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Court Is Urged to Change Media Ownership Rules

By STEPHEN LABATON

Published: February 12, 2004

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PHILADELPHIA, Feb. 11 - Broadcasters and public interest groups on Wednesday urged the federal appeals court here to order the Federal Communications Commission to rewrite its new rules that govern the size and reach of the nation's largest media conglomerates. Many of the parties joining the fight against the F.C.C., however, are doing so for diametrically opposed reasons.

The case has enormous implications for the newspaper, television and radio industries. The new rules make it significantly easier for the biggest companies to acquire other companies both in their existing markets and in new ones. The rules have been supported by some media companies, opposed by others, and have been heavily criticized by many civic organizations on the grounds that they could reduce competition and diversity of views on the airwaves, as well as lead to reduced news coverage of local affairs.

At a hearing lasting more than eight hours, public interest groups and some smaller broadcasters urged a three-judge panel of the United States Court of Appeals for the Third Circuit to restore the federal restrictions that had prevented a company from owning a newspaper and a radio or television station in the same market. Asserting that the commission used the wrong standard of review and flawed theoretical models about consumer behavior to create the ownership rules, the opponents also asked the court to reverse rules that would make it easier for a broadcaster to own more television stations in one market.

On the other side, a group of newspapers, television networks and other broadcasters, including Clear Channel Communications, the nation's largest broadcast radio company, argued that the commission had not deregulated the industry enough. They urged the court to return the rules to the commission and order it to apply a higher standard of review in trying to justify all of its media regulations.

Trying to steer a middle course, the commission's general counsel, John A. Rogovin, asserted that the new regulations were grounded in law and competition policy and should be affirmed by the court.

The announcement on Wednesday by Comcast of Philadelphia, the nation's largest cable company, that it was making a $54.1 billion bid for the Walt Disney Company, cast a shadow over the court proceedings, even though that proposed deal is not affected by the rules at issue in the court case. Two years ago, a federal appeals court struck down the restrictions barring a single company from owning a cable operator and a broadcaster in the same community.

But some advocates alluded on Wednesday to the proposed Comcast-Disney deal as evidence that the old ownership rules for newspapers and broadcasters were unfair.

"What we're saying is cable operators can buy any broadcaster, and yet a newspaper in a community cannot," said Carter G. Phillips of Sidley Austin Brown & Wood, which represents the Tribune Company and Media General. "I submit that is an immaterial and unfair distinction."

"The one thing you cannot do is single out newspapers for disparate treatment," he added.

(The New York Times Company has previously filed comments with the commission urging the repeal of the ownership restrictions for newspapers and broadcasters. The Times Company was not a party to the case before the court.)

The commission adopted the new rules in June in a contentious proceeding that was criticized by a broad coalition of civil rights, labor, religious and advocacy groups, including the National Rifle Association. The rules struck down the restriction on one company's owning a newspaper and a television or radio station in the same market. They also gave television networks the ability to grow to reach 45 percent of the national audience with their local affiliate stations from the previous limit of 35 percent.

Last month, Congress attached a provision to a spending bill that lowered that cap to about 39 percent - the current reach of the two largest networks, Viacom's CBS and the News Corporation's Fox. The legislation, which President Bush signed, eliminated that rule from consideration by the court.

In September, the appeals panel issued a surprise temporary order that prevented the commission from enforcing the rules. It is rare, though not unprecedented, for a court to issue such an order and ultimately approve the rules, although the court made clear at the time that it was not ruling on the merits of the case.

One central issue in the case before the court on Wednesday, Prometheus Radio Project v. Federal Communications Commission, was the appropriate legal standard for adopting the new rules. The Telecommunications Act of 1996 requires the agency to review its media ownership rules every two years to determine whether they are "necessary in the public interest" and to "repeal or modify any regulations it determines to be no longer in the public interest."


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