FCC OKAYS OWNERSHIP RULES ON PARTY LINES, AS EXPECTED

The special meeting itself drew the largest crowd of any in recent years, with standing-room only amid heavy security. Although Commission staff had expected hundreds, if not thousands of protesters, only about 50 actually marched outside the building. Among them were representatives of Common Cause, the Black Entertainment & Telecom Assn. (BETA) and others. Some members of a group called CodePink were in the meeting room and stood up as Powell called for a vote. They began singing loudly, interrupting the ayes and nays. “Mass deregulation of mass communication is the end of democracy,” they sang as they were escorted out by police and security guards. During the meeting, they had applauded Copps and Adelstein several times. The meeting also drew the Rev. Jesse Jackson, who later said the FCC was “wreaking havoc on our democracy.”

Powell described the work of the FCC Media Bureau in writing a proposal -- which was adopted with few significant changes -- as more akin to delicate surgery than the bomb described by Copps and Adelstein. Powell said that keeping the rules wasn’t an option, since doing so would result in the courts’ enforcing “a swift death” for them, having decided that, without some justification from the FCC, the rules should be swept away. “I am confident and proud of the job we have done. I believe that our actions will advance our diversity and localism goals and maintain a vigorously competitive environment,” Powell said. All along, he has maintained that the rules, which hadn’t been revised in 40 years, had to take into account new technology that provided viewers with hundreds of channels, 24-hour-a-day news and a vast Internet, none of which were in existence when the rules were adopted.

But although the Republicans won, it was the Democrats who took up much of the floor time during the meeting, essentially saying they would not go quietly. Of the 750,000 or so public comments sent to the FCC, 99.9% were against deregulation of the industry, Adelstein and Copps said. Copps had held a series of public forums around the country to hear from members of the public on the issue. He said he dissented from the majority because, with this decision, the FCC “empowers America’s new media elite with unacceptable levels of influence over the media on which our society and democracy so heavily depend.” The Commission, he said, had given a few corporations “gatekeeper control” over news and information and “veto power over the majority of what we and our families watch, hear and read.”

Copps called the Commission’s decision-making process “deeply flawed” for not having solicited more public input. The majority, he said, was subordinating diversity and localism to competition policy. He said the majority had dismissed what he saw as a correlation between increased concentration and an increase in indecency over the airwaves. Copps called on Americans to “reclaim their airwaves” and said the decision “awoke a sleeping giant” in the form of public anger.

Abernathy pooh-poohed the idea that the decision would allow some “mythical media monopoly” to try to control how people thought, saying the reality was that the order would ensure that most markets had 4-6 independent broadcasters, plus hundreds of cable channels and unlimited Internet voices. The new rules, she said, were grounded “in actual evidence of harm, as required by the courts, not in merely hypothetical fears.” She argued that degradation of broadcast content didn’t justify manipulation of consumer choice and that “degradation” was an elitist way of saying programming one didn’t like. “I refuse to pour one ounce of cement to support a structure that dictates to the American people what they should watch, listen to or think,” she said.

Adelstein, the newest member of the Commission, had the lengthiest and perhaps the most impassioned speech, saying, among other things, that the order “simply makes it easier for existing media giants to gobble up more outlets” and “shatters most of the last vestiges of consumer protections.” The decision, he said, has left the FCC as a toothless tiger. “This is a sad day for me, and I think for the country. I'm afraid a dark storm cloud is now looming over the future of the American media,” he said. Adelstein also said that in radio, provisions meant to help minorities and women buy grandfathered groups of radio clusters would find it more and more difficult to do so in concentrated markets.

Copps and Adelstein were particularly critical of the majority’s decision to retain the 50% UHF discount. They described the discount as an unnecessary anachronism, given that most people got their TV from cable or satellite. They wondered why companies received a 50% discount for the stations when the FCC was considering national ownership, but the stations counted as full voices in an analysis of cross- ownership and local TV rules.

As we reported (CD June 2 p1), the Commission increased the national ownership cap to 45% from 35% audience reach, eased the newspaper-TV cross-ownership ban, changed the radio market definition from a contour method to Arbitron to further restrict ownership in some markets and retained a ban on mergers among any of the top 4 broadcast networks. The new local TV rules stipulate that, in markets with 5 or more TV stations, a company may own 2 stations, but only one of those can be among the top 4 in ratings. In markets with 18 or more TV stations, a company can own 3 TV stations, but only one can be among the top 4. In deciding how many stations count, the FCC revised its rules to include noncommercial stations. The agency also adopted a waiver process for markets with 11 or fewer TV stations in which 2 of the top 4 stations wanted to merge. Media Bureau Chief Kenneth Ferree later said that was a possibility in small markets where a station or stations were considered to be failing. Those situations will be evaluated on a case-by- case basis.

