Source: http://www.techlawjournal.com/alert/2011/07/12.asp
Timestamp: 2019-04-20 15:07:14+00:00

Document:
TLJ Daily E-Mail Alert No. 2,256, July 12, 2011.
July 12, 2011, Alert No. 2,256.
7/7. The U.S. Court of Appeals (3rdCir) issued another opinion [58 pages in PDF] in a long series of challenges to the Federal Communications Commission's (FCC) rules regarding the regulation of ownership of media. This case is Prometheus Radio Project v. FCC, and this opinion is likely to be referred to as "Prometheus II".
Summary. This is another in a long series of federal court opinions pertaining to the FCC's old and obsolete media regulation regime. In this latest opinion, this Court vacated and remanded the FCC's newspaper/broadcast cross-ownership (NBCO) rules, released in early 2008, that reduced government regulation. See, FCC's Report and Order on Reconsideration [124 pages in PDF]. The Court held that the FCC failed to comply with the Administrative Procedure Act (APA).
This Court also concluded that it does not have jurisdiction to hear the challenge of the five permanent waivers of its NBCO rule contained in the 2008 order.
This Court also upheld the 2008 order's local television ownership rule, local radio ownership rule, local radio ownership rule, and dual network rule.
This Court remanded parts of a second FCC order, released later in 2008, termed by this Court as the "Diversity Order". See, FCC's Report and Order and Third Further Notice of Rulemaking [70 pages in PDF].
This Court briefly glossed over the substantial Constitutional issue -- how with a Constitution that bans any law abridging the freedom of speech, or of the press, the FCC can impose a regulatory regime that so minutely manages the affairs of newspapers and other news and entertainment media.
Similarly, this Court was not concerned that it is compelling the FCC to vigorously apply a regulatory regime that now reaches only limited media outlets (newspapers, broadcast TV, and broadcast radio), while leaving untouched a vast and growing array of media based upon new technology platforms.
Finally, this Court premised its holding in part on promoting competition, when there are in place antitrust laws and antitrust regulators with broad authority to address anticompetitive conduct in all media, and not just those over which the FCC has authority.
History. While the Constitution provides that "Congress shall make no law ... abridging the freedom of speech, or of the press", the FCC, which is a created and empowered by Congressional statute, has long regulated media companies, including ownership of such companies.
The following is a cursory summary of the administrative and judicial history of such regulation for just the last ten years.
On April 2, 2002, the U.S. Court of Appeals (DCCir) issued its opinion in Sinclair Broadcast Group v. FCC, 284 F.3d 148, remanding the FCC's 1999 local television ownership rule for further consideration. See, story titled "DC Circuit Remands Local TV Ownership Rule to FCC" in TLJ Daily E-Mail Alert No. 402, April 3, 2002.
On February 19, 2002, the DC Circuit issued its opinion in Fox v. FCC, 280 F.3d 1027. That Court overturned the FCC's national TV station ownership rule (NTSO) and its cable broadcast cross ownership rule (CBCO). See, stories titled "DC Circuit Vacates Cable Broadcast Cross Ownership Rule", TLJ Daily E-Mail Alert No. 372, February 20, 2002, and "FCC Files Petition for Review of Appeals Court Opinion in Fox v. FCC" in TLJ Daily E-Mail Alert No. 415, April 22, 2002.
On June 2, 2003, the FCC announced its Report and Order and Notice of Proposed Rulemaking [257 pages in PDF] amending its media ownership rules. See, story titled "FCC Announces Revisions to Media Ownership Rules" in TLJ Daily E-Mail Alert No. 672, June 3, 2003. The FCC adopted new rules in 2003. These too were challenged in multiple petitions for review.
However, as a result of successful forum shopping efforts by opponents of the FCC's 2003 rule changes, the legal challenge was heard by a different circuit, the 3rd Circuit, and by a three judge panel with different policy preferences regarding regulation of media ownership.
