Multiple ownership and DBS must-carry rules challenged

In separate appeals pending in the U.S. Court of Appeals for the D.C. Circuit, broadcasters are challenging the 35 percent nationwide population coverage cap and the requirement that eight independently owned TV stations remain in a market after a TV duopoly is created.
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In separate appeals pending in the U.S. Court of Appeals for the D.C. Circuit, broadcasters are challenging the 35 percent nationwide population coverage cap and the requirement that eight independently owned TV stations remain in a market after a TV duopoly is created. In the Fourth Circuit Court in Richmond, VA, DirecTV, EchoStar and the DBS trade association are challenging the FCC's must-carry rules for DBS operators.

The attack on the 35 percent cap is being brought by Fox TV, which wants to hold on to as many as possible of the Chris Craft TV stations it recently purchased (see below). The FCC temporarily waived the 35 percent cap in connection with approving the Fox/Chris Craft merger. The FCC is independently looking into relaxing or eliminating the rule. However, FCC Chairman Powell recently assured Senate Commerce Committee Chairman Earnest Hollings (D-SC) that the agency will take no action until the court renders its decision.

The eight-station test for TV duopoly is being attacked in court by Sinclair Broadcasting. Sinclair's brief argues that the Commission, in adopting the eight-station test, did not adequately explain how that number fits all markets, why daily newspapers, cable and the Internet were not factored in as “voices” for duopoly purposes and, generally, why the agency did not explain how it determined that eight rather than some other number should be the cutoff for purposes of assessing diversity.

The DBS must-carry challenge involves rules that require satellite operators to provide all local stations to subscribers in markets where any of the local signals are provided. The satellite companies are arguing that must-carry rules limit the types of programming that can be offered on DBS, thereby infringing their first amendment rights and harming the ability of DBS to compete with cable. On the other hand, local broadcasters are concerned that, without local must-carry, their signals will not be seen by the increasing numbers of viewers in their markets who are subscribing to DBS. Arguments in all three of these cases will be heard during the next few months, with decisions expected next year.

LMA ban stayed

A U.S. Court of Appeals for the D.C. Circuit issued a temporary stay of the FCC requirement that broadcasters cease programming television stations under local marketing agreements (LMAs) in markets where they own television stations.

In 1999, the FCC grandfathered, until Aug. 6, 2001, existing LMAs signed after Nov. 5, 1996, but which were prohibited under new duopoly rules adopted at the same time. It grandfathered until 2004 prohibited LMAs signed before Nov. 5, 1996. Once the grandfathering date passes, the LMA programming arrangements must terminate.

A television broadcaster appealed the new TV duopoly and LMA rules to the U.S. Court of Appeals for the D.C. Circuit, arguing that the FCC did not legally justify the new LMA restrictions. The appeal remains pending and is scheduled for oral argument in January. Meanwhile, the Court granted a stay of the rule, finding that the broadcaster had proven that it had a reasonable likelihood of winning the appeal and would suffer permanent harm if its LMAs were terminated before the Court acted. Other LMA operators have since sought similar relief from the FCC.

Fox/Chris Craft merger

The FCC recently approved the application of Fox Television Stations to acquire the 10 television stations held by Chris Craft Industries and its subsidiaries. The approval was granted with conditions requiring the license to comply with FCC rules on television duopolies, the 35 percent national audience cap and newspaper/broadcast cross-ownership. The transaction will result in duopolies in New York, Los Angeles, Phoenix and Salt Lake City. All but the Salt Lake City duopolies comply with the Commission's rules. Fox has six months to divest itself of one of its Salt Lake City stations.

Fox already has a waiver of the television/newspaper cross-ownership rule permitting it to own the New York Post and Station WNYW(TV), New York. As a result of the Chris Craft transaction, Fox will acquire a second New York station, WWOR(TV). The Commission gave Fox 24 months to come into compliance with the waiver's one newspaper/one television station ownership limit.

In approving the merger, the FCC's new Republican majority departed from the practice followed by the Kennard Commission of seeking an independent public interest rationale for approving media mergers. Chairman Powell, along with fellow Republican Commissioners Kathleen Abernathy and Kevin Martin went no further on this score than to insure the merger was consistent with existing rules and waiver policies.

Harry C. Martin is an attorney with Fletcher, Heald & Hildreth PLC, Arlington, VA.

Dateline

TV stations in the following states must file their biennial ownership reports on or before Dec. 3, 2001: Alabama, Colorado, Connecticut, Georgia, Maine, Massachusetts, Minnesota, Montana, New Hampshire, North Dakota, Rhode Island, South Dakota and Vermont.

Send questions and comments to: harry_martin@intertec.com