Current Legal Status of the FCC’s Media Ownership Rules
Congressional research reportAug 23, 2010
Ask Donna
What actually matters in this document.
Text
Current Legal Status of the FCC’s Media
Ownership Rules
/name redacted/
Legislative Attorney
August 23, 2010
Congressional Research Service
7-....
www.crs.gov
R41377
CRS Report for Congress
Prepared for Members and Committees of Congress
Current Legal Status of the FCC’s Media Ownership Rules
Summary
The Federal Communications Commission’s (FCC) media ownership regulations place limits on
the number of broadcast radio and television outlets one owner can possess in a given market and
place cross-ownership restrictions on these outlets and on the cross-ownership of broadcast
properties and newspapers. The FCC is under a statutory obligation to review these rules every
four years to determine whether the restrictions on ownership remain necessary in the public
interest as the result of competition. These media ownership regulation reviews have often been
controversial. Since the passage of the Telecommunications Act of 1996, the Commission has had
little success in relaxing its media ownership rules. The results of the FCC’s 2002 review of the
rules was largely invalidated by the Third Circuit Court of Appeals in Prometheus Radio Project
v. FCC and remanded to the FCC for further consideration. The FCC responded by folding the
Third Circuit’s remand order into its 2006 Quadrennial Review of the Media Ownership Rules.
This review sparked its own controversy, as well, and the resulting rule changes have been
appealed to the Third Circuit. In conjunction with this appeal, the FCC has commenced its 2010
Quadrennial Review of its Media Ownership Rules. This report will discuss each of these events
in greater detail.
Congressional Research Service
Current Legal Status of the FCC’s Media Ownership Rules
Contents
Introduction ................................................................................................................................1
2002 Biennial Regulatory Review and Prometheus Decision .......................................................1
Results of the 2002 Biennial Review .....................................................................................1
Prometheus Decision ............................................................................................................2
2006 Quadrennial Regulatory Review .........................................................................................3
2010 Quadrennial Regulatory Review and Current Media Ownership Rules ................................5
Local Television Ownership Limit.........................................................................................6
Local Radio Ownership Rule ................................................................................................6
Newspaper/Broadcast Cross-ownership Rule.........................................................................7
Radio/Television Cross-Ownership Rule ...............................................................................7
Dual Network Rule ...............................................................................................................7
Broader Issues.......................................................................................................................7
Contacts
Author Contact Information ........................................................................................................8
Acknowledgments ......................................................................................................................8
Congressional Research Service
Current Legal Status of the FCC’s Media Ownership Rules
Introduction
The Federal Communications Commission’s (FCC) media ownership regulations (1) place limits
on the number of broadcast radio and television outlets one owner can possess in a given market
and (2) place cross-ownership restrictions on these outlets and on the cross-ownership of
broadcast properties and newspapers. The FCC is under a statutory obligation to review these
rules every four years to determine whether the restrictions on ownership remain necessary in the
public interest as the result of competition.1 These media ownership regulation reviews have often
been controversial. Since the passage of the Telecommunications Act of 1996, the Commission
has had little success in relaxing its media ownership rules. The results of the FCC’s 2002 review
of the rules were largely invalidated by the Third Circuit Court of Appeals in Prometheus Radio
Project v. FCC and remanded to the FCC for further consideration.2 The FCC responded by
folding the Third Circuit’s remand order into its 2006 Quadrennial Review of the Media
Ownership Rules. This review sparked its own controversy, as well, and the resulting rule
changes have been appealed to the Third Circuit. In conjunction with this appeal, the FCC has
commenced its 2010 Quadrennial Review of its Media Ownership Rules. This report will discuss
each of these events in greater detail.
2002 Biennial Regulatory Review and Prometheus
Decision
The Commission initiated its 2002 Biennial Review3 in September of 2002 with a Notice of
Proposed Rulemaking announcing that it would review four of its broadcast ownership rules: the
national audience reach limit, the local television rule, the radio/television cross-ownership (“oneto-a-market”) rule, and the dual network ownership rule.4 The Commission had previously
initiated proceedings regarding the local radio ownership rule and the newspaper/broadcast crossownership rule.5 Those proceedings were incorporated into the Biennial Review.
