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Third Circuit Vacates New Newspaper Broadcast Ownership Rule on
Procedural Grounds and Upholds Other Media Ownership Rules |
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On July 7, 2011, the Court
of Appeals for the Third Circuit (the “Court”) released its decision in Prometheus
Radio Project v. FCC (“Prometheus II”), which reviewed the FCC’s
2008 Order with respect to its broadcast multiple ownership rules. In an earlier decision (“Prometheus I”),
the Court reviewed the FCC’s 2003 ownership order which relaxed several of
the broadcast ownership rules, and held that the FCC had not adequately
justified the rule changes. In its
2008 Order, the FCC abandoned the 2003 changes and retained the more
stringent local television and radio ownership rules and the radio/television
cross-ownership rule as those rules existed prior to 2003. The 2008 Order also adopted a new newspaper
broadcast cross-ownership rule (“NBCO”), which generally applied a positive
presumption for common ownership of a newspaper and one television or one
radio station in the 20 largest markets and a negative presumption for such
cross ownership in other markets. In Prometheus
II, the Court upheld the FCC’s retention of its pre-2003 rules but
vacated relaxation of the NBCO rule on procedural grounds. The Court also reviewed a separate but
related order of the FCC released in 2008 adopting certain policies to
increase diversity in broadcast ownership (the “Diversity Order”) and
remanded certain provisions of that order that relied on the definition of an
“eligible entity.” The Court concluded that
the FCC had not provided adequate notice and an opportunity to comment on the
new NBCO rule, in violation of requirements of the Administrative Procedure
Act (“APA”). Among other
irregularities, the new rule was first unveiled in a New York Times op-ed
article written by then-Chairman Kevin Martin only four weeks before the
Commission adopted the 2008 Order. The
Court found that the requirements of the APA had not been satisfied and
vacated the new rule, directing the FCC to consider any changes to the NBCO
rule in the context of its 2010 quadrennial review of the multiple ownership
rules, which is currently underway. As
a consequence, the NBCO rule in effect prior to 2008, which generally
prohibits all same-market newspaper/broadcast combinations that have not been
grandfathered or permanently waived, will apply pending any changes adopted
upon completion of the 2010 quadrennial review. In upholding the FCC’s
retention of the radio/television cross-ownership rule and the local
television and radio ownership rules, the Court concluded that the FCC had
adequately justified its position based on evidence in the record. The Court specifically rejected the
contentions of several broadcasters that further relaxation of the local
television ownership rules was called for in light of the significant
increase in the number of media outlets. The Court held that the FCC had not ignored
the “explosion” of media outlets in the industry, but rather had concluded
that the rules remained necessary to protect competition despite changes in
the media landscape. The Court
similarly rejected broadcasters’ contentions that the rules were
unconstitutional. The Court also
rejected the claims of public interest groups that the television duopoly
rule should be tightened because of the opportunities to operate multicast
channels as a result of the digital transition. The Court explained that the digital
transition had not been completed when the 2008 Order was issued and that the
public interest groups could raise this argument in the on-going 2010
quadrennial review. The FCC’s Diversity Order
adopted (with certain modifications) 13 proposals made by the Minority Media
and Telecommunications Council (“MMTC”) in response to a notice of proposed
rulemaking issued by the FCC. The MMTC
proposals were intended to promote minority ownership of broadcast stations. In Prometheus II, the Court
stated that most of the proposals adopted by the FCC were designed to advance
opportunities for “eligible entities,” a term based on Small Business
Association (“SBA”) revenue standards which define as a small business a
television owner that has no more than $13 million in annual receipts and a
radio entity that has no more than $6.5 million in annual receipts. The Court concluded that the SBA-based
“eligible entity” definition was not supported by evidence in the record. The Court emphasized that the Diversity
Order does not explain how the definition would increase broadcast ownership
by minorities and women and that the FCC provided no data to show a connection
between the definition used and the stated goal of increasing minority and
female ownership. The Court therefore
remanded those portions of the Diversity Order that relied on the “eligible
entity” definition. The Court also
found that the FCC did not adequately explain its determination to defer
consideration of a non-revenue based definition of
“eligible entities” – such as socially and economically disadvantaged
businesses (“SDBs”) – and directed the FCC to do so before it completes its
2010 quadrennial review. July 11, 2011 |
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