(By Bob Silverman and Gracie Kreth) In the 9-0 ruling that many broadcast interests have been awaiting for 18 years, the Supreme Court affirmed a 2017 FCC decision to relax its media ownership rules as part of the agency’s Congressionally-mandated Quadrennial Review to decide every four years whether any Commission rules are obsolete and no longer in the public interest.
Companies such as News Corp., Sinclair Broadcast Group Inc., Fox Corp. and Nexstar Media Group Inc. had been advocating for the FCC to relax its media ownership rules. Led by former Chairman Ajit Pai, the FCC repealed its newspaper-broadcast cross-ownership rule and radio-television cross-ownership rule and modified its local television ownership rule to eliminate the “eight-voices” test for mergers.
Those rules, adopted in 2002 and remaining largely unchanged ever since, were aimed at promoting competition, localism and diversity. Problematically, however, the FCC never collected solid data to justify the effectiveness of those rules, particularly pertaining to minority and female ownership. Based on the limited data it did have, the FCC decided that repealing its media ownership regulations would not diminish competition, diversity of viewpoint or localism, especially given the rise in internet and cable.
Public interest groups including petitioner Prometheus Radio Project, who have opposed consolidation of the media market, argued that the FCC’s decisions to eliminate and modify its rules was arbitrary and capricious because the FCC relied on flawed data, the Supreme Court disagreed. “Prometheus insists that the FCC’s numerical comparison was overly simplistic and that the data sets were materially incomplete,” wrote Justice Brett Kavanaugh on behalf of the court. “But the FCC acknowledged the gaps in the data. And despite repeatedly asking for data on the issue, the Commission received no other data on minority ownership and no data at all on female ownership levels.” The high court essentially was satisfied that the Commission reasonably relied on the data that it had at the time of the Quadrennial Review, despite characterizing some of the data as a “sparse record on minority and female ownership.”
Acting Chairwoman Jessica Rosenworcel, who in 2017 opposed striking the media ownership rules, expressed her disappointment by the decision in a brief statement. Rosenworcel stated that “the values that have long upheld our media policies—competition, localism, and diversity—remain strong” and she is “committed to ensuring that these principles guide this agency as we move forward.” It is unclear exactly what moving forward may mean.
Given the Supreme Court’s unified deference toward the agency scrapping the old rules, however, it is clear that any steps the agency may wish to take to restore or adopt new media ownership restrictions will need to be driven by a more thorough data collection.
One possible first step could be soliciting public comment specifically on how future media consolidation would affect female and/or minority ownership levels, which could get the ball rolling on collecting data until President Joe Biden installs a new Commission chair, giving the agency a 3-2 Democratic majority.
Until then, the floodgates allowing further media consolidation by Sinclair, Nexstar, and others, remain wide open.
Bob Silverman is a communications attorney at Womble Bond Dickinson and can be reached at (202) 857-4532 or [email protected].
“A broadcast operator is supposed to run a fiscally sound property as a condition of its license.”
Really? Where does it say that? I’m not aware that there is such a condition attached to holding a license. If there was, the FCC would be justified in canceling the licenses of several current licensees. They haven’t done that. In fact, the FCC has approved iHeart and Cumulus to take on foreign investors because they say the investment would help them meet the terms of their bankruptcy and pay their creditors.
Having said that, it’s possible to make such a stipulation part of any future purchase or expansion. That wasn’t part of this particular rulemaking. The TV companies identified in the above article have all operated properly. None of them have filed for bankruptcy, so why should Fox or Nexstar or Sinclair be penalized because of iHeart or Cumulus? In addition we all know that newspapers are struggling financially, and quite a few would benefit financially by diversifying their holdings to include local broadcast stations. So why should that be prevented?
I testified at an FCC hearing against further consolidation of ownership for an entirely different reason. As an agency representing smaller clients, I cited practices employed by large consolidated groups that prevented small, local advertisers from gaining access to their local stations. To wit, for example, not allowing advertisers to buy off-peak only ad schedules they could afford. We typically brought clients to radio this way and then expanded into prime dayparts when their campaigns succeeded and their budgets increased. Both iheart (then Clear Channel) and Adacy (then Entercom) have engaged in these practices. We also demonstrated the difficulty of soliciting competing proposals when one station group owned the top 5 rated stations in our desired demo in one market. My final argument: why give large operators the right to buy and operate more stations when they have mismanaged their funds, declared bankruptcy and not paid their creditors? A broadcast operator is supposed to run a fiscally sound property as a condition of its license.