Liberalizing the Ownership Rules

The commission noted that much has changed in the local media marketplace between 1975 and 2017
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Anyone involved in the broadcasting industry for a significant number of years has witnessed the Federal Communications Commission�s repeated efforts to modify the local and national ownership rules.

On Nov. 16, the FCC adopted new rules that will significantly liberalize the ownership restrictions, with a special focus on modifying the cross-ownership restrictions among radio and television broadcasters, and eliminating the cross-ownership restrictions on newspaper and broadcast properties.

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As a newly-minted attorney, this author cut his teeth on the implementation of the local radio ownership changes in the wake of the Telecommunications Act of 1996. Rapid consolidation among radio broadcasters was followed by more than a decade of the commission attempting to craft rules to address the cross-ownership and local television ownership rules. While the FCC adopted a Second Report and Order in August 2016 (which did not make significant changes to the ownership rules), in light of the 2016 election, the change in the FCC�s leadership led to reconsideration by that order last month.

First, the FCC granted petitions for reconsideration of the Wheeler FCC�s decision to not eliminate the newspaper-broadcast cross-ownership rule. The rule, originally adopted in 1975, prohibited the ownership of a newspaper and a radio or television station that served substantially the same area.

The commission noted that much has changed in the local media marketplace between 1975 and 2017, and it concluded that the original purpose of the rule � to promote viewpoint diversity � was being served by the substantial increase in the number of viewpoint platforms, including more radio and television stations in the local community. Moreover, the FCC noted that digital-only and Internet platforms should have been considered by the Wheeler FCC when determining if the rule was still necessary.

The FCC also took into consideration the relative decline of the newspaper industry and determined that the elimination of the rule may encourage more investment in the local markets by permitting broadcasters and newspapers to jointly serve the local community. The FCC also noted that the National Association of Black-Owned Broadcasters had recently reversed its opposition to relaxing the rule, concluding that its elimination would not affect minority-owned broadcasters.

AD�OS, RADIO-TV CROSS-OWNERSHIP BAN

Next, the FCC granted the NAB�s request for reconsideration of the decision not to eliminate the radio-television cross-ownership ban. That rule substantially limited the common ownership of television and radio stations in the same market in order to encourage more viewpoint diversity in the local market. In the largest markets, one entity could own one television station and seven radio stations, or two television stations and six radio stations. On the other hand, in those same markets, an entity could own up to eight radio stations � if they had no television interests in that market.

In granting NAB�s request, the FCC focused on the existing radio local ownership rule, which it decided to retain. In particular, the FCC determined that the contribution of local radio stations to local viewpoint diversity was not significant enough to maintain the ban.

Because the overall number of radio stations in a local radio market will remain in place, the commission determined that cross-ownership ban was not necessary. Instead, the FCC concluded that there was a relatively small difference between the six or seven stations owned by a television broadcaster and the eight stations that could be owned by a non-television broadcaster.

DATELINE

Jan. 10, 2018 � Issues/programs list must be placed in stations� public inspection file.

March 1, 2018 � All radio broadcast stations, including noncommercial educational FM stations, commercial radio broadcast stations in the top 50 Nielsen Audio markets with fewer than five full-time employees, and all commercial radio broadcast stations in markets below the top 50 or outside all markets, must complete the transition of their public file to the FCC�s online public file system.

The FCC also eliminated the local TV ownership rule; eliminated the attribution of joint sales agreements for television broadcasters, but will continue to require parties to shared services agreements to disclose their existence.

Finally, the FCC is seeking comment on the development of rules associated with an incubator program to encourage access to capital and technical expertise for new entrants and small businesses. The FCC requested comments on all facets of the proposed program, including eligibility, evaluation of available resources and the costs associated with running the program.

Petro is of counsel at Drinker Biddle & Reath LLP. Email: lee.petro@dbr.com.

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