FCC Releases Proposed Order to Modify Media Ownership Rules

As expected, FCC Chairman Ajit Pai yesterday released his proposed Order modifying the FCC's media ownership rules. Consistent with what he announced at an Oct. 25 House Energy and Commerce Committee FCC Oversight Hearing, the Order, if adopted, will allow nearly unrestricted television duopolies in almost every market, eliminate radio/TV cross-ownership restrictions, and abolish the Commission's long-standing prohibition on newspaper/broadcast cross-ownership.

Assuming the Chairman is able to get his fellow Republican commissioners to agree to the item (it being highly unlikely his Democratic colleagues will concur), it should be approved at the Commission's scheduled Nov. 16 meeting.

We will have more details as we further analyze the proposal and the rules that are ultimately adopted. However, below is a quick run-down of the major policy changes presented in the draft Order:

• Elimination of the newspaper/broadcast cross-ownership rule, based on findings that the drastic changes in the media landscape since 1975 make the rule unnecessary to protect viewpoint diversity, and that the rule instead is potentially harmful to localism.
• Elimination of the radio/television cross-ownership rule, in favor of relying on the separate local radio and television ownership rules. The Order finds that the proliferation of new sources contributing to viewpoint diversity, as well as the decreasing contribution of radio stations to such diversity, have made the rule unnecessary to protect viewpoint diversity.

• Elimination of the "eight voices" test currently used to evaluate proposed television duopolies, meaning duopolies would now be allowed in markets of all sizes. The draft Order explains that the FCC finds no evidence justifying a decision that eight voices are necessary to protect diversity, localism, or competition, and concludes that elimination of the test could help local stations better serve their communities by taking advantage of the efficiencies afforded by combining operations.
• Modification of the "top-4" restriction on television duopolies, which has served to prevent any ownership or attribution combinations involving two of the four most highly-rated stations (generally the ABC, NBC, CBS, and Fox affiliates) in a market. Pursuant to the proposed Order, the Commission would allow applicants to demonstrate for any particular combination that the public interest would be better served by allowing the combination of two top-four stations. Among the information, the Commission would consider in making such a determination: the stations' ratings and revenue shares in the market (including advertising and retransmission consent fees), market characteristics including major competitors outside the top-4, and likely effects on programming.
• Elimination of the policy that television joint sales agreements (JSA) are attributable, based largely on a finding that there was no evidence in the record (now or in 2014) showing that JSAs allow one station to exert undue influence over the second station.
• Establishment of an incubator program to encourage greater diversity in media ownership by granting ownership waivers to applicants who establish programs to enhance ownership by new and diverse entrants. Unable to find evidence in the record to support adoption of any specific program, the draft Order would include a Notice of Proposed Rulemaking requesting comment on how to design and implement such an incubator program.

Importantly, because there were still petitions for reconsideration of previous Chairman Wheeler's 2016 ownership Order, Chairman Pai's current proposal is for an Order on Reconsideration, rather than a Notice of Proposed Rulemaking.

As a result, if adopted at the November meeting, most of these rule changes would go into effect, absent court intervention, as soon as they are published in the Federal Register. Changes implicating the Paperwork Reduction Act (including the changes allowing parties to request approval of combinations of top-4 stations) will require further approval from OMB, but will likewise go into effect upon such approval. Thus, there will be no further official opportunity for interested parties to weigh in on the changes at the FCC (except for the incubator program, where the Commission is seeking comment in a new docket on how to structure such a program).

The proposed Order will undoubtedly be controversial, and numerous voices will come out in opposition to, and in favor of, the proposals in the coming weeks. Even if adopted in November, it is also very likely that the Order will be appealed in court. Any such appeal will likely also include a request to stay the effectiveness of the Order until the appeal is resolved. As was the case with the reinstatement of the UHF discount, courts are generally reluctant to grant a stay. If the rules are stayed, however, it will likely be a very long time before they go into effect if they ever do. As readers may recall, the last major overhaul of the ownership rules, attempted under Chairman Michael Powell in 2003, was appealed to the Third Circuit, stayed, and ultimately overturned.

Whether or not the Order is adopted in November, and allowed to promptly go into effect, it is probably safe to say that the proceeding still has a long way to go before it is finally resolved. For rules that have, in some cases, been in effect since the 1970s, however, a little more delay seems par for the course.