look for us to be writing about these issues far into the future. 

We've written about the advertising anti-discrimination certification before, suggesting language that stations include in their contracts.  What is new in today's notice is that the FCC has clarified that the certification only covers the period from today's notice until the filing of the license renewal application.  So stations that do not have such certifications can still get them into their contracts now to avoid certification issues later.  In our previous articles on this subject, we've noted that this is a confusing requirement, and that even its supporters have urged the FCC to clarify it. Today's Notice only says that stations must avoid advertising purchases made on the basis of "no urban, no Spanish" dictates, but does not go any further in interpreting the requirements of this policy. 

The RF certification is actually a reduction in paperwork, eliminating the need for stations that have had no change in the RF situation at their tower sites from having to provide any sort of exhibit explaining why no RF issue exists.  That exhibit will still be required if new antennas have been added at the station's tower site, changing the RF situation there.

The certification about whether a station has been off the air for 30 days arises as the FCC has suggested that a prolonged period of silence by a station could affect the FCC's determination of whether the station is operating in the public interest.  The newspaper certification is required as the rules preclude the FCC from granting any application for a license for an AM, FM or TV station if any attributable party owns an interest in a daily newspaper that serves substantially the same area (unless the FCC makes a public interest finding that such cross-ownership is acceptable).  Thus, the FCC will not grant an application to acquire a broadcast station if an owner has interests in a daily paper.  But the FCC has no jurisdiction over whether an existing licensee subsequently buys a daily newspaper.  The first chance that the FCC may have to deal with broadcast-newspaper cross-ownership created by the subsequent purchase of a daily newspaper may be in connection with the station's renewal application.

The FCC also notes that they will not be mailing any reminders to broadcasters about the need for the filing of the license renewal application.  At most, applicants will get an email reminder from the FCC. but only if their email address is current and on file at the FCC.  The FCC suggests that stations update this information now to avoid issues later.  There is a base fine of $4000 for a late-filed renewal. 

Renewal applications are fast approaching.  Read this public notice - and be ready!

The Commissioner suggested that no government action to bail out the media is necessary to preserve service to the public - citing the many examples of how that service is provided through new media sites that serve all sorts of communities and community groups - providing timely and detailed information on specific topics, often on a neighborhood level.  We have made that same point on these pages - the new media is already filling any void that may exist in local media coverage.  Some of these sites are produced by old media companies - as TV stations, newspapers and others develop microsites targeted to very local needs and interests.  Other sites are totally independent - developed by local interest groups or new media entrepreneurs.  So how can the Commission help these sites to develop?

Further highlighting the difficulty in completing the ownership review this year, is the FCC’s Public Notice that was just released - announcing that it is seeking bids for nine different studies to review various issues relevant to the media ownership proceeding. According to the Public Notice, studies will look at many of the issues on which the Commission has sought comment in the NOI, including studies of how consumers receive local news and information, the effect that media consolidation affects the diversity of programming and the degree of civic engagement in a community, and even requesting a study to design a model to be used to measure the degree of media consolidation in a market.  the Commission also asked for suggestions as to other studies that it could conduct relevant to this proceeding.  Comments on other potential areas of study are due by July 7.

The majority of the Commission is new since the last ownership review was completed in late 2007.  Given the emphasis on so many new issues since that time (including the broadband roll out and the proposals to reclaim some of the television spectrum for wireless broadband uses), one wonders if the Commission really will have the capacity to move quickly on the ownership review, which always involved many controversial issues.  And, with issues such as shared service agreements, newspaper-broadcast cross-ownership, television duopoly in small markets, and revisions to local radio ownership rules all seemingly on the table, there is no lack of controversy that will face the Commission this year.  So, prepare your comments, and get ready to let the FCC know what you think by the July 12 deadline.

