Broadcast Ownership - US Court of Appeals Serves Up Mixed Results

Over the years, the FCC’s broadcast ownership rules have traveled down a long and winding road.  The most recent twist occurred last week with a decision from the U.S. Court of Appeals for the 8^th Circuit in Zimmer Radio of Mid-Missouri v. FCC.  The case was joined by a number of broadcast companies, network affiliate associations, and the NAB.  At issue are the local ownership rules for television and radio.  The previous FCC, guided by then-Chairperson Jessica Rosenworcel, upheld these rules and even tightened up the local TV rules somewhat.  

Local Radio Ownership Rules: The current FCC rules limit the number of radio stations that may be owned by a single entity.  The number varies by market size.  For example, a single owner may own up to 8 radio stations in a large market.  However, there is a sub-cap that limits the number of FM or AM stations that may be owned.  For example, you can own up to 8 stations in a large market, but only 5 of them can be in the same (AM/FM) service. 

The Court of Appeals upheld the FCC’s local radio ownership rules.  The court ruled that the FCC had the legal authority to keep these rules in place.  It upheld the FCC’s legal ability to conclude that radio was a distinct service and that competition from digital and other audio services need not be considered when crafting these rules.  Importantly, the court made it clear that it was not second-guessing whether the FCC was correct in its assessment.  Rather, the court was stating that the FCC had the legal ability to make such a judgment, and the court would not substitute its judgment for the Commission’s.

This decision flies in the face of economic reality.  Moreover, the court seems to have gone out of its way to give significant differences to the Commission.  Such deference appears to conflict with the Supreme Court’s recent decisions limiting deference to administrative agencies.

Local TV Ownership Rules:  The current FCC rules allow a single entity to own up to two stations in a TV market, provided only one of the stations is considered to be a “top four” station.  The rule gives the FCC the ability to grant waivers.  In addition, because the FCC was concerned that stations were circumventing the rule by combining with low-power stations, the FCC extended the rule to include these stations.

The Court upheld the FCC’s rule limiting TV ownership to two stations in a market.  Once again, it supported the FCC’s conclusion that over-the-air TV was a unique market. 

Nonetheless, the court found that the “top four” rule was not supported by evidence before the Commission.  As a result, the court vacated the rule but gave the FCC 90 days to remedy the rule.  In addition, it struck down the FCC’s decision to extend the “top four” rules to include low-power TV stations. 

Impact: Importantly, the decision focuses on whether the FCC had the authority to adopt these rules.  It does not prevent the “Carr Commission” from reaching a different conclusion with respect to the television or radio ownership rules.

FCC Chairman Carr’s response to the court decision makes it clear he will not reopen the FCC’s “top four” rule for television.  In a statement, he noted:

“For decades, the FCC’s approach to regulating the broadcast industry has failed to promote the public interest.  That has only made it harder for trusted and local sources of news and information to compete in today’s media environment.  And that is why I dissented from the Biden-era FCC’s decision to retain a regulation that does not match marketplace realities.  I am pleased to see that the court agrees and has vacated that regulation.”  

Given Chairman Carr’s position that local stations exist in a new competitive environment, it is likely that he will revisit the local radio and TV ownership rules with an open mind.  This is important because the Court’s decision expressly ignored competition from non-broadcast sources when upholding the previous decision by the FCC under Chairperson Rosenworcel.   

On balance, the decision to eliminate the “top four” rule for local television stations is a huge step in the right direction.  We shall watch this closely as the saga of broadcast ownership rules continues to unfold.

You can see the Court of Appeals Decision for the 8^th Circuit here.

A good summary of the decision appeared in Inside Radio here.