Results of the 2002 Biennial Review
On June 2, 2003, the Commission adopted a Report and Order modifying its ownership rules. 6 In
the Order, the Commission concluded that “neither an absolute prohibition on common ownership
of daily newspapers and broadcast outlets in the same market (the ‘newspaper/broadcast cross1
Section 202(h) of the Telecommunications Act of 1996, P.L. 104-104.
373 F.3d 372 (3rd Cir. 2004).
3
The Telecommunications Act of 1996 required the FCC to review media ownership rules every two years. P.L. 101104, § 202(h). The Consolidated Appropriations Act of 2004 extended the review cycle to every four years. P.L. 108199, § 629.
4
In the Matter of 2002 Biennial Regulatory Review—Review of the Commission’s Broadcast Ownership Rules and
Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, 17 FCC Rcd 18503 (2002).
5
See 16 FCC Rcd 19861 (2001) and 16 FCC Rcd 17283 (2001).
2
6
In the Matter of 2002 Biennial Regulatory Review, Report and Order and Notice of Proposed Rulemaking, 18 FCC
Rcd 13620 (2003). Hereinafter, cited as Report and Order. For more information on the Commission’s media
ownership rules, see CRS Report RL34416, The FCC’s Broadcast Media Ownership Rules, by (name redacted).
Congressional Research Service
1
Current Legal Status of the FCC’s Media Ownership Rules
ownership rule’) nor a cross-service restriction on common ownership of radio and television
outlets in the same market (the ‘radio-television cross-ownership rule’) [remained] necessary in
the public interest.”7 The Commission found that “the ends sought can be achieved with more
precision and with greater deference to First Amendment interests through [its] modified Cross
Media Limits (‘CML’).”8 The Commission also revised the market definition and the way it
counted stations for purposes of the local radio rule; revised the local television multiple
ownership rule to permit the common ownership of up to three stations in large markets; modified
the national television ownership cap to raise the national audience reach limit to 45%; and
retained the dual network rule.
Prometheus Decision
Following the publication of the Commission’s Order, several organizations filed petitions for
review of the new rules. The Third Circuit Court of Appeals issued its decision in the Prometheus
case, invalidating a substantial portion of the FCC’s order. First the FCC’s decision to raise the
national television ownership cap to 45% was considered moot because Congress had intervened
and set the cap at 39%. Following that holding, a common theme throughout the rest of the Third
Circuit’s decision to remand many of the rules to the FCC was the court’s finding that the FCC
failed to provide adequate reasoned bases for its rule modifications. For example, with respect to
the Commission’s local ownership rules, the court agreed with the Commission’s decision to
modify these rules in many respects. However, the court found fault with the numerical limits set
by the FCC in each of the local ownership rules because the Commission’s assumption that all
types of media outlets make the same contribution to diversity and competition was unjustified.9
The court also determined that the Commission’s decision to repeal the ban on
broadcast/newspaper cross-ownership was justified and supported by evidence in the record and
found that the Commission’s decision to retain some limits on common ownership was
constitutional and not in violation of the Communications Act.10 However, the court found that
the FCC failed to provide reasoned analysis to support the specific limits that it chose with
respect to the new “cross-media” rules, stating that the limits “employ several irrational
assumptions and inconsistencies,” due to what the court found to be questionable methodologies
for measuring diversity.11
The court in Prometheus upheld the restriction on common ownership of the market’s top four
broadcast television stations, but, again, remanded the numerical limits “for the Commission to
harmonize certain inconsistencies and better support its assumptions and rationale.”12 In making
its decision, the court found that the Commission had presented evidence in the record to
adequately support the “top-four restriction,”13 while failing to justify the market share
assumptions used as the basis for the numerical limits. The court stated that “[n]o evidence
supports the Commission’s equal market share assumption, and no reasonable explanation
7
Id at ¶ 2.
373 F.3d 372.
9
Id. at 435.
10
Id. at 397 - 401.
11
Id. at 402.
12
Id. at 412.
13
Id. at 418.
