Appeals Court Blocks FCC’s Bid to Relax Media Ownership Rules

In a stinging reversal for the Federal Communications Commission, a federal appeals court issued an emergency order Wednesday blocking far-reaching media ownership rules from taking effect as scheduled today.

The surprise decision by the U.S. 3rd Circuit Court of Appeals throws into question when, and even whether, the agency’s new regulations will be implemented.

The temporary stay delivered an immediate victory to opponents of the relaxed media ownership rules, and a defeat to FCC Chairman Michael K. Powell, who had championed the changes.

Over the long haul, it appears likely to trigger an extended legal battle over how large television and radio broadcasters may grow, and whether a single company may own newspapers and TV stations in the same market.

In the short term, the ruling is certain to affect the debate now raging in Congress over whether to overturn the FCC reforms.

Opponents of the new rules hope the court ruling will embolden lawmakers to move quickly despite the threat of a presidential veto.

“Legislation overturning the FCC rules would still be preferable to having this slog through the courts for years,” said Andrew Schwartzman, head of the Washington-based Media Access Project, a watchdog group that requested the stay.

But others said the stay might stall congressional action by removing the sense of urgency.

“The Bush administration must be ecstatic about this,” one broadcast industry official said. “This could take the issue off the table during the election year.”

The Philadelphia court issued its three-page ruling Wednesday evening, just hours after hearing arguments in the case that consolidates nearly a dozen lawsuits challenging the new regulations.

“Given the magnitude of this matter and the public’s interest in reaching the proper resolution, a stay is warranted pending thorough and efficient judicial review,” the court said.

The FCC’s current media rules will remain in place indefinitely, pending the outcome of the consolidated suits.

During a two-hour hearing Wednesday, a panel of three judges largely skirted the broader issue of whether they believed that opponents of the rules would succeed on the merits of their case. Instead, the judges expressed concerns that it would be difficult to unwind media mergers that might occur under the new rules, should they later be overturned. The court said there was little indication that a stay would harm the FCC or media companies.

“The court has done what the commission should have done in the first place,” said FCC Commissioner Michael J. Copps, a Democrat who voted against the new rules June 2 in a contentious FCC meeting.

Copps and fellow Democrat Jonathan S. Adelstein had asked Powell to delay implementation of the rules pending a review by the courts and Congress.

“I think this is great news,” said Sen. Byron L. Dorgan (D-N.D.), who is leading efforts to invoke a rarely used congressional veto of the rules. “It stops the process dead in its tracks for now.”

Powell, the FCC’s Republican chairman, declined to comment on the ruling.

FCC spokesman David Fiske said, “While we are disappointed by the decision by the court to stay the new rules, we will continue to vigorously defend them and look forward to a decision by the court on the merits.”

The ruling probably will prompt FCC and media industry attorneys to redouble their efforts to move the case from the court in Philadelphia to the District of Columbia, which they say has more experience in dealing with the rules. That court is also viewed as being more sympathetic to Powell’s arguments.

Chief Judge Anthony Scirica of the 3rd Circuit ordered parties Wednesday to submit by Sept. 11 final comments about the request to transfer the case.

But in a sign that the court may not be willing to release the case, Scirica also told attorneys to be prepared to litigate the case on an expedited basis.

The ruling frustrated broadcast and newspaper companies that have been seeking deregulation for years.

“If you were thinking of doing a deal, think again,” said one top Fox executive in reaction to Wednesday’s ruling. “Don’t even do it, because it might not stick.”

The new FCC regulations would dramatically increase the size of major broadcasters by allowing them to own stations reaching 45% of the nation’s households, up from the current 35%.

The new rules would also let companies increase their ownership of broadcast stations in a single market and permit companies to own both TV stations and newspapers in one city.

With TV stations that reach about 40% of the nation’s television households, both Fox, a unit of News Corp., and CBS, a unit of Viacom Inc., are over the federal 35% cap.

But both companies have FCC waivers that protect them from having to sell stations pending the outcome of the FCC rule proceeding. Those waivers are expected to be extended by the court stay.

A Senate appropriations subcommittee is expected today to pass an amendment to a spending bill that would overturn part of the FCC order, including the TV ownership cap increase. This summer, the House passed a similar measure. President Bush has threatened to veto efforts to roll back the FCC reforms.

Powell, who has argued that the old rules no longer reflected the modern media marketplace, was counting on the federal courts to back up his reforms. He frequently said his top priority was crafting rules that would stand up in court.

His review of the media rules was prompted largely by a string of court defeats in the U.S. Court of Appeals for the District of Columbia Circuit, which found many of the old FCC rules -- several of which Powell had opposed while an FCC commissioner -- to be unjustified.

“The old rules were a disservice to the public interest,” FCC Associate General Counsel Jacob Lewis told the judges Wednesday.

Lewis accused FCC critics of attempting to reopen policy debates they’ve already lost, and warned that the stay would lead to regulatory and marketplace uncertainty.

Supporters of the new media rules called Wednesday’s court ruling a serious setback.

“It’s surprising and disappointing,” said Richard E. Wiley, a former FCC chairman who now represents newspaper industry chains. “This could really slow things down.”

(Tribune Co., parent of the Los Angeles Times, was a leading proponent of relaxing the media rules.)

In arguing for the stay, Schwartzman said media merger deals were already in the works in cities such as Shreveport, La., and Fairbanks, Alaska.

“The FCC order starts an irreversible process that will result in a wholesale restructuring of the media industry in this country,” Schwartzman told the judges.

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Times staff writer Sallie Hofmeister in Los Angeles contributed to this report.