Media goes a-courtin'

After D.C. court doffs cable caps, others want the same

The cable industry struck gold with the D.C. federal appeals court decision last month striking down the 30% cap on a cable company's audience. Such news travels fast on the information highway, and it didn't take long for broadcasters and others to seek the same regulatory relief.

Since the court's March 2 decision, cable and TV companies have filed three more suits in the same court to capitalize on the ruling, which found that the FCC failed to justify the cap's infringement on system operators' free-speech rights. Their attorneys argue that the court's order casts doubt on the validity of other media-ownership restrictions.

The court challenges are forcing the FCC to defend its 35% cap on TV-audience reach, the ban on TV duopolies in markets where fewer than eight unaffiliated owners would remain if one company were allowed two stations, and prohibitions on cable/broadcast station crossownership.

The debate is long overdue, said AOL Time Warner General Counsel Paul Cappuccio. "We're going to finally face the question of whether it was legitimate for the government to make the choices as to what content should be promoted or what voices should be out there," he told the American Bar Association last week.

Related battles are also being waged at the FCC. Paxson Communications, NBC and Viacom are fighting to restore the exemptions that allowed partial investors in broadcast properties to shield their holdings from ownership tallies when another partner held a stake of 51% or more. Also, more than 600 affiliates of the Big Three networks-fearing, among other things, that the court will boost the networks' power-are asking the FCC to vigorously enforce rules regulating network/affiliate relations.

The court's ruling on the cable caps, which applies only to cable operators, does not necessarily mean media companies have hit the deregulatory motherlode. But industry sources say the decision means the FCC no longer is free to set any limit the commissioners like, based solely on their power to act in the public interest.

"The court clearly said restrictions on media ownership impinge on First Amendment rights," said Blair Levin, Legg Mason policy analyst and one-time chief of staff to former FCC Chairman Reed Hundt. "That doesn't mean the commission can't impose them, only that there must be a certain standard for justifying them."

The reason broadcasters and cable operators can't count additional deregulation as a given is that the cable limits thrown out and derided by the court as "plucked from thin air" were devised entirely by the FCC but the broadcast cap was set in 1996 by Congress. Lawmakers, noted one FCC staffer, get much more deference from judges than do regulatory agencies.

It's also unclear how eager FCC Chairman Michael Powell is to relax ownership rules without clear direction from the court. Although a vocal critic of what he calls "prophylactic" restrictions on media ownership, he also appears reluctant to take the lead in rewriting the rules without some direction from the court or Congress.

He has already been tentative in expanding the scope of the court ruling. The FCC on March 16 cited the decision as sufficient reason to suspend AT&T's deadline for divesting enough cable systems to get below the cable ownership cap, but the agency refused to make a similar grant regarding Viacom's obligation to sell enough broadcast stations.

"Philosophically, he is of very strong opinion," said the FCC aide, "but, operationally, he takes a very measured approach."

But even if the FCC relaxes the ownership limits following the next round of court decisions, Capitol Hill can be expected to have the final word.

"Ultimately, this problem goes back to Congress," said Ben Golant, aide to Commissioner Harold Furchtgott-Roth.

David Donovan, lobbyist for the Association of Local Television Stations agrees, at least when it comes to raising the ownership cap, which is vehemently opposed by the local affiliates. "Every affiliate will talk to their hometown congressman," he said, "and the broadcast ownership cap will be a battle."

Powell, too, acknowledges the volatile nature of the ownership debate. "There is something visceral and hard to define that this country thinks is different about TV or media or voices or things that affect the marketplace of ideas and democracy," he told the ABA.

Still, he noted that the court decision will make it hard for either the FCC or Congress to maintain today's rules.