FERREE SEES ISSUES THAT COULD INTEREST THE SUPREME COURT

Ferree said he was somewhat surprised by the court’s decision. “It’s stunning the extent to which the court did not defer to us” as the expert agency, Ferree said. Among the potential issues for a Supreme Court appeal are inconsistencies between the 3rd Circuit decision and a ruling by the D.C. Circuit on media ownership with regard to part of the Communications Act that calls on the FCC to justify retention of its media ownership rules every 2 years (now 4 years) or discard them. The 3rd Circuit said there was no deregulatory presumption in that section, 202-H, but Ferree said he disagrees. There is also the question of Chevron deference normally given by courts to the expert agency. Ferree said he found it “stunning as a lawyer” that the court didn’t rely on the FCC’s judgment.

Another issue that could bring the case to the Supreme Court, Ferree said, is that the FCC lacks the normal recourse of en banc review by the 3rd Circuit. That’s because so many judges from the court recused themselves from the case that there aren’t enough available to sit en banc. The court didn’t say why the judges had recused themselves, though often judges do that if they hold a financial stake in a company that might be affected by a decision. Also, a nearly 100-page dissent by 3rd Circuit Chief Judge Anthony Scirica could signal that it’s “an important case and worthy of some review,” Ferree said.

Ferree said there were other options besides a Supreme Court appeal, including policy changes at the FCC. Attorneys at the meeting were particularly concerned about the court’s stay on the FCC’s ownership rules, despite agreement between the court and agency in some instances, like the newspaper cross-ownership ban. One possibility is that the FCC could ask the court to lift the stay in those areas, Ferree said, though he added that “there are some reasons we may not want to do that.” For media companies that wish to do transactions meantime, the FCC will consider waiver requests, he said.

Several attorneys asked about the possibility that the agency would drop “bright line” ownership caps altogether and consider deals on case by case. “It’s certainly more precise to look at every case on the merits,” he said, but conducting a diversity and competition review for every case would over- tax the agency’s resources. “That’s no way to run an agency,” he said.

Ferree was particularly miffed by the court’s discussion in its ruling on the so-called “diversity index” devised by the FCC to give a broad gauge of diversity in a given market. “The judges came back and said, ‘Well, you know, you should consider market shares.’ Well, you know, gee, thanks, we only thought about that for 6 months and had a team of PhD economists trying to work out what would happen with market shares.” He said the court misconstrued the diversity index, believing the agency had heavily relied on it when it was actually used as one tool. In the end, Ferree said, the index “may well be unfixable.” Ferree said it was possible that the agency would make decisions about each rule separately, rather than as a package. However, Ferree said he preferred considering them together in the interest of a coherent framework.

Asked whether the agency might be gun-shy on a decision on pending cable horizontal ownership rules after the court decision, Ferree said the FCC could divide the item into 2 pieces. In that case, the Commission could decide some of the issues and then put out a further notice on issues where the record is thin, he said.

Earlier in the day, Comr. Copps told reporters that he and Comr. Adelstein had submitted a plan to Chmn. Powell on how to proceed. Their plan calls for hearings and town meetings on the media ownership rules within 30 days. “Number one is to hit the road, get out of D.C. and talk about what the reality is in the media markets,” Copps said. Powell’s office, however, wasn’t aware of any plan, said Powell aide Jonathan Cody. Adelstein has suggested the Commission seek public comment on the diversity index (CD June 28, p3). Asked about those ideas, Ferree said he “follows orders” from the commissioners but said, “That’s not the kind of help we need.” Hearings and comments in which most people say they're against media consolidation don’t help the agency justify rules restricting ownership, Ferree said.

Copps, who said the rules were his “highest priority,” also proposed the FCC conduct independent research studies on the impact of media consolidation on minority communities, small independent broadcasters and advertisers. “We didn’t raise all the questions that should have been raised,” Copps said.

The FCC must make it clear that the previous rules will apply and that the Commission will ensure that mergers serve the public interest, he said. Copps said he would like to see the FCC reinstate its flagging policy. Prior to the June 2003 decision, the Commission would flag, and note in the public notice seeking comment, any radio station combination that would provide one company with 50%, or 2 companies with 70%, of the advertising revenue in a market. “The bureau is now looking at this again and I would like to see us go back to that,” Copps said. Since the court’s stay of the rules, the FCC has been conducting informal radio flags, Cody said.

Copps knocked a suggestion by Powell to tackle the rules separately, not decide them as a package. “I thought his initial judgment to try to do them all together was probably pretty good. These are all interrelated and it’s very hard to separate one rule out from another because they all interact with each other,” he said.

Copps criticized “big media” for not providing more coverage of the issue. He said he didn’t understand why “this major court decision” and a topic that Congress has continuously dealt with was not receiving more play. “You have to ask yourself, what is the agenda here?” he asked.