Justices Decline to Hear FCC Media Case

The Supreme Court on Monday put the incendiary issue of expanded media ownership back in the lap of the Federal Communications Commission, forcing officials to take another crack at revamping their rules.

The action means FCC commissioners will have to rewrite polices they moved to dramatically loosen in 2003 that govern how many TV and radio stations companies can own. They also must better justify the rationale for wanting to ease restrictions on companies owning TV stations and newspapers in the same market.

But any new plan probably won’t be finalized for at least six months, and could still face legal challenges from media watchdog groups that contend that ownership consolidation is reducing media diversity.

The Supreme Court’s decision is a setback for the nation’s big news and broadcast companies. Citing technological and market changes, media conglomerates have long argued that rules that limit station acquisitions, as well as the cross-ownership of newspapers and broadcast stations, are antiquated.

Companies had sought to have the high court reinstate the 2003 rules after the U.S. 3rd Circuit Court of Appeals in Philadelphia last year ordered the FCC to rewrite them. But the Supreme Court, without comment, declined to hear the case.

The Supreme Court decision was not a surprise, given that the Bush administration had itself declined to appeal, purportedly because officials saw no major constitutional issues raised in the case.

Still, the decision will probably keep media deal makers on the sidelines by extending the uncertainty that has surrounded the media ownership rules since the FCC moved to ease them. It also may prove worrisome for critics of media consolidation, who could see the FCC produce a new rule no more to their liking than the old one.

“Will the FCC use this rebuke as an opportunity to institute media policy that reflects the wishes of the millions and millions of Americans who oppose greater media consolidation?” asked Josh Silver, executive director of FreePress, a Northhampton, Mass.-based media watchdog. “Or will the majority on the commission simply try to sneak in the same indefensible policies through the back door?”

Tribune Co., which owns the Los Angeles Times and KTLA-TV Channel 5, was one of the companies seeking a hearing from the Supreme Court.

In a statement, Tribune said it was confident that a new FCC rewriting of the rules would still allow cross-ownership of newspapers and TV stations, noting that the Philadelphia appeals court affirmed FCC efforts to change that specific part of the law. Tribune has some urgency in seeing uncertainty resolved soon, because KTLA’s broadcasting license comes up for FCC review at the end of next year.

The media ownership rules, adopted in 2003 on a 3-2 vote along party lines, lifted a 1975 ban on owning both a newspaper and a television or radio station in the same market. The revised rules also would have allowed a company to own two TV stations in more than 90% of local markets, and as many as three stations in the biggest markets, including Los Angeles and New York.

Monday’s high court action means the 1975 ownership limits will continue. A company may own a maximum of two stations if there are eight other independent TV stations in the area.

New FCC Chairman Kevin J. Martin has been an advocate of easing ownership restrictions but has suggested they be tackled piecemeal rather than in the sweeping way his predecessor, Michael K. Powell, tried to change them. In either case, experts say, Martin probably will defer any new action on the rules until the Bush administration fills a Republican vacancy on the five-member commission.

Meanwhile, the FCC’s two Democrats, Michael J. Copps and Jonathan S. Adelstein, are expected to push the agency hard to start work quickly on rewriting the rules to keep the heat on the panel’s Republicans. A coalition of conservative and liberal groups has flooded the agency with more than 2 million e-mails, faxes and letters protesting the revised media ownership rules.

Adelstein said he would urge his colleagues to hold a new round of public hearings on media ownership rules, saying, “if we don’t go at it comprehensively we could make a big mistake.” Adelstein’s approach appeared to draw support from several members of the Senate.

“The Supreme Court’s action is the final nail in the coffin for the misguided FCC rule relaxing media ownership restrictions,” said Sen. Russell D. Feingold (D-Wis.). “Rather than advancing the interests of media conglomerates, the FCC needs to listen to the people across this country who are calling out for more, not less, localism and diversity in television and radio.”

But some analysts said the ruling would continue to put a chill on a media market that had seen little trading for more than two years.

“The [broadcast station] deal level has been abnormally low in an industry known for the liquidity of its assets,” said Bishop Cheen, who follows broadcasting industry investment as director of Wachovia Securities Fixed Income in Charlotte, N.C. “I expect that to continue” until the final rules are issued, he said.

After the decision, which came Monday morning, Tribune shares rose 38 cents to $35.74, although a Barron’s article speculated that Tribune and Knight Ridder Inc. could be candidates for buyout by private-equity firms.