(By John Garziglia) “Here we are again” are the first words in the U.S. Court of Appeals for the 3rd Circuit’s 4th Prometheus Radio Project v. FCC decision. This decision is one more chapter in a “saga” (the Court’s word) that now extends over 15 years.
In what will now be known as Prometheus IV, the 3rd Circuit in its decision struck down the FCC’s 2017: elimination of the newspaper/broadcast and television/radio cross-ownership rules, rescission of the television “eight-voices” test for mergers, and establishment of a broadcast station incubator program allowing for an increased concentration of ownership in exchange for fostering third-party ownership diversity. The court, in striking down these rule changes, held that the FCC had an obligation “to adequately consider the effect its 2017 rules would have on ownership of broadcast media by women and racial minorities.”
The court was harsh, noting that the FCC was required by previous court decisions to consider the effect of any rule changes on female as well as minority ownership. The Court admonished that “the Commission cited no evidence whatsoever” on the effect of the changed rules on female ownership. With respect to broadcast station ownership by racial minorities, the court stated that “the FCC’s analysis is so insubstantial that it would receive a failing grade in any introductory statistics class.”
FCC Chairman Pai in a statement promised to “seek further review” of the decision, castigating the Court “for the last fifteen years … blocking any attempt to modernize [media ownership] regulations to match the obvious realities of the modern media marketplace.
The FCC had ample warning of the basis upon which this Court would rule. Indeed, the court has criticized the FCC in the past for a lack of data supporting its ownership regulation and deregulation decisions. The Court, however, may be asking the FCC to show substantive data on something that may impossible to prove – that the FCC’s broadcast station ownership rules, whether regulatory or deregulatory, have any effect whatsoever upon minority and female broadcast station ownership.
The question for our radio industry is the extent to which this court decision will impact and delay the current 2018 Quadrennial Review. The 2018 Quadrennial Review has the potential to dramatically change radio ownership restrictions. One of the changes being considered by the FCC is the proposal submitted by the National Association of Broadcasters to eliminate radio ownership restrictions in all markets except for the top 75, allow for the ownership of up to eight FM radio stations in each of the top 75 radio markets (with two additional stations allowed if there is participation in the Commission’s incubator program), and allow the unlimited ownership of AM stations in any market. If the FCC is unable to show substantive data on changes to minority and female ownership in support its 2017 rule relaxations, it is equally unlikely to currently have such data to support any relaxation of the radio ownership rules.
Assuming the FCC does appeal this Prometheus decision, many more months will elapse before any subsequent decision is issued. Then, if the FCC does not prevail, it will need to do the labor of justifying its 2017 deregulation which will likely further delay any radio deregulation actions.
As long as the FCC’s broadcast station ownership regulations remain subject to the review of the 3rd Circuit, the FCC “will no longer get by with the bad data and shoddy analysis,” according to the Statement of Commissioner Geoffrey Starks released in response to the Prometheus decision. Chairman Pai, on the other hand, believes that “there is no evidence or reasoning – newspapers going out of business, broadcast radio struggling, broadcast TV facing stiffer competition than ever – that will persuade [the 3rd Circuit] to change their minds.”
The Prometheus decision concludes that “the Commission must provide a substantial basis and justification for its actions whatever it ultimately decides.” This is a standard that, at least according to the 3rd Circuit, the Commission has failed to fulfill for the past 15 years.
John Garziglia is a communications attorney at Womble Bond Dickinson and can be reached at (202) 857-4455 or [email protected]
“Logically, the only practical way to increase minority/female diversity is simply to increase the numbers of stations available for sale. ”
That’s wrong. Right now, there are hundreds of radio stations available for purchase. Instead of women or minorities buying them, they are being bought by EMF. The fact is that women and minorities haven’t taken the opportunities to buy broadcast stations. You can lead a horse to water but you can’t make them drink. The group that challenged these new rules is the same group that got Congress to create LPFM stations. How many women and minorities started LPFM stations? None. They’re all religious stations. You can’t regulate women and minorities to buy something they don’t want to buy.
Also a very valid point. If you could invest say–$200K in a franchise restaurant (you could probably get into a Subway for that amount)–or buy a small town FM, or an AM in a larger market for that amount–which would you do?
Logically, the only practical way to increase minority/female diversity is simply to increase the numbers of stations available for sale. Of course, even with more buying opportunities that does not mean we will see increased investment by minority and female owners in what–in many smaller markets–is an overcrowded, dying business. We may see some of this when the I-Heart empire is finally broken up by the debtors/shareholders–there’s no rational reason for that group to hold onto markets like Chillicothe, Ohio or Somerset, Ky. Unfortunately, what the activists really want is to force the large group owners to donate or discount major market properties to their “stakeholders.”
As to newspaper/radio cross ownership–this is for the benefit of the newspaper owners. Witness the recent death of the Youngstown Vindicator..outside of a few major markets most papers are shrinking. But many of you folks in the east think it’s still 1975. And Woodward and Bernstein are in the newsroom, pounding away on IBM Selectrics.