Yesterday’s unique Public Notice outlining Chairman Martin’s proposals for reform of the multiple ownership rules (which we summarized here) is a surprisingly restrained and limited approach to relaxation of the ownership rules – proposing to relax only the newspaper-broadcast cross-ownership prohibitions, and only in the Top 20 TV markets.  Moreover, the reform would only allow the combination of a daily newspaper and a single radio or TV station, and the newspaper-TV combination would only be allowed if the TV station is not one of the Top 4 ranked stations in the market.  While the extremely limited nature of the proposed relief has not stopped critics of big media from immediately condemning the proposal (see the joint statement of Commissioners Copps and Adelstein, here), much less attention has been paid to those multiple ownership issues that the Chairman’s proposal does not seem to address – including TV duopoly relief in small markets and clarifications to the radio ownership rules requested by a number of broadcasters who sought reconsideration of the changes that arose from the 2003 ownership reforms. 

The Chairman’s Public Notice is itself a new approach to regulation – putting out for public comment (due by December 11) an action of the Commission just before that action is to be taken.  Usually, the Commission proposes a set of rule changes in a Notice of Proposed Rulemaking, and the Notice provides time for interested parties to comment and then reply to each other’s comments.  Once all the written comments are submitted to the Commission, parties and their representative often make informal visits to the FCC to argue about the suggestions that have been made, and eventually, after much consideration, the Commission’s staff writes up a decision which is vetted by the Commissioners and their staff, and voted on by the full FCC.  Usually, these final decisions are shrouded in secrecy – though outlines of the proposals are often the subject of informed gossip and rumor, rarely does anyone see the full set of rules that the Commission is considering until after the decision is made. 


In this proceeding, the procedure has been somewhat different.  The Commission’s Notice of Proposed Rulemaking really did not suggest any proposed rules – instead just asking a number of questions that gave little guidance as to what the Commission was really thinking about doing to reform the ownership  rules (see our summary here).  The original Notice was much more akin to a Notice of Inquiry, which asks for general guidance on a subject, and then usually leads to a more specific Notice of Proposed Rulemaking.  Here, the Chairman’s Public Notice was really the public’s first look at what the proposed revisions to the rules would look like – and the suggestions seem to be those of the Chairman only, not those of the full Commission (or even necessarily a majority of the Commissioners).  And, instead of providing an opportunity for comments and replies and informal lobbying and advocacy, the Public Notice gives only a single date of December 11 for comments, and then seems to contemplate an FCC decision the next week (leaving no time for informal lobbying after the comment date, as there is a 7 day quiet period, where no lobbying is permitted, before a decision to be made at an FCC open meeting). 

In looking at the specifics of the proposal, one is struck by how many issues it leaves unanswered.  One would think that these issues will have to be addressed in any final order issued by the Commission.  The Notice of Proposed Rulemaking asked about a number of subjects that seem to have been ignored by the Chairman’s proposal.  For instance, small market television stations have long been clamoring for some relief from the rules that only allow TV combinations in markets where there are eight separate TV owners.  Small market owners have long contended that in the very small markets the only way to start a station that is not affiliated with a major market is to run it in combination with another station – and certainly the only way to be able to afford local news on one of these stations is to have a second station that can share the costs.  And with the costs of the digital transition fast upon stations in these market, who have a limited revenue base from which to pay for the costs of the digital conversion (costs that are essentially the same as the costs for a large market station with far greater revenue opportunities), many of these smaller stations are hurting economically.  Yet there is no mention of small market duopoly relief in the Chairman’s proposal.  Given that the US Court of Appeals, in a case brought by Sinclair Broadcasting, ruled that the Commission needed to provide more justification for its rules limiting TV duopolies to markets where there would be 8 independent owners after any combination, and prohibiting combinations among the Top 4 stations in a market, it would seem that this issue needs to be addressed and justified in any order of the FCC. 

Large market TV operators were also looking for some opportunities.  In the 2003 order, the FCC allowed one entity in the very largest markets to own up to three TV stations.  No such proposal is contained in the Chairman’s proposal. 

Radio, too, was hoping for some clarifications of the ownership rules that went into effect in 2004.  The radio rules adopted in the FCC’s 2003 Multiple Ownership reform order were the only rules from that order that actually went into effect.   And those rules actually tightened the rules that were previously in effect – determining the number of stations in a market based on Arbitron market definitions rather than by contour overlaps.  As this reduced the number of stations in a number of markets, and the number of stations in a market determines how many stations one party can own, a number of issues were raised.  Many of the issues dealt with grandfathering of preexisting interests.  While the Commission grandfathered most combinations that existed at the time that the rules were adopted, that grandfathering protection would disappear in most cases upon an assignment or transfer.  While the FCC allowed grandfathering to continue if there was a transfer caused by the death of a shareholder, it made no provisions for grandfathering where there is a transfer that takes place over time in employee-owned or other closely-held businesses,  where continuity of ownership remains, though a technical transfer may have occurred.  The rules also forfeited grandfathering protection if there was a city of license change for any station in the cluster – even if that city of license change was from one community in an Arbitron market to another in the same market.  Some parties asked for reconsideration of that rule – again something not addressed, and much more important given the recent Commission decisions easing city of license changes to make it easier for radio stations to improve their technical facilities (see our posts, here and here)).

The 2003 Order also, for the first time, made radio Joint Sales Agreements attributable interests (meaning that stations subject to such agreements count as if they are owned by the party doing the advertising sales in assessing that party’s compliance with the multiple ownership rules), and gave parties two years to divest themselves of any JSA which would result in a combination that would exceed the ownership rules.  A number of parties asked for reconsideration of that ruling – asking for further grandfathering of those agreements to preserve the economic benefits of the parties.  Parties also asked for clarification or other relief of situations in some geographically large Arbitron markets, where some parties need two lower power stations to cover a market.  Should those lower power stations count the same as a high power station that might alone cover the entire market.  The Third Circuit Court of Appeals decision which overturned most of the 2003 ownership rules seem to require that the Commission address the rationale for the strict reliance on the number of stations in a market in deciding ownership limitations without any consideration of the coverage or audience of such stations.  Again, there is no mention of any consideration of that issue in the Chairman’s notice.  The Notice of Proposed Rulemaking in this proceeding also asked for a permanent definition of a radio market in areas not served by Arbitron – and there certainly has been no specific proposal made in that regard.

Thus, the Chairman’s Public Notice would seemingly not signal the end of the ownership debate, as there remain many, many unanswered questions raised in this and other related proceedings.  So, even if the newspaper- broadcast issue is resolved next month, the Commission’s multiple ownership work appears to be far from complete.