FCC Chairman Tom Wheeler this week released a “fact sheet” setting out a summary of the draft order now circulating among the FCC Commissioners for review and possible approval. This order, if adopted, would resolve the Quadrennial Review of the FCC’s ownership rules. As we wrote here, the US Court of Appeals for the Third Circuit recently pushed the FCC to quickly resolve this proceeding. The FCC had punted two years ago when it decided that it could not resolve its 2010 Quadrennial Review of the ownership rules and pushed consideration of most of the issues forward to this Quadrennial Review, preliminarily suggesting that few rule changes were necessary. The Chairman’s fact sheet seems to suggest that, in fact, few are being proposed.

  • With one exception, despite the proliferation of new media outlets that compete for the revenue and audience of over-the-air radio and television, the proposed changes set out in the fact sheet seem to make the ownership rules more restrictive – not less restrictive. In other words, traditional media is not given any significantly greater leeway to combine operations to compete with its digital competitors. The one exception is a very modest proposal to allow case-by-case waivers of the newspaper-broadcast cross-ownership rule (which some commentators, including us, have suggested may outlive the newspaper), but only where it can be shown that there are economically failing media entities looking to combine. The order addresses basic FCC ownership rules as follows:
    Continue Reading FCC Chairman Releases Summary of Media Ownership Reform Proposals – Little Change in Existing Ownership Rules, Reinstatement of JSA Ban

The Third Circuit Court of Appeals yesterday issued an opinion faulting the FCC for not completing any required review of its broadcast ownership rules since the 2006 review was completed in 2007. These reviews of its ownership rules, now done as “Quadrennial Reviews” every four years, but previously required to be done biennially, have been the subject of much judicial review and delay in the past 9 years. Because of the delays in finalizing a review and addressing issues previously raised by the Court, yesterday’s decision ordered the FCC to meet with certain parties who brought the appeal to finalize a timetable for FCC review of the rules designed to promote minority ownership of broadcast stations. At the same time, the Court threw out the FCC’s 2014 decision determining that television Joint Sales Agreements were attributable interests (see our article here), which had essentially banned these agreements in most markets as the attribution of an interest in one station to the owner of another station in the same market would constitute a combination of stations not permitted under the local TV duopoly rules. The discussion in the decision also raised questions as to whether the FCC could justify the continued existence of the broadcast-newspaper cross-ownership rules given the radically changed state of the newspaper industry since these rules were adopted over 40 years ago.

While much has been made of the decision overturning the attribution of television Joint Sales Agreements, that part of the decision was actually a narrow one, and one which leaves the FCC in a position where it could reinstitute the attribution requirement when it completes its current review of the ownership rules. The Court looked at the 2014 decision determining that JSAs should be attributable, and concentrated on the dissenting opinion of Commissioner Pai. The Commissioner argued that the FCC’s decision making the interests attributable ignored record evidence that such combinations were in the public interest. The dissenting opinion said that some combinations were necessary, particularly in smaller television markets, to permit the profitable operations of weaker stations in these markets, and that the agreements otherwise contributed to the public interest by allowing stations that could not afford news and other beneficial programming to air such programming. The Commission dismissed those arguments, contending that they were really addressing questions as to whether more small market TV duopolies should be permitted. But, as the FCC did not address whether small market TV duopolies might be in the public interest, but instead deferred that decision until the next Quadrennial Review, the Court found (as Commissioner Pai had argued) that the FCC decision could not be justified. The FCC could not ban JSAs as not being in the public interest until they considered the arguments as to whether small market duopolies, which could permit many of the JSAs to continue even if attributable, were in the public interest.
Continue Reading Appeals Court Tells FCC to Finalize Multiple Ownership Review, Throws Out TV JSA Attribution, and Questions Newspaper-Broadcast Cross-Ownership Ban

The recent decision of the Third Circuit Court of Appeals which overturned the FCC’s 2007 rulings on newspaper-broadcast cross ownership and on diversity initiatives, took an unexpected turn today.  The FCC issued a Public Notice announcing that it would immediately stop giving "Eligible Entities" an advantage in certain instances – most particularly the extension of construction permits for new stations that are close to their expiration dates.  In the FCC’s 2007 Diversity Order, the Commission, to encourage more diversity in broadcast ownership, allowed "eligible entities", i.e. small businesses under SBA definitions, to acquire construction permits for new stations that were close to expiration, and to get an additional 18 months in which to construct the station.  In most other circumstances, the FCC will not extend a construction permit (absent some limited "tolling events" that will give applicants a limited amount of time to construct – but just the amount of time that a limited unforeseen event takes out of the usual 3 year construction period).  The 18 month extensions given to Eligible Entities have become an important way of saving construction permits about to expire when the original permit holder could not complete construction in the given 3 year construction period.

Today’s decision takes away that opportunity to extend unbuilt construction permits.  And the ruling goes even further, pulling the rug out from under recent grants of CP extensions – even ones that have already been granted, unless the extensions have become "final," i.e. no longer subject to reconsideration or appeal.  Those extensions granted in the last 40 days are subject to this order, and if these CPs have an initial expiration date that has already passed, they will be canceled.  This will no doubt cause some great consternation among parties who have purchased a construction permit in reliance on an FCC order extending the permit by 18 months, and may even have taken steps to construct the station since purchasing it, and now find themselves with a permit that has already expired.  The Commission makes no suggestion why some other remedy consistent with the Court’s order, but not so harmful to parties that relied on prior Commission policy, could not have been adopted – perhaps a new "tolling event" giving applicants a limited period of time to get a station on the air before the CP was canceled.  Sellers no doubt relied on the prospects of a pending sale (and simultaneous extension) to stop taking last minute extraordinary efforts to get a station constructed before the CP expired, and Buyer’s relied on the FCC order extending a CP to close purchases.  Given the potential for some entities to suffer greatly by this ruling, look for appeals to be filed.


Continue Reading FCC Stops Processing Applications By “Eligible Entities” – No Extensions of Unbuilt CPs When Sold to a Small Business