Ownership Rules Up for Grabs

Judges may ask FCC to revamp its economic model

Las Vegas wouldn't take this bet. How will Philadelphia judges rule on new FCC ownership rules? It's tough to predict, but we'll know in a couple of months.

Usually, these court cases are heard in Washington, so the wild card is how the appeals court in the City of Brotherly Love view the FCC's new rules. The court last week heard legal challenges to deregulation of local and national limits on station ownership.

Led by Chief Judge Anthony Scirica, the three-person panel seemed generally neutral. They rarely grilled either attackers or defenders of FCC rules, which would allow local TV "triopolies," permit more duopolies, and tighten restrictions on local radio combos.

Here's how the sides stack up.

Industry officials, including lawyers from the National Association of Broadcasters, Paxson Communications, Sinclair Broadcasting, Media General, Gannett, and radio giant Clear Channel argue that the June 2 deregulation did not liberalize ownership rules as much as Congress ordered. Media Access Project, Prometheus Radio Project and Consumer Federation of America also are suing, saying the FCC harmed media diversity by going too far.

NAB lawyer Donald Verrilli urged the panel to strike down a limit preventing duopolies among the top four rated stations in a market. He claims the restriction prevents pairings in more than 80 small markets. He also dismisses issues of diversity and antitrust, saying both are adequately safeguarded. The duopoly limit, he says, should be eliminated. "That prohibition actually prevents the benefits of consolidation where the FCC found they were most needed."

NAB added that small-market stations are the most likely to be starved of essential ad revenue. The efficiencies of mergers would allow them to say in business.

Verrilli's plea got little feedback. Similar deregulation-only arguments waged by Clear Channel lawyer Miguel Estrada fell flat.

Estrada argued that the FCC violated the intent of the deregulatory 1996 Telecommunications Act by reducing the number of stations an owner can possess in small markets. The act ordered the FCC to "repeal or modify" restrictions no longer necessary to protect the public interest, he added. A puzzled Judge Scirica queried: "Modification doesn't work both ways?"

That point was made by Media Access Project President Andrew Schwartzman, who rejected notions that the 1996 law was biased in favor of deregulation: "It's neither regulatory nor deregulatory." Permitting only deregulation would eviscerate the FCC's authority to protect the public interest, which he said Congress never intended.

Media insiders did detect a judicial inclination to order the FCC to redesign the economic model that will determine which markets are eligible for station/newspaper combos and pairing of same-market TV and radio stations. But no one expects the judges to toss current restrictions until a decision is rendered. "It would be a remand without vacation," says Judge Thomas Ambro.

Now it's back to the familiar: Waiting for a real answer.