The agency replaced both the newspaper-broadcast and radio-TV cross-ownership rules with one new rule. In markets with 3 or fewer TV stations, no cross-ownership is permitted. A company can get a waiver if it can show that the TV station doesn’t serve the area served by the cross-owned property. In markets with 4 to 8 TV stations, combinations are limited to one of 3 scenarios: (1) A daily newspaper, 1 TV station, and up to half of the radio station limit for that market, or (2) A daily newspaper and up to the radio station limit for that market, or (3) Two TV stations if permissible in that market, and up to the radio station limit, but daily newspapers. In markets with 9 or more TV stations, the FCC eliminated the newspaper-broadcast cross-ownership ban and the TV-radio cross-ownership ban.

In changing local radio, the Commission decided that, in markets with 45 or more stations, a company could own 8 stations, only 5 of which could be in one class, AM or FM. In markets with 30-44 stations, a company could own 7 stations, only 4 of them in one class. In markets with 15-29 radio stations, a company could own 6 stations, only 4 of them in one class. And in markets with 14 or fewer stations, a company could own 5, only 3 of them in one class. The FCC acknowledged that the new rules could result in a number of companies’ being over the limit. It grandfathered owners of those clusters but generally prohibited the sale of above-cap clusters. The Commission made a limited exception to allow sales of grandfathered combinations to small businesses.

The FCC also released the details of its Diversity Index (DI), which measures the availability of outlets of various types and assigns a weight to each type, be it radio, newspaper or TV, etc., based on a value to consumers. It was modeled on the Herfindahl-Hirschmann Index (HHI) used in antitrust analysis. Both HHI and DI are derived by adding together the sum of squared market shares of competitors in each market. Different types of media are assigned weights based on Nielsen’s nationwide survey of 3,136 people who were asked what sources they used for local news and current affairs. Adelstein called the DI “a noble effort that tragically degenerated into an ill-conceived rote formula that even Merlin couldn’t decipher. The Index is seemingly nothing more than economic jujitsu, an ornate castle built upon a foundation of sand at the ocean’s edge.” Ferree stressed that it was merely a tool to assist in decisionmaking, not the foundation for decisions.

Several interest groups said they were expecting a “race to the court house” in search of an appeals panel they considered most favorable. This has happened several times in the past. When multiple petitions for review are filed in various appeals courts, a “random selection method” generally is used by the Judicial Conference to combine all the petitions in one court. All parties have the option of going directly to court, bypassing petitions for reconsideration at the Commission.

The deadline for filing a notice of appeal in an appeals court outside the D.C. Circuit is 10 days after the FCC order is printed in the Federal Register, with the actual appeal due in 60 days. Parties have 30 days to file for reconsideration at the FCC. When petitions for reconsideration are filed, the FCC typically asks the court to stay any judicial proceedings until the agency acts. Both have the authority to put any new rules on hold until any judicial proceedings have been decided.

In a legal memo to broadcasters on their options, it pointed out that a petition for reconsideration gave the Commission the opportunity to “shore up its decision, making the decision more difficult to overturn in court.” The memo concluded that broadcasters’ “chances of drawing a sympathetic panel might increase” if an appeal were filed outside the D.C. Circuit -- such as the 10th (Colo., Kan., Okla., N.M., Wyo., Utah) which includes many small-market TV stations.

The FCC established processing guidelines to govern pending and new applications for TV and radio stations until 30 days after the final order is published in the Federal Register. During the transition period, the Commission put a freeze on the filing of all radio and TV transfer of control and assignment applications that required the use of certain FCC forms, which are to be revised. Once the order is in effect, companies can file new applications if they are in compliance with the new rules or can show a waiver is warranted. Companies with pending applications can amend those applications by showing they're in compliance with the new rules or submitting a request for a waiver. Those amendments can be filed once the order is published. Applications that still are pending when the new rules become effective will be processed under the new rules. Pending petitions to deny and informal objections submitted prior to the adoption of the order and that raise issues unrelated to competition will be addressed when the Commission acts on the applications. Such petitions submitted before the adoption date and contest applications solely on competition grounds related to the interim policy will be dismissed as moot.