It should be noted when the FCC writes new rules on remand, and the inevitable challenges follow, the same panel of the 3rd Circuit will hear the petitions for review. The just released opinion of this Court states that "This panel retains jurisdiction over the remanded issues."
On June 24, 2004, the 3rd Circuit issued its opinion [213 pages in PDF] in Prometheus Radio Project v. FCC, or Prometheus I, reported at 373 F.3d 372, overturning some of the FCC's media ownership rules as amended in 2003, and remanded. See, story titled "3rd Circuit Rules in Media Ownership Case" in TLJ Daily E-Mail Alert No. 930, July 1, 2004. The Supreme Court denied certiorari. See, story titled "Supreme Court Denies Certiorari in Media Ownership Rules Case" in TLJ Daily E-Mail Alert No. 1,153, June 14, 2005.
The just released opinion summarizes the holding of the 2004 opinion: "We affirmed the Commission's authority to regulate media ownership but remanded aspects of the Commission's 2003 Order that were not adequately supported by the record, including its numerical limits for local television ownership, local radio ownership rule, rule on cross-ownership of media within local markets, and repeal of the failed station solicitation rule."
On remand, the FCC was slow to act. It adopted new rules on December 18, 2007, in its Report and Order on Reconsideration [124 pages in PDF]. It released these rules on February 4, 2008. It is FCC 07-216.
See, story titled "FCC Releases Text of Media Ownership Order" in TLJ Daily E-Mail Alert No. 1,714, February 8, 2008. See also, story titled "Copps and Adelstein Complain About FCC Media Ownership Agenda Item" in TLJ Daily E-Mail Alert No. 1,688, December 13, 2007, and story titled "Martin Releases Media Ownership Proposal" in TLJ Daily E-Mail Alert No. 1,675, November 13, 2007.
In the 2008 order the FCC revised its newspaper/broadcast cross-ownership (NBCO) rules. It also adopted five permanent waivers of its NBCO rule. One waiver was for Gannett's newspaper/broadcast combination in Phoenix, Arizona. The other four were for Media General's combinations in Myrtle Beach-Florence, South Carolina,Columbus, Georgia, Panama City, Florida, and in the Tri-Cities DMA in Tennessee/Virginia.
The FCC also retained its radio/television cross-ownership (RTCO) rule and local television and radio ownership rules in existence prior to the 2003 order. It also retained its failed station solicitation rule (FSSR).
Also on December 18, 2007, the FCC adopted its Diversity Order regarding enhancing opportunities for minorities and women in broadcast ownership. See, Report and Order and Third Further Notice of Rulemaking [70 pages in PDF]. It is FCC 07-217 in MB Docket No. 07-294. The FCC did not release this order until March 5, 2008.
The Prometheus Radio Project (PRP), a litigation and lobbying group based in the 3rd Circuit, is one of many entities that petitioned for review of the FCC's 2008 order. It states in its web site that it is "freeing the airwaves from corporate control".
Holding. The Court of Appeals wrote that "Today we affirm the 2008 Order with the exception of the newspaper/broadcast cross-ownership rule, for which the Commission failed to meet the notice and comment requirements of the Administrative Procedure Act".
This Court upheld the radio/television cross-ownership rule of the 2008 order. The FCC first adopted this rule in 1999. It dropped it in its 2003 order. But, the 3rd Circuit overturned that portion of the 2003 order in Prometheus I, and the FCC's 2008 order reinstated the 1999 rule. Broadcasters challenged this.
Basically, it provides that a party may own up to two TV stations and up to six radio stations, or one TV station and seven radio stations, in a market where at least 20 independently owned media voices would remain post-merger. Or, a party may own two TV stations and up to four radio stations in a market where 10 independently owned media voices would remain. Or, a party may own two TV stations and one radio station regardless of the number of media voices in the market.
This Court also upheld the local television ownership rule of the 2008 order. Here too, after Prometheus I, the FCC reinstated its 1999 rule. It provides that an an entity may own two television stations in the same DMA if "(1) the Grade B contours of the stations do not overlap; or (2) at least one of the stations in the combination is not ranked among the top four stations in terms of audience share, and at least eight independently owned and operating commercial or non-commercial full-power broadcast television stations would remain in the DMA after the combination."