The FCC is concerned with all aspects of its media ownership rules.  Thus, it sets out that it will explore the following rules:

• The Local Television Ownership cap, which limits owners to two stations in markets where there are at least 8 competing television owners and operators, and which forbids combinations of the top 4 stations in any market.  Television operators, particularly in smaller markets, have been urging the Commission to allow more consolidation in those markets so that stations can provide better service to their communities.  They argue that the current limits preclude small market consolidation, which is most needed in these markets where the costs of operation are not significantly lower than in large markets, but where revenue opportunities are far more limited.
• The Local radio ownership caps, that currently limit owners to 8 stations in the largest markets, no more than 5 of which can be in any single service (i.e. AM or FM).  Some radio owners contend that these limits no longer make sense given the competition for audio listening from so many sources (including satellite and Internet radio, who can provide unlimited formats in any market).  Other issues include whether AM and FM still need to be treated separately, and even whether AM should be counted to the same degree as FM in a multiple ownership analysis.
• The Newspaper-Broadcast cross-ownership rule, that forbids cross-ownership of broadcast stations and daily newspapers without a waiver - which, as the result of changes in the cross-ownership rules in 2007, will be granted on a more liberal basis, but only in the top 20 markets.  Given the economic state of the newspaper industry, many seek the repeal of this rule in its entirety. As we have written before, will the newspaper cross-ownership rule outlive the newspaper?
• The Radio-Television cross-ownership rule, which limits the number of radio and television stations that can be owned by a single party in a single market
• The Dual Network Rule, that prohibits the common ownership of any of the top 4 television networks.

Each of these rules is up for review, and numerous questions have been asked, and issues identified, for consideration in this proceeding. 

• Competition - the Commission asks for comments on how to measure whether competition exists in a marketplace, how to define the market in which the competition is being evaluated, and what sort of competition it should be assessing.  The Commission suggests many different types of competition which may be relevant to its analysis, including: 
  • Competition between stations for the same viewers or listeners
  • Competition between services (e.g. radio, TV, etc) for the attention and time of the audience
  • Competition between stations for advertising revenue
  • Competition as it affects program providers
• Localism - the Commission asks many questions about localism and the impact of media ownership regulation on localism, including:
  • Whether the traditional focus of localism - the selection of programming responsive to local needs and interests and the quantity and responsiveness of local news - are all that the Commission should look at in assessing localism.  The Commission even asks how "news" should be defined, if news is indeed the appropriate measure of localism.
  • What other metrics can be used to asses localism?
  • Should the Commission attempt to measure the consumer's interest in "local" programming in making its decisions as to whether goals of localism are met by particular rules?
  • Should the Internet and other sources of information be assessed in determining local needs for programming from broadcasters?
  • How exactly do structural ownership regulations contribute to assuring localism?
  • Are the needs of advertisers and program content creators relevant to an analysis of the localism factor?
  • Whether minorities and other identifiable groups within a community are served by local stations, and to what extent each such group needs a separate voice in order to be served
• Diversity - many of the same questions that are considered under the Competition and Localism factors are also discussed under the Diversity criterion.  The Commission asks about various kinds of diversity, and seeks comments on how these various measures of diversity can be assessed, and which are the most important to the FCC's analysis.  Some of the differing diversity issues include:
  • Program diversity - maximizing the difference in programming on stations, which might actually be aided by common ownership, as a common owner is likely to program different things so as to not compete with itself
  • Viewpoint diversity - getting independent viewpoints on important issues to a community
  • Source diversity - whether the source of viewpoints needs to itself be different to serve the public interest, e.g. the same owner could program a conservative talk radio station and a modern rock radio station that might have different viewpoints on issues, but does the fact that one company is behind both have a public interest impact?
  • Outlet diversity - should the Commission be looking to maximize the number of independently owned stations in a market, and should diversity of the owners of these stations be an important goal (i.e. should minority ownership be a goal of the ownership rules)?

These are but highlights of the issues raised in connection with each of the Commission's identified goals.  Many more specific questions about how each of these goals can be best achieved, how to measure the achievement of the goals, and what factors need to be considered in connection with each of these goals, are all part of the NOI.  To get the full impact of the questions being asked, you need to read the full NOI.

The Commission also recognizes that these goals may at times conflict, and asks how these conflicts should be resolved.  It also asks what other issues should be considered.  For instance, should the impact of ownership rules on the status of "investigative journalism" be an important goal in the proceeding?  If so, how is this to be measured and defined. 

