APPEALS COURTS BLOCKS MEDIA CONSOLIDATION RULES

Tells FCC to Better Explain Limits Placed to Protect Diversity

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WASHINGTON (AdAge.com) -- A divided three-judge panel of 3rd Circuit Court of Appeals in Philadelphia today set aside a major portion of the Federal Communications Commission's controversial media ownership rules adopted last June.

The court ruling also put on hold any

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implementation of the rules until the FCC better justifies how it came up with those rules and the numerical limits placed on media companies. The 217-page decision could make the final fate of the rules hinge on the outcome of the November election.

Last year the FCC adopted sweeping rules regarding media ownership that would allow a single company to own three TV stations, eight radio stations, the local newspaper and the local cable company in a single market and would allow much greater concentration of ownership.

In defense of diversity
Public interest groups, among them the Prometheus Radio Project, which was represented by the Media Access Project, had challenged the rules, arguing they would reduce the diversity of news sources and content. The groups also argued that the FCC, in crafting its rules, had tallied the numbers but had not differentiated among various media, lumping together weeklies and Internet sites that carry little local content with major newspapers and local TV stations in determining when local consolidation could occur.

Broadcasters, meanwhile, argued the FCC's rules didn't go far enough, as previous ownership restrictions dated to an era before the explosion of cable TV and the World Wide Web. They claimed new technology would in fact help protect local diversity. Critics of the FCC changes feared that the new rules would lead to greater media hegemony by a handful of conglomerates, squashing independent outlets and viewpoints.

The two judges in the majority, Thomas L. Ambro and Julio M. Fuentes, while siding with the FCC on a few of the rules changes, strongly questioned the numbers the FCC used to justify how much consolidation could take place in a local market and when. They also questioned the FCC's assumption that it had to ease rules unless they proved necessary.

A media jumble
"The commission gave too much weight to the Internet as a media outlet, irrationally assigned outlets of the same media type equal market shares [despite major viewership or readership differences] and inconsistently derived its diversity index from the results," the judges said. They also said the FCC, in looking at diversity, incorrectly counted Web sites of local newspapers and broadcast stations that republish information already available as independent sources.

While the judges overturned major facets of the rule, they did approve several sections of the FCC's easing of some broadcast-newspaper cross-ownership restrictions but delayed their implementation until the rest can be justified.

In a 100-page dissent judge, Chief Judge Anthony J. Scirica said he would have allowed the rules to take effect and suggested the majority was substituting its own views for those of the FCC.

The decision drew the predictable reactions in the world where media groups, Washington and the public interest converge.

Cautious praise
"We're doing high four and a halves," said Andrew Jay Schwartzman, president-CEO of the Media Access Project, and lead counsel for consumer groups in the challenge. "This is a big, big win for diversity. It looks like the court agreed with us that preserving democracy is more important than helping big companies grow bigger. It will take a few hours to sort it all out, but the court has told the FCC to take its deregulatory thumb off the scale."

Gene Kimmelman, senior public policy director for Consumers Union, called the decision a "complete repudiation of rules that would allow one or two media giants to dominate the most important sources of local news and information in almost every community in America."

FCC Chairman Michael Powell, however, called the decision "voluminous" and warned that it could "make it dramatically" more difficult for the Commission to protect against greater media consolidation.

Chairman reacts
"It sets near-impossible standards for justifying bright-line ownership limits. The fear is realized in the opinion itself," Mr. Powell said. "The court rejected the commission's effort to limit further radio consolidation. It also upheld the elimination of the newspaper cross-ownership rule, while rejecting our efforts to place reasonable limits on those combinations. This is deeply troubling and hampers the flexibility of the agency to protect the American public, as this agency is charged to do."

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