This Court also upheld the local radio ownership rule of the 2008 order, which allows an entity to own, operate, or control. from five to eight commercial radio stations, only three to five of which may be in the same service (AM/FM), depending on the number of full-power commercial and non-commercial stations in the market.
This Court also upheld the dual network rule of the 2008 order, which permits common ownership of multiple broadcast networks, but prohibits a merger between or among the top four networks. CBS challenged this rule.
Finally, this Court rejected the First Amendment challenges to all of the 2008 order's rules regulating ownership of media . The Court construed the Constitution's "no law" mandate to mean no law of which the Court does not approve. And, in the present case, the Court held that media ownership laws are Constitutional if they are "rationally related to substantial government interests in promoting competition and protecting viewpoint diversity".
This Court also remanded parts of the FCC's Diversity Order.
It wrote that "We also remand those provisions of the Diversity Order that rely on the revenue-based ``eligible entity´´ definition, and the FCC's decision to defer consideration of other proposed definitions (such as for a socially and economically disadvantaged business (``SDB´´), so that it may adequately justify or modify its approach to advancing broadcast ownership by minorities and women."
Judge Ambro wrote the opinion of the Court of Appeals, in which Judge Fuentes joined. Judge Scirica wrote a separate opinion in which he concurred in part and dissented in part. He concurred in all of the Court's opinion, except as to the NBCO rule, which he would have upheld.
Reaction. FCC Commissioner Michael Copps released a statement. He wrote that he is "pleased" with the opinion.
He wrote that "It is clear from this decision that those previous Commissions abdicated their responsibility to consider diversity of ownership and diversity of viewpoint when they wrote their flawed rules. The Third Circuit underlines the need for better process and analysis in the forthcoming but overdue 2010 Quadrennial Review. I only hope that Report will be based upon the kind of specific, accurate, hard data the Court is looking for and that it will be inspired by an awakened appreciation of the need for the FCC to get serious -- after all these years -- about diversity and justice for America’s minorities and women. That's why I have been pushing so hard for the completion of in-depth studies that are needed to better inform our decisions and to help new diversity rules survive any court challenges they may face."
FCC Commissioner Mignon Clyburn (at right) also released a statement. She wrote that the decision to vacate and remand the Diversity Order "sends the important message that ownership diversity remains an important aspect of the overall media ownership regulatory framework. As the Court noted, the current Commission has taken steps towards gathering updated studies on ownership diversity as part of its 2010 Quadrennial Review proceeding."
She added that "I hope this Court decision will serve to encourage all of us at the Commission to take a laser like focus on the necessary and long awaited need for robust ownership studies and thoughtful recommendations to advance diverse voices in America's media market place."
The National Association of Broadcasters' Dennis Wharton stated in a release that "There have been sweeping changes in the media landscape since most of the broadcast ownership rules were adopted decades ago. NAB believes that modest reform of rules to allow free and local broadcasters to compete successfully in a universe of national pay TV and radio platforms is warranted."
Andrew Schwartzman of the Media Access Project (MAP), counsel for the PRP, stated in a release that "We won on almost every point. This decision is a vindication of the public's right to have a diverse media environment. The FCC majority knew that its effort to allow more media concentration was politically and legally unworkable, so it tried to end-run the procedural protections that are designed to give the public the right to participate in agency proceedings. It was disapointing that FCC Chairman Genachowski chose to defend his predecessor's erroneous action, but now that the Court has directed the FCC to make sure the public is not ignored, we can look forward to having a right to meaningful participation as the FCC looks at these questions again."
Cory Wright of the Free Press stated in a release that "In rejecting the arguments of the industry and exposing the FCC's failures, the court wisely concluded that competition in the media -- not more concentration -- will provide Americans with the local news and information they need and want."
