The FCC's New Media Ownership Rules:
Why They Are Likely to Survive Court Challenges

On June 2, 2003, the Federal Communications Commission (FCC) announced its decision to relax media ownership rules. The decision was a close call, the result of a 3-2 vote among the commissioners.

Commentary has focused on three major changes in the rules. First, a single company may now own TV stations reaching, at most, 45 percent of US households. Previously, a single company could own TV stations reaching, at most, 35 percent of U.S. households.

Second, the prior ban against a single company's owning both a broadcast outlet and a newspaper in a given market has been effectively lifted - in all but the smallest markets (those with less than 9 TV stations).

Third, and finally, the rules increase individual companies' ability to own more than one TV station. Duopolies are permitted in markets where there are at least five TV stations. In markets with eighteen or more stations, triopolies may exist- as long as no more than one of the top four stations belongs to a given owner.

The FCC has argued that these more flexible rules will aid the public interest, and serve the agency's own mandate. For instance, in his press statement regarding the new rules, Commissioner Michael Powell defended them as having been designed to "promote the cherished values of diversity [of viewpoint], localism and competition."

But opponents, including the two dissenting Commissioners, argue that the new rules will result in mergers that will leave the largest conglomerates in control of the majority of media. This concentrated ownership, they believe, will lead to Americans receiving less, and more homogenous, news and opinion (especially local coverage).

Legislators and public advocacy groups have already vowed to challenge the new rules in court. Recently, opponents have been successful in challenging FCC orders. However, there is reason to believe they will not succeed here.

A Brief History of Media Regulation

The regulation (and deregulation) of media ownership has a long history in the U.S.. In 1912, passage of the Radio Act prohibited the operation of a radio station without government permission. For a while, the radio industry was allowed to self-regulate, but the attempt was a disaster - resulting in a cacophony of interference over the airwaves, due to "spectrum scarcity," the limited number of viable frequencies over which to broadcast.

Thus, in 1927, with a new Radio Act, government resumed regulation of broadcast media. And in 1934, the Communications Act created the FCC and granted the agency the exclusive power to regulate the broadcast industry, mainly through licensing schemes.

Gradually, the tide turned towards media deregulation. In 1984, the Cable Act lifted local rate regulation. The result was pricier but higher quality cable television. In 1992, a new Cable Act followed, which re-regulated rates, and thus lowered program quality. However, in 1994, the rate controls were eased again.

In 1996, the Telecommunications Act was enacted. It was aimed at increasing competition in local, long distance, and cable TV markets, and some have argued that it was extremely successful in doing so.

Among other measures, the Telecommunications Act repealed cross-ownership rules for telephone/cable, cable/broadcast, and cable/network combinations. It also increased the maximum percentage of U.S. households that a single broadcaster could reach, from 25 to 35 percent. And it required the FCC to review media ownership rules biennially, to determine whether they are "necessary in the public interest as a result of competition."

It was pursuant to this last mandate that the FCC created the new set of media ownership rules that were just announced.

The Test a Court Will Use to Evaluate the New Rules

The value of diversity of viewpoints that Commissioner Powell invoked has long been recognized as important in the First Amendment context, and in the context of broadcast regulation. But, crucially, the Court has not yet forced the FCC to take measures to ensure this kind of diversity. Instead, it has, at times, allowed the FCC to use the diversity of viewpoints as a justification for some of its past regulation decisions when it so chose.

As early as 1944, in Associated Press v. United States, the Supreme Court emphasized the value of diversity of viewpoints in itself - citing the importance of the "widest possible dissemination of information from diverse and antagonistic sources."

And in 1969, in Red Lion Broadcasting Co. v. FCC, the Court embraced diversity of viewpoints in the broadcast context in particular.

More specifically, in Red Lion the Court upheld the FCC's (now defunct) "fairness doctrine," which required TV stations to present both sides of a given issue, despite a First Amendment challenge. However, it grounded the doctrine's constitutionality on the fact of "spectrum scarcity" - now a less urgent problem thanks to consumer access to cable and satellite media. Moreover, it did not hold that the FCC was required to adopt some version of the fairness doctrine; it only held that the FCC had the latitude to do so if it so chose.

Later, in 1978, in National Citizens Committee for Broadcasting v. FCC, the Court affirmed the FCC's decision to bar cross-ownerships of newspapers and broadcast stations in the same locality, and to require certain owners with that combination to divest themselves of either the newspaper or the broadcast station.

Neither the Administrative Procedure Act's ban on "arbitrary and capricious" decisionmaking, nor the First Amendment rights of the media companies, the Court held, barred the FCC from reaching its decision. Rather, the decision was a reasonable means of furthering the FCC's interest in both diversity and competition.

Ironically, the very same logic that persuaded the Court to allow the FCC to impose rules against cross-ownership in NCCB will probably convince the Court to also allow the new relaxation of those rules, as well. Again, the test, in effect, will be reasonableness - and the rules will very probably pass the test.

Why the New Rules Are Likely to Survive Court Challenges

Following NCCB, the Court (or the lower federal courts, if the Court declines review) will ask whether the new rules are a reasonable means of furthering the Commission's stated interests in localism, diversity and competition. It will probably answer yes to this question.

In the past, the Court has recognized that a ban on cross-ownership is one way of attempting to achieve diversity. But it has never said that such a ban is set in stone.

In addition, the Court's past decisions on this point were issued in an era of spectrum scarcity. Particularly since the advent of cable, that era is long gone. In part for this reason, the U.S. Court of Appeals for the District of Columbia Circuit, which reviews FCC actions, recently expressed skepticism about the continuing need for the old regulatory measures, including the cross-ownership bans, in the new media environment.

The D.C. Circuit's pronouncements (and its recent rejections of FCC rules) are likely what motivated Commissioner Powell to predict that "without . . . surgery, the [old] rules would assuredly meet a swift death." In the new era of media abundance, it is regulation, not deregulation, that is most suspect.

For all of these reasons, the Court may also acknowledge that there are other reasonable ways for the FCC to try to attempt to achieve all three of its main goals - and, more generally, to perform its basic task of regulating broadcast in the public interest. And it may well conclude that the new rules permitting media consolidation are one such way.

Accordingly, any claim that the new rules constitute "arbitrary and capricious" decisionmaking in violation of the APA seems likely to fail absent a truly impoverished FCC record. Moreover, First Amendment challenges to the new rules will not be evaluated under the courts' most stringent tests because the rules are not content-based; they apply equally to all companies, no matter what material they seek to broadcast. Because the rules make no distinctions based on political, economic or social views of individual owners, they are likely to pass First Amendment muster.

In the end, only time - and empirical evidence - can show whether the new FCC rules will enhance or stifle the diversity of viewpoints available through the broadcast media. Media consolidation and viewpoint diversification may not be incompatible in a time when networks and other traditional media are increasingly struggling to compete with newer media.

Accordingly, cross-ownership rules which were originally implemented to encourage media competition (by disallowing joint ownership within the same markets) may rightfully be thought too stringent today. After all, today cable, broadcast, and the print press do not operate in the same markets, at least according to the antitrust law.

Affirmation of the new rules may result in temporary monopolies or near-monopolies. Yet in the long run, the new rules may permit companies to compete meaningfully and provide consumers with wider options - an outcome that courts are also likely to see as well within the FCC's "public interest" mandate.