8
Congressional Research Service
2
Current Legal Status of the FCC’s Media Ownership Rules
underlies its decision to disregard actual market share.”14 The court upheld the Commission’s new
definition of local markets with respect to radio finding that the Commission’s decision was “in
the public interest” and that it was a “rational exercise of rulemaking authority.”15 The court also
found that the Commission justified the inclusion of noncommercial stations in the new
definition. However, with respect to the numerical limits retained by the Commission, the court
concluded that while the numerical limits approach was rational and in the public interest, the
Commission failed to support its decision to retain these particular limits with “reasoned
analysis.”16 Because, none of the parties bringing the Prometheus case challenged the retention of
the dual network rule, this was not addressed by the court.
On September 3, 2004, the Third Circuit granted the Commission’s motion requesting a partial
lifting of the stay to allow those parts of the rules approved by the court in its June 24 decision to
go into effect. Specifically, the stay was lifted with respect to the use of Arbitron metro markets to
define local markets; the inclusion of noncommercial stations in determining the size of a market;
the attribution of stations whose advertising is brokered under a Joint Sales Agreement to a
brokering station’s permissible ownership totals; and the imposition of a transfer restriction.
2006 Quadrennial Regulatory Review
On July 24, 2006, the FCC issued a Further Notice of Proposed Rulemaking (FNPR) in the
Broadcast Media Ownership proceedings that had been remanded to the Commission in 2003.17
The FNPR sought comment on new ownership rules that would comport with the Third Circuit’s
decision in Prometheus.18 Specifically, the FCC sought comment suggesting new rules that would
foster “localism;” increase opportunities for ownership among minorities and women; revise the
numerical limits placed on cross ownership of local television stations and local radio stations;
revise the Diversity Index used to calculate the availability of outlets that contribute to diversity
of viewpoints in local media markets; and other suggestions for improvement of existing and
proposed rules.19 The FCC also commissioned multiple studies on media ownership and sought
comment on these studies to determine whether and to what extent to take the studies into account
in the final ownership rules.20
Following the close of all comment and reply comment periods, FCC Chairman Martin proposed
that the review of broadcast ownership rules should conclude by adopting a relaxation of the ban
on newspaper and broadcast cross-ownership.21 The proposal also indicated that no changes
14
Id. at 420.
Id. at 425.
16
Id. at 426.
17
In the Matter of 2006 Quadrennial Regulatory Review - Review of the Commission’s Broadcast Ownership Rules
and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, Further Notice of Proposed
Rulemaking, 21 FCC Rcd 8834 (July 24, 2006).
18
Id.
19
Id. For a thorough discussion of the rules proposed in 2002 and the current state of the FCC’s media ownership rules,
see CRS Report RL34416, The FCC’s Broadcast Media Ownership Rules, by (name redacted).
20
FCC Seeks Comment on Research Studies on Media Ownership, Public Notice, MB Docket No. 06-121 (July 31,
2007), available at http://fjallfoss.fcc.gov/edocs_public/attachmatch/DA-07-3470A1.pdf.
21
Press Release, Federal Communications Commission, Chairman Kevin J. Martin Proposes Revision to
Newspaper/Broadcast Cross-Ownership Rule (November 13, 2007), available at http://hraunfoss.fcc.gov/edocs_public/
attachmatch/DOC-278113A1.pdf.
15
Congressional Research Service
3
Current Legal Status of the FCC’s Media Ownership Rules
would be made in the local television “duopoly” rule, the local radio ownership rule, or the local
radio-television cross-ownership rule already in force.