The Commission asks what kinds of rules are best to achieve the FCC's goals.  Which of the following types of rules should it choose?

• Bright line rules - these would be rules like those currently in place for local ownership.  If you meet certain numerical limits, your application is granted, no matter what other factors may be in place.  It has the advantage of ease of application and certainty for the parties, but may not take into account all public interest factors
• Case-by-case analysis - this would require that the FCC adopt policies, but not specific numerical rules.  The FCC would have to evaluate each proposed combination on its own merits, and independently assess whether that combination would serve the public interest.  While having the advantage of being flexible enough to catch any issues, it would also be time-consuming and costly, both for applicants and the Commission, and outcomes would not be certain
• Hybrid approach - this approach would use bright line limits, but allow public interest factors to be applied in certain cases to permit or deny certain combinations, regardless of their compliance with the numerical limits, if there are special circumstances.

In addition, that FCC asks if it should apply a broad, cross-media approach - looking at all media in a market, not just analyzing radio with other radio, or TV with other TV.  If so, how would a broader analysis work?

Two other questions were tossed into the end of the NOI.  One asked how the transition to digital operations should affect the rules, as TV no longer has the Grade A and Grade B contours that are specified in the current rules.  The Commission also asks about the National Broadband Plan, and how the FCC's interest in reclaiming some of the TV spectrum, and in the expansion of broadband generally, should impact the multiple ownership analysis.

This is obviously a very broad inquiry, requiring very detailed analysis and much thought to answer the many questions raised by the Commission, but which we have only touched on here. Yet the FCC provides only 30 days for comments, and 15 days for replies (all dates measured from the Federal Register publication, which will occur at some point in the near future).  So get your thinking caps on, and let the FCC know your opinions, so they can figure out where to go from here. 

The Commission sets out a series of questions that it would like to have addressed.  These questions include:

• The FCC is required by statute to consider the rules governing local radio ownership, local television ownership, radio-TV cross-ownership, broadcast-newspaper cross-ownership and the dual network rule.  The Commission asks if it should consider other rules in the context of this proceeding.
• In assessing ownership rules, should the Commission treat each rule in isolation, or should it look at all media together and attempt to craft more general rules addressing media consolidation as a whole in relevant markets?
• Should rules that are adopted be "bright line" rules, that limit entities to specific numbers of stations, or should the Commission make a case by case determination of whether a combination is in the public interest, subject to some general principles?
• Should the Commission address the traditional concepts of competition, diversity and localism to this proceeding, or come up with new ways of looking at these concepts, or different concepts to assess ownership goals?
•  How should the FCC analyze competition, localism and diversity in today's marketplace?  What are the relevant markets for analysis?  What metrics should be used?
• What studies or analysis should the FCC use to inform its decisions on these topics.

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. 

In late 2007, Acting Chairman Copps was active in his opposition to the Commission's very limited relaxation of the cross-ownership prohibitions.  See our summary of the FCC debate on that relaxation, here.  But would he take the same position today in light of the current economic climate for newspaper publishers?  As the Bloomberg article pointed out, House of Representatives Speaker Nancy Pelosi has suggested that the Justice Department might want to relax antitrust review of newspaper combinations given their economic plight.  Other legislative fixes have been suggested - including allowing papers to operate as non-profit, tax-exempt entities to which charitable contributions could be made.  With these kinds of legislative efforts underway, perhaps a change in direction at the FCC is indeed possible.  One more issue to watch in the coming months. 

We summarized the decision with respect to the newspaper television rules here.  That summary was based on the statements made at the December 18 meeting and on the press release issued that day which provided a brief summary of the Commission's decision.  The outline we provided in December was basically accurate, and there were few surprises about the newspaper-television cross ownership rules in the text.  The Commission was very thorough in documenting the basis for its decision that newspapers and television stations could be commonly controlled without adversely affecting the public interest, citing a legion of studies supporting their decision, while carefully refuting the studies supplied by consolidation critics.  However, the remainder of the decision, dealing with other aspects of the multiple ownership rules which the Commission refused to change, contained reasoning which was far more limited.  In some cases, particularly dealing with radio issues, the reasoning was almost absent.

