FCC Implements Supreme Court Order Reinstating 2017 Ownership Rule Changes, and Asks for Updating of Record of 2018 Quadrennial Review
David Oxenford
By: David Oxenford,
Wilkinson Barker Knauer LLP
The Newspaper Broadcast Cross-Ownership Rule is Finally Dead – And More Ownership Rule Changes – Including for Radio – Are to be Considered
Last Friday, the FCC took two actions on broadcast ownership resulting from the recent Supreme Court decision (about which we wrote here) upholding changes to the ownership rules that the FCC adopted in 2017. Those 2017 changes (summarized here) and any additional changes to the rules, including changes to the radio ownership rules that have not been substantially reviewed since 1996, have been held up by the 2019 decision of the Court of Appeals for the Third Circuit. That Court reversed the FCC’s 2017 decision which had relaxed many ownership rules, notably including the abolition of the newspaper-broadcast cross-ownership rule and some of the local television ownership restrictions.
The Third Circuit found that the FCC had done an inadequate job of assessing the impact of the 2017 changes (and past ownership changes) on the diversity of broadcast ownership. Until such a historical review could be conducted, all FCC ownership proceedings were put on hold. This hold was finally lifted by the Supreme Court’s decision reversing the Third Circuit and reinstating the 2017 FCC decision. On Friday, the FCC issued an Order that formally reinstated the rules that had been overturned by the Third Circuit and also took some tentative steps toward restarting its regular review of broadcast ownership rules, including the local radio ownership rules that were largely unaffected by the 2017 FCC rule changes. The FCC issued a Public Notice that asked for an update on comments they filed on the 2018 Quadrennial Review of the ownership rules (see our article here) in 2019.
Before getting to the FCC’s request for updated comments on the proposals in its 2018 Quadrennial Review, we should first look at the 2017 rule changes that the FCC reinstated in its Order released on Friday. Perhaps the rule that has received the most publicity has been the abolition of the newspaper-broadcast cross-ownership rule. For well over a decade, the FCC has recognized that rule was obsolete but had trouble abolishing it (see our article here wondering if the rule would outlive the daily newspapers to which it applied). Also abolished was the radio-television cross-ownership rule, which had already been significantly watered down over the years. The rule of eight – requiring that there be 8 independent owners and operators of TV stations in a market before two TV stations could be combined (through ownership or an LMA) – which had prevented the joint operation of TV stations in smaller markets where the economics are such that the survival of many stations depended on that kind of joint operation – was also abolished, as was the rule that attributed for ownership purposes TV stations (meaning they count as if they are commonly owned) that were doing a Joint Sales Agreement to sell more than 15% of the advertising time on another station in their market.
The absolute ban on combining two of the top four rated TV stations in a market was also eliminated – with the FCC going back to the case-by-case analysis adopted in 2017. Finally, the FCC reinstated a presumption that would allow radio stations licensed to communities in “embedded markets” defined by Arbitron to be counted only for ownership purposes in the embedded market in which they are located (and not in the parent market as well) – a little used rule applicable in only a handful of radio markets (see our more detailed explanation of that policy here). The FCC’s Order implementing the Supreme Court decision is technically effective once published in the Federal Register, though such publication should just be a formality.
Not only did the Supreme Court decision undo the repeal of the 2017 rule changes, it also freed the FCC from any additional obligations to assess the impact of past rule changes on ownership diversity. Thus, the FCC can once again take up its required review of the ownership rules. Congress requires the FCC to conduct a Quadrennial Review of the ownership rules to determine if those rules are still necessary in order to serve the public interest. The FCC started such a proceeding in 2018. Comments and replies in that Quadrennial Review were filed in the first half of 2019.
The most significant issue posed by the 2018 Quadrennial Review was whether changes needed to be made to the radio ownership rules, as those rules have not been significantly revised since 1996. The NAB offered a proposal that would end FCC enforcement of local ownership rules outside the Top 75 markets. Other parties were supportive of that proposal, or asked for even greater relief, while others were concerned about such a sweeping relaxation of the rules. While it seemed that a majority of the Commissioners at that time favored significant changes in the radio rules (see, for instance, then-Chairman Pai’s comments just before he left office, about which we wrote here), the Third Circuit decision, and the potential for the FCC to have to do historical research into the effects of past ownership changes on diversity, prevented them from acting.
The Quadrennial Review also asked other questions, including whether the FCC should adopt objective criteria to assess proposed combinations of two of the top 4 TV stations in any market. Also on the agenda for review was whether the dual network rule, which prevents a company owning more than one of the Top 4 television networks, should be abolished.
Now, the new FCC has asked for an updating of the comments filed in 2019. In its Public Notice asking for updated comments, the FCC wants the public to reflect on technological and competitive changes that have occurred since 2019, and to also assess changes in the economy, including those caused by the pandemic, and discuss their impact on the broadcast industry. Interested parties are also to review the record of the 2018 Quadrennial Review to see if other issues have been raised since 2019 and to discuss whether any of those issues warrant further scrutiny by the Commission. As in any ownership proceeding, the FCC asks for studies that support any of the claims being made about the marketplace changes.
With comments due 30 days after the Public Notice is published in the Federal Register, and replies due 60 days after the publication, it may well be sometime in the Fall before the comment cycle for the updated comments runs its course. Don’t look for any FCC action until 2022, presumably after a permanent Chair of the FCC is appointed and the vacant FCC seat is filled. Many changes can occur in that time period – so be watching for developments in the coming months.
David Oxenford is MAB’s Washington Legal Counsel and provides members with answers to their legal questions with the MAB Legal Hotline. Access information here. (Members only access).
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