The House will meet at 10:00 AM for morning hour, and at 12:00 NOON for legislative business. The House is scheduled to continue consideration of HR 2354 [LOC | WW], the "Energy and Water Appropriations Act, 2012", and begin consideration of HR 1309 [LOC | WW], the "Flood Insurance Reform Act of 2011". See, Rep. Cantor's schedule for the week of July 11.
The Senate will meet at 10:00 AM. The schedule lists resumption of consideration of S 1323 [LOC | WW], a sense of the Senate bill regarding taxing rich people.
12:30 - 2:00 PM. The American Bar Association (ABA) will host a webcast panel discussion titled "Tech Contracts: Nine Lessons for Drafting and Negotiating Better IT Agreements". The speakers will be David Tollen, author of the book [Amazon] titled "The Tech Contracts Handbook: Software Licenses and Technology Services Agreements for Lawyers and Businesspeople". Prices vary. CLE credits. See, notice.
1:00 - 2:00 PM. Fulbright & Jaworski (F&J) will host a web seminar titled "Making Sense of Therasense: Past, Present and Future of Inequitable Conduct". See, the May 25, 2011, en banc opinion [88 pages in PDF] of the U.S. Court of Appeals (FedCir) in Therasense v. Becton, Dickinson and Co., and story titled "Federal Circuit Raises Standards for Prevailing on Defense of Inequitable Conduct" in TLJ Daily E-Mail Alert No. 2,253, July 1, 2011. The speakers will be Mark Emery, Sheila Kadura, Michael Krawzsenek, and Daniel Leventhal of F&J, and Dennis McNamara of Pozen, Inc. See, notice and registration page.
1:00 - 2:00 PM. The American Bar Association (ABA) will host a webcast panel discussion titled "Preventing and Cleaning Up After Corporate Cyber-Terrorism, Hacking, Viruses and Other Electronic Pestilence". The speakers will be Elizabeth Shirley (Burr & Foreman), Paul Adams (Microsoft), Keith Jones ( Jones Dykstra), and Marc Zwillinger (Zwillinger Genetski). Prices vary. CLE credits. See, notice.
8:45 - 11:00 AM. The Free State Foundation (FSF) will host an event titled "Universal Service and Intercarrier Compensation: Will the FCC Finally Bite the Reform Bullet?" The speakers will be James Assey (NCTA), Jerry Ellig (Mercatus Center), Mike Romano (NTCA), Tom Tauke (Verizon), and Deborah Tate. See, notice. A light breakfast will be served. This event is free and open to the public. To register to attend, e-mail Kathee Baker at kbaker at freestatefoundation dot org Location: National Press Club, 13th Floor, 529 14th St., NW.
10:00 AM. The House Judiciary Committee (HJC) will meet to mark up bills. The fourth of four items on the agenda is HR 1002 [LOC | WW], the "Wireless Tax Fairness Act of 2011". See, notice. Location: Room 2141, Rayburn Building.
10:00 AM. The Senate Judiciary Committee (SJC) will hold an executive business meeting. The agenda again includes consideration of Steve Six (to be a Judge of the U.S. Court of Appeals for the 10th Circuit), Stephen Higginson (USCA/5thCir), Jane Milazzo (USDC/EDLa), Alison Nathan (USDC/SDNY), Katherine Forrest (USDC/SDNY), and Susan Hickey (USDC/WDArk). The agenda also includes consideration of Christopher Droney (USCA/2ndCir), Robert Mariani (USDC/MDPenn), Cathy Bissoon (USDC/WDPenn), Mark Hornak (USDC/WDPenn), and Robert Scola (SDFl). The SJC will webcast this event. See, notice. Location: Room 226, Dirksen Building.
1:00 - 2:00 PM. The American Bar Association (ABA) will host a telecast panel discussion titled "Privacy and Information Security Update". The speakers will be Erin Egan (Covington & Burling), and Deborah Peden, Catherine Meyer and Wayne Matus (all of Pillsbury Winthrop). See, notice.

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