The Commission did, however, hold off on grants of certain newspaper-television combinations where the combinations involved more than one newspaper or television station in the same market.  In those cases, the Commission stated that it would hold additional proceedings to determine if these existing combinations should be permitted to continue.  With these waiver decisions, and the Democratic opposition, public interest groups have already indicated that they will appeal the Commission's relaxation for the ownership rules.

What has drawn less attention and, so far, less protest, are the ownership rules that the Commission did not relax.  On the issue of TV duopoly, the Commission was facing a remand from the US Court of Appeals, which had questioned the FCC rules limiting local ownership combinations of television stations to situations where there would be eight separate TV owners in a market after the combination, and prohibited combinations of any of the top 4 stations in a market.   The text of the decision, rather than relying on well-developed analysis of detailed economic showings submitted by the parties (as was done in the analysis of the newspaper-television analysis), the Commission cited some anecdotal evidence submitted by a few parties, and came to the conclusion that it would not change it rules.  No significant analysis is given to arguments that in smaller television markets, to have a viable fourth station, a combination is necessary.

On the TV duopoly issue, there was at least some discussion and analysis.  Radio received even less consideration.  The Third Circuit, in remanding the Commission's 2003 decision, asked the Commission to determine whether its numerical limits on the number of AM and FM stations that one party could own made sense - especially as stations have different coverage areas and different size audiences.  Should all of the stations count the same?  The Commission read the court's question at its most narrow - whether the Commission should allow more AM stations to be co-owned than allowed by the current limits.  The Commission concluded that some AM stations still are successful (again based on a few examples of AM stations that are still rated well rather than an extensive economic analysis of the AM radio segment of the industry), and concluded that the cap on AM ownership should not be relaxed.

The question asked by the Court could be read in a much broader context, that the Commission should consider the relative power and reach of stations before determining how much they should count in any multiple ownership analysis.  At least one party raised exactly that issue - whether a small Class A FM stations should count the same in a multiple ownership analysis as a large Class C FM station.  One example was posed where two Class A stations that are simulcasting in order to cover a geographically large market.  Should those two stations really count twice as much toward a licensee's ownership limits as a Class C station that totally encompasses the area served by the two Class A stations?  The Commission chose not to address that issue, concluding only that the rules that it had adopted had not been specifically overturned by the Court, so there was no reason to revisit them now.

Similarly, several parties asked for reconsideration of other aspects of the radio rules, including the rules dealing with grandfathering of ownership situations that did not comply with the rules adopted in 2003.  The Commission indicated that some grandfathering provisions would be dealt with in the Diversity order decided on at the December 18 meeting (though the full text of what was decided still has not been released).  Other clarifications or requests for reconsideration - including proposals for grandfathering of existing Joint Sales Agreements (or simply reconsidering the decision to make joint sales agreements attributable) were denied, basically with no reason except that the rules were adopted in 2003, not overturned by the Court, and therefore the FCC decided not to revisit the issue now.  As the Commission obviously decided to reconsider some aspects of the 2003 decision (e.g the grandfathering provisions considered in the diversity proceeding), how they can ignore other issues simply based on the fact that the Commission once decided the issue?  The purpose of reconsideration is to give the Commission an opportunity to revisit and review a decision that it made earlier, to consider points not examined or potentially decided incorrectly when the initial decision was made.  To refuse to even address the substance of the issues raised on reconsideration seems to defeat that purpose.

In short, with the issues that were decided, and those that were not, its likely that we have not heard the last of the ownership debate.  Court appeals are probable, and legislative intervention is even possible (Senator Dorgan has reportedly promised to introduce a resolution to overturn the decision).  So keep watching this space.

As the full text of the decision has not been released, details of how the Commission addressed every issue are not available.  From the comments of the Democratic Commissioners who dissented from the decision, changes were being made to the standards adopted today throughout the night and as early as an hour before the meeting was held (see Commissioner Copps' impassioned statement against the new rules, here, where he details the last minute revisions).  Given the last minute nature of the final order, it may be a while before the full text is released.  However, from statements made today and from the Commission's press release, some details of the decision are known.  They are summarized below.

