Full story: http://archives.seattletimes.nwsource.com/cgi-bin/texis.cgi/web/vortex/display?slug=media25&date=20040625
By Los Angeles Times and Seattle Times staff
WASHINGTON — In a major setback to broadcast companies and the government regulators who oversee them, a U.S. appeals court yesterday largely barred the Federal Communications Commission's bid to relax media-ownership rules.
The 3rd U.S. Circuit Court of Appeals in Philadelphia blocked implementation of FCC regulations that would have allowed companies to own more radio and television stations in the same market, and directed the agency to rewrite the rules.
"The commission falls short of its obligation to justify its decisions to retain, repeal or modify its media ownership regulations with reasoned analysis," the court said in a 218-page opinion approved by the panel in a 2-1 vote. The decision was a victory for public-interest groups and consumers who flooded the FCC with more than 2 million letters, e-mails and faxes criticizing the regulations.
They claimed the changes in ownership limits would lead to further media consolidation — and a loss of distinct voices.
The decision also was a defeat for FCC Chairman Michael Powell, who had championed the rules governing the ownership of newspapers, radio and television stations, only to see them come under relentless attack from Congress. The Senate this week took steps to unravel the ownership rules, passing a measure to block them for one year.
The FCC and the Bush administration now must decide whether to appeal and risk further public ire or undertake a lengthy rewrite of the rules that could drag well past the November elections, risking the possibility that the process could be commandeered by a new administration.
Powell called the court's action "deeply troubling" and said it would throw the media industry into chaos as it seeks to compete in an environment that now includes the Internet, as well as cable and satellite television and radio.
"This has created a clouded and confused state of media law," Powell said.
Meanwhile, public-interest leaders who forged an unusual coalition with liberal and conservative groups alike to battle the rules, were jubilant.
"I'm elated," said Seattle Times Publisher Frank Blethen, a vocal opponent of relaxing ownership rules. "But I'm more elated by the fact that it didn't go the other direction."
Loosening controls on concentration would have produced a "feeding frenzy" of large media companies buying, selling and swapping television, radio and newspaper properties "with no concern to the employees or journalism," Blethen said. "And the public would have been the big loser."
The court's ruling appeared to leave open the prospect that the rules still could change if the FCC revises its arguments. But Blethen said he thought greater awareness of the issue among the public and in Congress might prompt the FCC to ease off, especially ahead of the election.
"I can't imagine the White House wants this to become a national issue when there's no way they'll get the public on their side," he said.
There also was praise on Capitol Hill.
Sen. Olympia Snowe, R-Maine, said the FCC "did not have sufficient basis for rewriting those rules that prevent our media outlets from falling under the control of a few large corporations."
Rep. John Dingell, D-Mich., top Democrat on the House Energy and Commerce Committee, said in a statement, "The burden is now squarely on the FCC to do what it should have done in the first place — put forth a set of judicially sustainable rules that will ensure a diversity of voices in the media marketplace and will protect our democracy from further unwarranted media consolidation."
The media ownership rules, adopted in a 3-2 vote along party lines in June of last year, lifted a 1975 ban on owning both a newspaper and a television or radio station in the same town. The new rules allow a company to own two TV stations in more than 90 percent of local markets and up to three stations in the biggest markets such as Los Angeles and New York.
The court's decision effectively rolls back the station limits to 1975 levels, when a company could own a maximum of two stations if there were eight other independent TV stations in the market. However, the FCC has granted a number of waivers that have allowed companies to own more than two stations. Those waivers likely will stand for now. It is unclear whether the FCC can revoke those waivers.
The court was less critical of two other media ownership rules: The court said the FCC has the authority to redefine local radio markets to allow greater ownership and also has the power to lift a ban on newspaper-broadcast cross ownership. But the court said the FCC would have to provide better justification for the rules before implementing them.
In doing so, the court criticized an FCC "market diversity" formula that provided justification for the cross ownership and radio-market rules. The formula was set up by the agency to gauge whether a media market had enough different news outlets to permit consolidation.
The court said the formula gave too much weight to Web sites and small television stations and directed the FCC to come up with better analysis before the rules are implemented.
The court also did not address a provision in the ownership rules that would allow broadcasters to vastly increase their size by owning stations reaching 45 percent of the nation's households, up from the current 35 percent. The court said Congress had made the rule "moot" this year by voting to set its own limit of 39 percent.
Seattle Times business reporter Alwyn Scott contributed to this report.