(By John Garziglia) Every four years, the FCC is required by law to review its ownership rules and determine whether the limitations are “necessary in the public interest as a result of competition” and to “repeal or modify any…no longer in the public interest.”
The FCC finally released the results of its 2010 and 2014 Quadrennial Reviews in a 100-plus page opus titled “Second Report and Order.” Warning: there are few rule changes.
As previously noted in “Court Chides FCC For Not Doing Its Job,” the U.S. Court of Appeals in its ownership decision known as Prometheus III, considered throwing out virtually all of the FCC’s ownership limitations if the FCC did not adequately justify a retention of the rules. The FCC in this decision came up with very few new arguments in favor of keeping intact most ownership limitations. Therefore, this FCC decision may face an uncertain future in court.
Rather than listing all of the ownership rules that the FCC decided to keep in place, let’s take a look at the several areas in which the FCC’s decision does change radio ownership rules and policies.
One of the radio issues before the FCC was embedded Nielsen radio markets. For a simple embedded market example, imagine a large circle (the major market) with two non-overlapping smaller circles (suburban markets) at opposite sides inside that large circle. Broadcasters asked the FCC to regard stations in different non-overlapping embedded markets as being in discrete markets, and not to be counted as being in the larger market. The FCC refused to adopt this requested embedded market change.
The FCC did agree, however, to consider market-specific waivers if Nielsen listings in a parent market “do not accurately reflect competition by embedded market stations and thus should not be ‘counted’ for multiple ownership purposes.” This is a small victory for those broadcast groups who have acquired stations based upon serving suburban markets rather than the larger major market. While the FCC offers absolutely no guidance on how it intends to apply its waiver criteria, this slight concession to the realities of embedded markets may give some groups an opportunity for additional acquisitions.
Another change to the radio ownership rules is exempting community of license changes within a metro area from possible divestitures. There are broadcasters who now have grandfathered over-ownership-limit groups, either as a result of acquisitions under the original FCC contour-overlap methodology prior to the switch to Nielsen (then Arbitron) market definitions, or as a result of a later market-size reduction. In such grandfathered over-limit situations, previous FCC policy would not have allowed an “intra-metro” community of license change but now does.
In the Puerto Rico Nielsen market, the FCC has regularly waived its methodology of counting stations under the Nielsen definition in favor of using the contour-overlap methodology due to the mountainous terrain, the large number of stations and station owners, and the presence of eight metropolitan statistical areas. The FCC now officially adopts the contour-overlap methodology for calculating radio ownership limits in Puerto Rico.
Finally, in a change that may have ramifications for a broadcaster with a soon-to-expire construction permit for either new facilities or for a modification of facilities, the FCC has reinstituted its previous “eligible entity” policy that enables an 18-month extension on an expiring construction permit, provided the station is sold to an entity that meets the SBA’s definition of a “small business” with no more than $38.5 million in annual revenue.
For such eligible entities, the Commission also reinstates a relaxed equity/debt-plus-attribution standard to allow same-market investors with other media interests to have a greater non-attributable interest; the distress sale of a station in a license revocation hearing; the extension of divestiture deadlines in qualifying mergers; and a one-year time period of over-limit ownership in the sale of grandfathered radio station combinations. None of these changes are of general applicability. But, there will be broadcasters that can take advantage, assuming that a court finds that the FCC has now sufficiently justified these eligible entity policies and does not once again strike them down — something that is far from certain.
If nothing else, the FCC can now rest knowing that it has completed its promised 2010 and 2014 ownership reviews. The decision was strictly along party lines with the two Republican appointees authoring dissents well worth reading. Commissioner Pai hopes “that the court that reviews this sad and total abdication of the administrative function finds, once and for all, that our media ownership rules can no longer stay stuck in the 1970s [as they are] as timely as ‘rabbit ears’… .” Commissioner O’Rielly laments that “rarely have I seen a proceeding take so long and a document say so much in order to accomplish nothing of value.”
For radio broadcasters, while there are few rule changes, there will be some broadcasters holding expiring construction permits, or located in an embedded market or in Puerto Rico, or that have grandfathered ownership combinations, who will be able to take advantage of the scant rule changes. Then, possibly by the time a court has completed its review of this most recent FCC ownership decision, the required 2018 Quadrennial Review will commence, and the FCC can once again go through the exercise of determining if the existing ownership rules “are necessary in the public interest as a result of competition.”
John F. Garziglia is a Communications Law Attorney with Womble Carlyle Sandridge & Rice in Washington, DC and can be reached at (202) 857-4455. or [email protected]