The FCC adopted a revised version of Chairman Martin’s proposal to ease the ban on
newspaper/broadcast cross-ownership on December 18, 2007.22 The Report and Order in the
proceeding was released on February 4, 2008.23 The new rule established the presumption that
newspaper/radio broadcast station cross-ownership in the top 20 largest DMAs is in the public
interest, and that newspaper/television broadcast station cross-ownership in the top 20 largest
DMAs is in the public interest when the television station is not among the top four ranked
stations in the market and at least eight “major media voices” would remain in the DMA postmerger. 24 For all other DMAs, the new rule establishes the presumption that newspaper/broadcast
station cross-ownership is not in the public interest, except in two circumstances (discussed
below). 25 Applicants attempting to overcome a presumption that the proposed combination is not
in the public interest will have to demonstrate, through clear and convincing evidence, that the
merged entity will increase the diversity of independent news outlets and increase competition
among independent news sources in the relevant market.26 The FCC also has laid out four factors
to help inform its evaluation of these proposed combinations. 27
The new rules identify two circumstances in which the presumption that cross-ownership is not in
the public interest will be reversed. 28 The first circumstance adapts the FCC’s failed or failing
station waivers to newspaper/broadcast combinations.29 Therefore, when either the broadcast
station or the newspaper involved in a proposed combination is “failed” or “failing,” the FCC will
presume that the proposed combination is in the public interest.30 The presumption that a
combination is not in the public interest also will be reversed when the proposed combination will
result in a new source of local news in a market, specifically defined as a combination that would
initiate at least seven hours of new local news programming per week on a broadcast station that
previously has not aired local news. 31 All other cross-ownership rules and restrictions will remain
unchanged. 32
22
Press Release, Federal Communications Commission, FCC Adopts Revision to Newspaper/Broadcast CrossOwnership Rule (December 18, 2007), available at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC278932A1.pdf.
23
In the Matter of 2006 Quadrennial Regulatory Review—Review of the Commission’s Broadcast Ownership Rules
and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996; 2002 Biennial Regulatory
Review—Review of the Commission’s Broadcast Ownership Rules Pursuant to Section 202 of the Telecommunications
Act of 1996; Cross-Ownership of Broadcast Stations and Newspapers; Rules and Policies Concerning Multiple
Ownership of Radio Broadcast Stations in Local Markets; Definition of Radio Markets; Ways to Further Section 257
Mandate to Build on Earlier Studies; Public Interest Obligations of TV Broadcast Licensees, MB Docket No. 06-121,
MB Docket No. 02-227, MM Docket No. 01-235, MM Docket No. 01-317, MM Docket No. 00-244, MB Docket No.
04-228, MM Docket No. 99-360 (Released February 4, 2008), 23 FCC Rcd 2010.
24
Id. at ¶¶ 20, 53-62.
25
Id. at ¶¶ 20, 63-75.
26
Id. at ¶ 68.
27
Id.
28
Id. at ¶ 65.
29
Id. at ¶¶ 65-66.
30
Id.
31
Id. at ¶ 67.
32
Id. at ¶ 1.
Congressional Research Service
4
Current Legal Status of the FCC’s Media Ownership Rules
The FCC also adopted rules in December 2007 to promote diversification of broadcast ownership
in a separate order from the newspaper/broadcast station cross-ownership rule (“Diversity
Order”). The new rules are intended to allow “eligible entities” to more easily access financing
and spectrum by, for example, modifying the distress sale policy to allow a licensee whose
licenses were designated for a revocation hearing to sell its station to an eligible entity prior to the
commencement of the hearing, revising the FCC’s equity/debt plus attribution standard to
facilitate investment in eligible entities, and giving priority to any entity financing an eligible
entity in certain duopoly situations.33 “Eligible entities” are defined as “entities that would qualify
as a small business consistent with Small Business Administration standards, based on
revenue.”34
The Third Circuit lifted its stay against the enforcement of the rules as modified by the 2006
Quadrennial Review on Mach 23, 2010.35 The changes to the newspaper/broadcast crossownership rule and the “Diversity Order” have been challenged by Prometheus Radio in the Third
Circuit Court of Appeals.36 The case has not been set for oral argument yet.
2010 Quadrennial Regulatory Review and Current
Media Ownership Rules
Concomitant with its defense of its previous rulemaking proceedings, the FCC has also launched
its 2010 review of its media ownership rules. On May 25, 2010, the FCC issued a Notice of
Inquiry (NOI) to begin the proceedings.37 The NOI asks a number of fundamental questions about
the nature of the media market of today and how ownership restrictions benefit or detract from
diversity and competition in that market (or those markets, as the definitions may require).
Presumably, after reviewing the comments it receives pursuant to this notice, the Commission
will then issue a notice of proposed rulemaking with more specific proposals for rule revision.
What follows is a description of the current rules governing media ownership, and some of the
questions the FCC has posed related to those rules in the NOI.
