Broadcast Deregulation Clears a Court Hurdle

Legal victory will likely clear the way for more mergers and acquisitions

Broadcasters have cleared a potential hurdle to long-sought ownership deregulation.

It was a victory in what has been a years-long legal battle to get out from under cross-ownership and small-market duopoly restrictions that station owners said have unfairly hampered their ability to compete with national distributors, like pay TV providers, who face no such limits.

As of Feb. 7, the FCC’s November broadcast-regulation rollback went into effect, meaning TV stations can buy newspapers and vice versa, and group owners can buy more stations as long as they stay under the 39% national ownership cap (though that is now also under review).

The hurdle had been the attempt by Prometheus Radio Project to get the 3rd U.S. Circuit Court of Appeals to block that order as unresponsive to that court’s directive on media diversity.

With the FCC orders in place, broadcasters can also now own two stations in a market even if it means there are fewer than eight independent owners overall — meaning duopolies are permitted in smaller markets — and can potentially own two of the four top-rated stations in a market, with the FCC looking at such arrangements on a case-by-case basis.

The move should spur some station sales. “The 3rd Circuit’s decision gives the green light to M&A in the broadcast sector and has been seen as a good sign by Wall Street,” Adonis Hoffman, chairman of Business in the Public Interest and a former FCC official, said.

A single company still can’t own more than one broadcast network, still a big difference from cable network owners, who own dozens of networks if they want.

It has been a decade and a half since the FCC’s attempt to deregulate broadcasting, under then-chair Michael Powell, was stayed and remanded by the 3rd Circuit after being challenged by none other than Prometheus.

Various FCCs have taken their shots at responding to the court, but the issue has yet to be settled.

There remains an underlying challenge to the November rule rollback — filed by Prometheus, of course — but it separately had asked the court to stay that Feb. 7 effective date. It argued that FCC had deregulated without gauging the impact of that decision on media diversity, and the agency should be ordered to better account for that affect on diversity.

But the FCC’s Republican majority did propose a diversity incubator program to companies to provide capital and support service to help minorities and women get into the business.

Pai Pledges Diversity Action

FCC chair Ajit Pai was signaling to the court last week that there would be action on the diversity front.

Pai told an audience at the Multicultural Media, Telecom and Internet Council’s (MMTC) ninth annual Broadband and Social Justice Summit in Washington that while there has long been general support for the incubator idea — including from MMTC — the idea had stalled because “past commissions had failed to take action,” adding, “That is until now.”

In denying to block the rules, the court gave the FCC the benefit of the doubt, but the agency will have to deliver.

The court noted that the FCC will be collecting comment on that until April, and told the FCC to report back by Aug. 9 on the program’s status.

Broadcasters aren’t quite out of the woods on the legal front. Prometheus still has that underlying challenge to the rule change — as too much deregulation — and its lawyers were huddling last week to consider next steps.