In a move that could fuel a tremendous new wave of media consolidation,
federal judges threw out the ban on cable-broadcast cross-ownership
Tuesday and ordered the Federal Communications Commission to either
justify or eliminate the government's 35 percent cap on one company's
national TV-household reach.
The decision was in response to suits filed by Fox Broadcasting Co. and
Time Warner Inc. and later consolidated by the court.
Tuesday's ruling could also make it difficult to maintain the local
newspaper-broadcast cross-ownership limits, which the FCC is currently
One analyst predicted that the court's decision will force the
commission to significantly raise the ownership cap and cede much of its
merger oversight to the Department of Justice and the Federal Trade
'The court decision points toward a shift in oversight of media
ownership from prophylactic FCC rules to case-by-case analysis by
antitrust authorities,' Legg Mason Wood Walker Inc.'s Blair Levin
The ownership cap will remain in place pending the FCC review.
This is in contrast to the same court's decision to remand the FCC's 30
percent cap on a cable company's pay TV-audience share in March 2001. In
that case, it immediately vacated the cap but gave the commission the
option of reinstating it or imposing another limit later.
Both ownership-limit decisions are based on court findings that the FCC
did not adequately explain a rationale for the specific limits.
In vacating the broadcast-cable cross-ownership rules, the judges said,
the FCC failed to consider increasing competition from direct-broadcast
satellite or to put forward any adequate reason for believing the rule
remains necessary in the public interest.
The court also said the agency 'failed to consider the increased number
of TV stations since the rule was imposed in 1970.'
Adding that the FCC could always try to reinstate the rule with a new
justification, the court said it didn't think vacating it would be too
disruptive to the agency, although it added that the probability that the
FCC could justify it was 'low.'
Time Warner, which has launched several local cable news channels,
challenged the ownership limits on grounds that it might want to buy
broadcast stations in markets where it operates cable systems, such as New
'We are very pleased that the court has vacated the cable-broadcast
cross-ownership rule,' AOL Time Warner Inc. executive vice president and
general counsel Paul Cappuccio said. 'That rule had long ago become an
The National Cable & Telecommunications Association, while not a
party to the case, welcomed 'the increased flexibility' cable operators
will obtain, a spokesman said.