FCC Reversal Could Hit Gannett, Tribune

By: Todd Shields

(Mediaweek) A court rebuke of looser media-ownership rules last week leaves federal officials the job of rewriting the regulations, a task likely to drag well past the fall elections as big broadcasters wait even longer for the deregulation — and the deal making — they had hoped was imminent.

The 2-to-1 decision by the Third U.S. Circuit Court of Appeals in Philadelphia struck hardest at cross-ownership relief, meaning it could have the greatest impact at companies such as Gannett Co. Inc., which owns a one newspaper-TV station combination in Phoenix, and Tribune Co., which has five such cross-media holdings. If the new rules continue to be stymied, these companies could be forced to sell properties when TV licenses come up for renewal beginning in 2006 in Phoenix and in Los Angeles. Officials with each company reacted with little enthusiasm. “What our industry needs now is clarity, not further delay,” said Dennis FitzSimons, Tribune president and CEO.

At issue was the Federal Communications Commission’s decision in June 2003 to enact sweeping relaxation of longstanding media-ownership laws. The rules have not taken effect because the Third Circuit placed them on hold as it considered claims by public-interest groups that said they were too loose and media companies that said they were too restrictive. Now, the court said, the hold will continue until the FCC returns with rules that can meet the judges’ approval. “The bottom line: The commission gets another chance to justify its actions,” Judges Thomas Ambro and Julio Fuentes wrote in their decision.

The ruling did not immediately affect ownership patterns for such big broadcast companies as CBS owner Viacom and Fox owner News Corp., because Congress earlier this year set a national ownership limit, moving that issue outside the court’s purview.

The court said Congress also ensured a continuation of the so-called UHF discount. Its preservation means companies, including Paxson Communications, need not trim holdings of low-power stations.The court let stand existing duopoly combinations of two stations in a community, but retains at least for now a prohibition on duopolies in many mid-sized communities, and of three-station ownership, or triopolies, in any market.

Chief Judge Anthony Scirica III filed a dissent in which he accused colleagues of substituting their policy judgment for that of the FCC. The majority disagreed. “We have no view of [the FCC’s] policies save that it act with reason,” the judges wrote.

The court said the FCC needs to justify limits it set in three areas: local radio ownership, local TV ownership and cross-ownership among TV, radio and daily newspapers within the same market. The court was especially critical of analysis the FCC used to support relaxed cross-ownership in which it systematically compares the relative importance of newspapers, TV, radio, the Internet and other media in communities’ public affairs diet. The formula the agency devised “generates absurd results,” the judges said. For instance, the Dutchess County Community College’s TV station in New York received a weightier score than The New York Times. Similarly, the judges said the FCC overstated the importance of local news on Web sites and local cable systems.

Public-interest groups reacted with glee. “This is a complete repudiation of rules that would allow one or two media giants to dominate the most important sources of local news and information in almost every community in America,” said Gene Kimmelman, senior public policy director for Consumers Union.

FCC Chairman Michael Powell, a Republican, said the agency would study the opinion before deciding its next step. He must decide whether to slog back into the thick of rulemaking or appeal to the Supreme Court, which some analysts consider unlikely to take the case because it does not present novel legal problems. Powell said the ruling “created a clouded and confused state of media law.” Commissioner Michael Copps, a Democrat and foe of the relaxed rules, said the agency must “gather a far more complete record of the impact of media consolidation on local communities.”

Several analysts said the court’s decision would merely extend rulemaking that began in 2002 but would not change the deregulatory result. “No worse than expected,” said Leland Westerfield, an analyst at Harris Nesbitt. Others were less sanguine.

Legg Mason analyst Blair Levin noted the FCC’s response would carry past fall elections that could change control of the agency. “Prognostications about how all this is going to play out can only be impressionistic,” Levin said. “But the ruling clearly is a defeat for media conglomerates.”

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