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Will Cross Ownership Ever Be Relaxed

We had a GM send in a great question for attorney John Garziglia in our weekly "Ask The Attorney" segment. "I would like to know if the FCC will take any action on newspaper cross ownership issues and as well as loosening ownership restrictions with the current Obama administration in office."

John Garziglia says:  As background, it was in 1975 that the FCC first banned the cross-ownership of a daily newspaper and radio/television stations in the same market.  For radio ownership, the current scheme in which radio station owners can own a combination of up to eight AM and FM radio stations in a market is the result of the 1996 Telecommunications Act. 

The FCC is required by law to review its media ownership rules every four years. The current review commenced in 2010.  Thus, arguably every media ownership rule is now on the table.  The FCC in its current ownership Notice of Inquiry, according to it, is taking a fresh look at the rules to determine whether they serve its public interest goals of competition, localism and diversity going forward in todays marketplace.

To put the FCCs current ownership proceedings into perspective, up until 1996 it was unimaginable to many people that the FCC and Congress would do away with the radio national ownership limits entirely, and adopt rules that allowed for up to eight radio stations in a market.  The fact that this happened as a result of the 1996 Telecommunications Act awakened public interest groups to the issue of media ownership. 

The combination of a scrutiny by public interest groups of the changes resulting from the 1996 Telecommunications Act, and the then nascent power of the public to comment upon FCC proceedings through the Internet, resulted in the years immediately after being a turning point for public participation in the FCCs ownership proceedings.  In recent years, just about every proposed change to the FCCs ownership rules has been strongly challenged, at the FCC, in Congress and in court, by public interest groups and the public behind those groups. 

This brings us to the question of whether there is likely to be any relaxation of the newspaper cross-ownership rules, or any other ownership rule in the near term.  The relaxation of the newspaper cross-ownership rules is promoted by several large entities with evident self-interest.  It is opposed by public interest groups wary of going back to what they saw as the power wielded by strong newspaper/broadcast station combinations prior to 1975.  In strong favor of a relaxation of the newspaper cross-ownership rules is the sad state of the newspaper business in todays world.  If the rule is relaxed, it is likely to be the result of a realization by the FCC and the administration that changes to cross-ownership restrictions have the potential to rescue some daily newspapers from almost certain future oblivion.   

Radio broadcasters have recently pushed for the elimination of the radio ownership rules AM/FM sub-caps.  Out of a combination of eight stations allowed in the largest markets, a broadcaster is limited to owning five FMs and three AMs, or the reverse.  An elimination of the AM/FM sub-caps would allow for broadcasters in the largest markets to own any combination of no more than eight FMs or eight AMs with a sliding scale for smaller markets.  

Such a change would undoubtedly spur new transactional activity, and would be a benefit to the consolidation goals of many broadcasters.  Because broadcasters desiring to take advantage of the elimination of the sub-cap relaxation would have to spin off stations, the sub-cap elimination would arguably make stations available for new entrants to purchase. 

To the extent that the current administrations focus has been on communications issues other than broadcasting, it is possible that an AM/FM sub-cap elimination may be seriously considered as merely a minor tweak to the current restrictions.  The FCC will often sway to the desires of Congress.  If significant legislators are convinced by broadcasters of the good that would flow from the elimination of the AM/FM sub-caps, the FCC may see the wisdom of a change.  In this time of hyper-scrutiny to all governmental restrictions on business, it is hard to make a case as to why there are the specific sub-caps in the first instance why five FMs and three AMs instead of four FMs and four AMs, and so forth.  It can be easily argued that the sub-caps are arbitrary and largely nonsensical. 

But, public interest groups will likely see changes to both the newspaper cross-ownership rules and to the AM/FM sub-caps as leading to significant further consolidation.  Whether the public interest groups are able to push back with enough ferocity to what are arguably minor tweaks to the FCCs ownership rules is yet to be seen. 

John F. Garziglia is a Communications Law Attorney with Womble Carlyle Sandridge & Rice in Washington, DC and can be reached at (202) 857-4455 or jgarziglia@wcsr.com. Have a question for our "Ask The Attorney" feature? Send to edryan@radioink.com.




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