33
In the Matter of Promoting Diversification of Ownership in Broadcasting Services, 2006 Quadrennial Regulatory
Review—Review of the Commission’s Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of
the Telecommunications Act of 1996, 2002 Regulatory Review—Review of the Commission’s Broadcast Ownership
Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, Cross-Ownership of
Broadcast Stations and Newspapers, Rules and Policies Concerning Multiple Ownership of Radio Broadcast Stations
in Local Markets, Definition of Radio Markets, Ways to Further Section 257 Mandate to Build on Earlier Studies, MB
Docket No. 07-294, MB Docket No. 06-121, MB Docket No. 02-277, MM docket No. 01-235, MM Docket No. 01317, MM Docket No. 00-244, MB Docket No. 04-228 adopted December 18, 2007, released March 5, 2008.
34
Id.
35
Prometheus v. FCC, Order Nos. 08-3078 et al. (3d Cir. Mar. 23, 2010).
36
Prometheus Radio v. FCC, Brief for FCC and United States on Notices of Appeal and Petitions for Review of Orders
of the Federal Communications Commission, Nos. 08-3078, et al. (3d Cir. Jul 21, 2010).
37
In the Matter of 2010 Quadrennial Regulatory REview – Review of the Commission’s Broadcast Ownership Rules
and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, Notice of Inquiry, MB
Docket No. 09-182 (2010) (“NOI”).
Congressional Research Service
5
Current Legal Status of the FCC’s Media Ownership Rules
Local Television Ownership Limit
Currently, an entity may own two television stations in the same designated market area (DMA)
only if (1) the Grade B contours do not overlap, or (2) at least one of the stations is not ranked in
the top four stations for audience share in that DMA and at least eight independently owned-andoperated commercial or noncommercial full-power broadcast television stations remain after the
merger. 38 The “eight voices” test includes the four major networks in each market, “plus at least
an equal number of independently owned-and-operated broadcast television stations that are not
affiliated with a major network.”39
For this rule the FCC has asked, among other things, whether the eight voices test serves its
purpose of promoting competition and diversity.40 The Commission asks if this rule should be
considered in the context of the larger market for program delivery, including cable, satellite, and
Internet providers, and to what extent the broadcast market should be considered a market of its
own. Lastly, the Commission asks how a modification to this rule might affect the market for
acquiring content.
Local Radio Ownership Rule
The local radio ownership rules allow a single person or entity to (1) own up to eight commercial
radio stations, not more than five of which are in the same service in a radio market with 45 or
more stations; (2) own up to seven commercial radio stations, not more than four of which are in
the same service in radio markets with between 30 and 44 radio stations; (3) own up to six
commercial radio stations with not more than four in the same service, in markets with between
15 and 29 radio stations; and (4) own up to five commercial radio stations, not more than three of
which are in the same service in radio markets with 14 or fewer stations, except than an entity
may not own more than fifty percent of the stations in a market unless the combination consists of
not more than one AM and one FM station.41 These limits are the same as those imposed by
Congress in the 1996 Telecommunications Act. The FCC has not relaxed these ownership
limitations in any of its previous ownership rule reviews.
In the NOI, the FCC has asked whether the current limits achieve the goal of preserving
competition in the local radio market.42 Specifically, the Commission asks if it continues to make
sense to have subcaps on ownership of stations within the same service (FM and AM), and
whether it should take into account other forms of delivery for audio programming (presumably
satellite and Internet radio) when determining the ownership caps.
38
47 C.F.R. § 73.3555(b).
2006 Quadrennial Review Order, 23 FCC Rcd at 2605.
40
NOI, supra note 37 at ¶¶ 83 – 85.
41
47 C.F.R. § 73.3555(a).
42
NOI, supra note 37 at ¶ 86.
39
Congressional Research Service
6
Current Legal Status of the FCC’s Media Ownership Rules
Newspaper/Broadcast Cross-ownership Rule
The current state of the newspaper/broadcast cross-ownership rule was described in the previous
section discussing the results of the 2006 Quadrennial Review. 43 In the NOI, the FCC asked
whether the structure of the rules fits the market.44 Specifically, the Commission asked what
effect the decline in newspaper readership, as consumers get their news more often from nontraditional sources, should have on the ownership restrictions, if any. The Commission also
inquired about the extent to which its recent relaxation of this rule would benefit or harm
competition and the provision of local news to communities.