In evaluating requests to rebut the presumption in smaller markets, the Commission will use a multi-part test that will include looking at:

• The level of media concentration in a market
• Whether the combination would increase the amount of local news coverage in a market
• Whether the newspaper and broadcast station would continue to have independent news and editorial staffs
• The financial condition of the combining media outlets, and whether the Buyer is willing to commit to spend money to increase newsroom operations

In addition, the Commission would consider the negative presumption to be overcome in any of the following specific situations:

• Where there was a "failed" station or newspaper, i.e. one in bankruptcy or which had ceased operation for 4 months before FCC approval for the combination was sought
• If there is a "failing station" or failing newspaper - found only in situations meeting a four part test:
  • If the television station in the proposed combination had an audience share of less than 4%
  • If the station or newspaper which is claimed to be failing had 3 consecutive years of negative cash flow
  • If public interest benefits could be shown, and
  • If it can be shown that there is no other out-of-market buyer for the failing outlet
• If the combination resulted in a new news operation at the broadcast station which would include at least 7 hours of weekly local news coverage.

Commissioner Copps derided these conditions,finding it difficult to believe that promises made to receive permission for a combination would be kept.  How, he asked, could it be believed that parties would buy a failing property that no one else wanted and increase costs by investing in news?  Instead, he found it much more likely that any new owner would cut costs by combining staff, leading to less diversity. 

There were also numerous arguments between the Commissioners about whether the process was fair, and whether it gave interested parties a meaningful opportunity to have their views heard and considered.  While Chairman Martin, in his statement appends a long list of the process that was gone through over the last several years in considering the ownership revisions, Commissioner Copps focused instead on the "end game," faulting the Chairman for rushing the decision - for example, by having his proposal published in the New York Times and released in a Press Release by the FCC the day after the last field hearing (meaning that the statements at that hearing could not have been considered in drafting the proposal), and having a draft final decision circulated weeks before comments on the Chairman's proposal had even been received.

We may well have not heard the end of this proceeding.  First, the full text will need to be released, addressing some of the many unanswered questions, including what happened to all the reconsideration requests filed in connection with the already effective 2003 revision of the radio ownership rules, to the question of how the FCC dealt with the US Court of Appeals decision that had found the local television ownership rules (which forbid TV "duopolies" except in a market where there will be 8 independent voices after the transaction, and forbid combinations among the Top 4 stations in a market) to be arbitrary and capricious.  Legal challenges to the final decision may follow.  And many in Congress have been actively opposed to this decision, including 25 Senators who signed a letter indicating an interest in overturning this decision.  So, once again, stay tuned for the next episode in this long running series. 

Contemplating a December action is certainly aggressive.  The Commission had promised to complete the two sets of public hearings - one on the ownership rules and a second on the localism provided by broadcasters - before reaching conclusions in this case.  Each set of hearings still has a final hearing to be held.  The Commission has yet to officially announce the date and location of either of these final hearings - though press reports have indicated that the Commission may look to hold one at the end of the month on the West Coast, and the final hearing in Washington, DC in early November.  In addition, the Commission has just received the final set of comments on the proposals to foster minority ownership, which the Third Circuit had indicated was to be part of the analysis in this proceeding when it stayed the effect of most of the Commission's 2003 multiple ownership decision and remanded that decision to the FCC for further consideration.  With the comments on minority ownership just having been filed, and comments on the Commission's own studies on the effect of consolidation not not due until next week (see details), and replies due early next month, does the Commission really have time to consider the issues raised in these comments in this proceeding and reach a December decision, or will some issues need to be delayed for independent consideration?  Seldom has the FCC finished any proceeding within a month and a half of the end of the public comment period - much less an important and controversial one like multiple ownership.

