On December 18, 2007, the Federal Communications Commission ("FCC" or "Commission") concluded a review of its broadcast ownership rules by relaxing the ban on cross-ownership of a newspaper and a broadcast station in certain markets. The order adopted that day ended agency proceedings that had been ongoing for five years. In 2003, the FCC had adopted a comprehensive order (in its 2002 Biennial Review) revising many of its cross-ownership rules but, as will be discussed below, the United States Court of Appeals for the Third Circuit found insufficient basis for many of the proposed changes in that order and remanded it to the FCC for reconsideration. This report discusses the 2002 Biennial Review, the decision by the Third Circuit that struck many of those rules down, and the FCC's actions upon remand. The report also addresses the current status of the rules. The Telecommunications Act of 1996 sought to create a "pro-competitive, deregulatory national policy framework designed to accelerate rapidly private sector development of advanced telecommunications and information technologies and services to all Americans by opening all telecommunications markets to competition." Among other things, the act eliminated limits on national radio ownership, raised the cap on the percentage of the national audience that a single station owner may reach, set new limits for local radio ownership, and directed the Commission to conduct a rulemaking proceeding to determine whether to retain, modify, or eliminate the local television ownership limitations. The act also directed the Commission to review its broadcast ownership rules every two years to "determine whether any of such rules are necessary in the public interest as the result of competition." The Commission initiated its 2002 Biennial Review 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 ("one-to-a-market") rule; and the dual network ownership rule. The Commission had previously initiated proceedings regarding the local radio ownership rule and the newspaper/broadcast cross-ownership rule. Those proceedings were incorporated into the Biennial Review. On June 2, 2003, the Commission adopted a Report and Order modifying its ownership rules. 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 cross-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." 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')." 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. Following the publication of the Commission's Order, several organizations filed petitions for review of the new rules. The petitions for review were consolidated and heard by the United States Court of Appeals for the Third Circuit. After an initial hearing on September 3, 2003, the court entered a stay for the effective date of the proposed rules, preventing their enforcement, and ordered that the prior ownership rules remain in effect pending resolution of the proceedings. On February 14, 2004, the court heard oral arguments and issued its opinion on June 24, 2004. As noted above, on June 2, 2003, the Commission approved a Report and Order modifying its media ownership rules to provide a "new, comprehensive framework for broadcast ownership regulation." The Commission determined that new technologies necessitated new rules and that the prior rules "inadequately [accounted] for the competitive presence of cable, [ignored] the diversity-enhancing value of the Internet, and [lacked] any sound basis for a national audience reach cap." According to the Commission, the newly adopted rules were "not blind to the world around them, but reflective of it," and "necessary in the public interest." With respect to the ownership of broadcast stations on a nationwide level, the Commission determined that while "a national TV ownership limit is necessary to promote localism by preserving the bargaining power of affiliates and ensuring their ability to select programming responsive to tastes and needs of their local communities," the evidence demonstrated that a 35% cap was not necessary to "preserve that balance" and raised the limit to 45%. Under the new rule, a single entity was prohibited from owning stations that would allow it to reach more than 45% of the national audience. The Commission also elected to retain the "UHF discount," which attributes UHF stations with only 50% of the households in their DMA, despite many cable operators now carrying UHF stations. While it modified the national television ownership cap, the Commission determined that its dual network rule, which prohibits common ownership of the top four television networks, remained necessary in the public interest and did not attempt to repeal or modify it. In the 2002 Biennial Review, the Commission either modified or repealed its local ownership rules. The cross-ownership rules prohibiting the common ownership of a full-service broadcast television station and a daily newspaper in the same community and limiting the ownership of television and radio combinations by a single entity in a given market were both repealed. The Commission determined that neither rule remained necessary in the public interest and replaced both rules with a single set of cross-media limits based on market size. In large markets, defined as those with more than eight television stations, cross-ownership was unrestricted. The Commission combined an earlier remand from the D.C. Circuit Court of Appeals of its modified "duopoly rule" with the 2002 Biennial Review and adopted a new rule that would permit common ownership of two commercial television stations in markets that have seventeen or fewer full-power commercial and noncommercial stations, and common ownership of three commercial stations in markets that have eighteen or more stations. These limitations are subject to a further restriction on the common ownership of stations that are ranked among the market's largest four stations based on audience share. The Commission also elected to repeal the "Failed Station Solicitation Rule" related to the sale of failed, failing, or unbuilt stations, which required notice of the sale to be provided to out-of-market buyers. With respect to local radio ownership, the FCC modified its prior rule by adopting a new method for determining the size of a local market, but retaining the rule's prior numerical limits on station ownership. The Commission's prior regulations defined the local market by using the "contour-overlap methodology," which the Commission abandoned in favor of the "geography-based market definition used by Arbitron, a private entity that measures local radio audiences for its customer stations." The Arbitron markets include both commercial and noncommercial stations. While it changed the definition of local market, the Commission retained its numerical limits, which allow a single entity to own as many as eight radio stations in markets of 45 or more commercial stations. An additional modification to the local radio ownership rule created a new system for the attribution of joint sales agreements (JSAs). Generally, a JSA authorizes a broker to sell advertising time for the brokered station in return for a fee paid to the licensee. The Commission noted that because the broker station normally assumes much of the market risk with respect to the station it brokers, it typically has the authority to make decisions with respect to the sale of advertising time on the station. Under the prior rules, JSAs were not attributable to the brokering entity and were not counted toward the number of stations the brokering licensee may own in a local market. The new rules made the JSAs attributable to the brokering entity for the purpose of determining the brokering entity's compliance with the local ownership limits if the brokering entity owns or has an attributable interest in one or more stations in the local market, and the joint advertising sales amount to more than 15% of the brokered station's advertising time per week. Several organizations filed petitions for review of the new rules upon their publication. The numerous petitions for review were consolidated and the case was heard by the United States Court of Appeals for the Third Circuit in Philadelphia. As noted above, after an initial hearing, the court entered a stay for the effective date of the proposed rules. On February 14, 2004, the court heard oral arguments and issued its opinion on June 24, 2004. With respect to the national ownership rules, the court did not address the Commission's decision to raise the national audience reach cap from 35% to 45% citing Congress's modification of the rule in the 2004 Consolidated Appropriations Act. Section 629 of the act directed the Commission to modify the rule by setting a 39% cap on national audience reach. The court determined that because the Commission was under "a statutory directive to modify the national television ownership cap to 39%, challenges to the Commission's decision to raise the cap to 45 were moot." Additional challenges to the UHF discount provisions in the rule were also deemed moot even though the UHF discount rules were not mentioned in the 2004 Consolidated Appropriations Act. The court determined that the UHF discount was intrinsically linked to the 39% national audience reach cap because "reducing or eliminating the discount for UHF stations audiences would effectively raise the audience reach limit." The court also noted with respect to the UHF discount that the 2004 Consolidated Appropriations Act specifically provided that the periodic review provisions set forth in the amendment did not apply to "any rules relating to the 39% national audience limitation," and as a rule "relating to" the national audience limitation, Congress intended to insulate the UHF discount from review.