Radio/Television Cross-Ownership Rule
This rule allows a single person (or entity) to own up to two television stations and up to six radio
stations in markets where at least 20 independently owned voices would remain post-merger.45 In
these markets, a person may alternatively own seven radio stations and one television station. In
markets, where at least ten independently owned media voices would remain post-merger, a
single entity or person may own up to two television stations and up to four radio stations.46 An
entity can own two television stations and one radio station regardless of the number of voices
remaining in the market. This rule is also subject to the local radio and local television ownership
rules described above. In relation to this rule, the Commission has asked, among other questions,
whether recent technological developments should change the way that media voices are counted
in a particular market.
Dual Network Rule
The dual network rule prohibits a merger between the top four networks (ABC, NBC, CBS, and
Fox).47 It otherwise permits common ownership of multiple broadcast networks. With regards to
this rule, the Commission has asked if it should refine its approach to consider common
ownership of networks more broadly, rather than merely banning common ownership of the top
four.48 Among other general questions, the Commission also asked how a merger of two of the
top four might affect access to programming and competition in the market.
Broader Issues
The Commission also asked generally about how to quantify its policy goals of increased
competition, localism, and diversity of voices. 49 The Commission noted that there are multiple
ways to define each of those terms and inquired as to how to do so more precisely, so as to
comport with the demands of judicial review and more clearly achieve the goals of the
43
See 47 C.F.R. § 73.3555(d).
NOI, supra note 37 at ¶ 87.
45
47 C.F.R. § 73.3555(c).
46
NOI, supra note 37 at ¶ 88.
47
47 C.F.R. § 73.658(g).
48
NOI, supra note 37 at ¶ 89.
49
NOI, supra note 37 at ¶¶ 28 – 75.
44
Congressional Research Service
7
Current Legal Status of the FCC’s Media Ownership Rules
Communications Act. Furthermore, the Commission inquired as to whether the rules as they are
currently structured, should generally remain or if there were more effective ways to define media
ownership.50 For example, the Commission has asked whether it should, as it has generally in the
past, maintain bright line rules.51 In the alternative, the Commission asked about taking a more
case-by-case approach to media ownership, as it did when it relaxed the newspaper/broadcast
cross-ownership ban by establishing a presumption in favor or against cross-ownership depending
on market size. The Commission noted that there were certainly benefits and detractions to each
potential course, but sought comment on the potential effects of developing a new strategy for a
new media marketplace.
Many other questions were posed by the NOI. The information accepted and analyzed by the
Commission in addressing these questions likely will be processed and presented in a notice of
proposed rulemaking later in the year.
Author Contact Information
(name redacted)
Legislative Attorney
[redacted]@crs.loc.gov, 7-....
Acknowledgments
An earlier version of this report was originally authored by Angie Welborn, Legislative Attorney.
50
51
NOI, supra note 37 at ¶¶ 90 – 91.
NOI, supra note 37 at ¶¶ 92 – 96.
Congressional Research Service
8
EveryCRSReport.com
The Congressional Research Service (CRS) is a federal legislative branch agency, housed inside the
Library of Congress, charged with providing the United States Congress non-partisan advice on
issues that may come before Congress.
EveryCRSReport.com republishes CRS reports that are available to all Congressional staff. The
reports are not classified, and Members of Congress routinely make individual reports available to
the public.
Prior to our republication, we redacted names, phone numbers and email addresses of analysts
who produced the reports. We also added this page to the report. We have not intentionally made
any other changes to any report published on EveryCRSReport.com.
CRS reports, as a work of the United States government, are not subject to copyright protection in
the United States. Any CRS report may be reproduced and distributed in its entirety without
permission from CRS. However, as a CRS report may include copyrighted images or material from a
third party, you may need to obtain permission of the copyright holder if you wish to copy or
otherwise use copyrighted material.
Information in a CRS report should not be relied upon for purposes other than public
understanding of information that has been provided by CRS to members of Congress in
connection with CRS' institutional role.
EveryCRSReport.com is not a government website and is not affiliated with CRS. We do not claim
copyright on any CRS report we have republished.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.