Following the Commission's 2003 multiple ownership decision, the only significant portion of the decision to become effective was the tightening of the radio ownership rules.  While there have been some calls to relax the local ownership rules for radio, these calls seems somewhat muted -especially when contrasted with the calls from newspaper owners to be allowed back into broadcasting, and even when compared with the pleas of small market television for more ability to combine operations.  But, in connection with recent transfers of control of several large radio companies, there are numerous radio stations held in trust, awaiting disposition.  These trusts were formed because, after the 2003 tightening of the rules, certain local radio clusters were no longer in compliance with the rules.  The transfers of control triggered a divestiture requirement.  Could companies look to relief from the divestiture requirements through these upcoming rule changes?  And could the outcome of the proposed XM-Sirius merger affect the decision on local radio ownership?  If the Department of Justice and the Commission allow the merger by finding that these companies are not forming a monopoly in the satellite radio market because they are instead part of a larger market for audio services, wouldn't radio also be part of that greater market, and wouldn't that call for allowing more consolidation?  If one company can own 300 channels in a market, why should another be restricted to 8 (or maybe 13 or 18 should one consider what would happen if FM multicasting in the new IBOC digital radio format becomes more prevalent)?

Already, the anti-consolidation forces are beginning to muster opposition to any rapid resolution of the proceeding.  According to yesterday's Broadcasting and Cable report, the Senate Commerce Committee promised a hearing on the plans to bring the case to a close, while at least two Senators (a Democrat and a Republican) have already written the FCC a letter asking for a delay in the proceeding.   The anti-consolidation forces are also rallying to stop the decision (see the Press Release from the Stop Big Media Coalition, here). 

With so many questions to be answered, and the opposition that is already forming, we will see if the December decision is a real target - or but a trial balloon floated to see if anyone was paying attention.

Evidence of the FCC's increasing attention to the multiple ownership issues include the recent Further Notice of Proposed Rulemaking, asking questions about minority ownership and making proposals on how that ownership can be encouraged (proposals we summarized here).  The FCC has also asked for comment on several studies that it commissioned to look at the effects of ownership consolidation in the broadcast media (the public notice asking for comments is here, and the studies can be found here).  Comments on the Further Notice and the ownership studies are due on October 1, with replies due on October 15.  Some have suggested that this time table is unnecessarily accelerated, especially as certain peer review documents on the ownership studies were just recently released.

At this week's Future of Music Policy Summit in Washington, DC, a legal assistant to Commissioner Adelstein expressed concern over this rush to reach a decision, suggesting that the Chairman wanted to see the decision out before his term ended, and was looking for a decision early next year.  Several Congressional staffers on a panel about Capitol Hill activities that affect the music industry, as well as Senator Dorgan of North Dakota, all also expressed concerns about FCC action in this area, and indicated that both the House and the Senate intended to hold hearings on media consolidation this Fall, before any decision can be reached.

With battle lines being drawn, there are likely to be stormy times ahead in the multiple ownership debate.  In 2003, with a Republican-controlled Congress, there were a number of bipartisan Congressional attempts to roll back the FCC's relaxation of the ownership rules before the Third Circuit Court or Appeals blocked most of those reforms.  With a Democratic Congress, who knows what would come of any FCC relaxation of those rules in the coming months.  But we may well see that issue play out - and perhaps become a political football in the upcoming elections.

 Also, press reports note that the petitions to deny have been filed against applications for the renewal of Fox's television stations in New York, arguing that the combination of  Fox's television stations in the market with the ownership of the New York Post is not in the public interest.

Seemingly, the proposed purchase of the Wall Street Journal by News Corporation, the owners of Fox,  if it were to ever come to fruition, would at least be reviewed by the FCC, as the Journal is published in New York, where Fox owns television stations.  However, FCC precedent established when Gannett purchased a Washington, DC TV station, in the same market where USA Today is published, would seem to set a precedent for the treatment of a specialized national newspaper like the Journal. While published in New York, the Journal really is national in scope - and not focused on local news, sports, entertainment or advertisers in the same manner that a local newspaper would be. 

Look for these combinations to stay in place while the FCC continues its consideration of the multiple ownership rules.  As some relaxation seems to be in store, and as combinations once broken up are difficult to reassemble, the Commission would likely not break up these long-standing combinations while rules which would make them permissible are pending.