Court Orders FCC to Reconsider Ownership Limits

In a unanimous opinion, the three-judge panel of the U.S. Court of Appeals for the District of Columbia called the FCC’s decision to retain the rule “arbitrary and capricious and contrary to law,” and said the agency would have to better justify why the audience cap needs to remain in place.

Plaintiffs Fox Television, Viacom, CBS Broadcasting and NBC argued the rule restricts their companies’ growth potential and free speech rights.

The FCC granted Fox a reprieve from complying with the ownership cap last year, allowing it to begin its purchase of Chris-Craft Industries — a merger that would give Fox a 40 percent audience reach. But the rule has kept Fox from completing that purchase.

Viacom, meanwhile, exceeded the audience limit with its purchase of CBS in 2000 — a move that gave the company a 41 percent reach. The FCC approved the merger last year, but said Viacom must comply with the cap within 12 months.

Earlier this year, the same appeals court gave Viacom a reprieve from that order, but vacated its stay today.

According to court documents, the ownership cap grew out of a 1940s rule prohibiting broadcasters from owning more than three television stations — a number raised in succeeding decades.

In 1984, the FCC considered repealing the rule, but that move was blocked by Congress. The agency later set a limit of 25 percent of the national audience for television station owners and a cap of 12 TV stations per owner regardless of their reach.

The rule was amended in the 1996 Telecommunications Act, which repealed the 12 station limit and raised the national audience cap to 35 percent.

Cable/broadcast ownership rule repealed

The same federal court today struck down an FCC rule barring a cable TV system from carrying any broadcast station’s signal if the system’s owners have a broadcast station in the same market.

The judges threw out the rule, saying that they thought it was “unlikely the Commission will be able on remand to justify retaining it.”

AOL Time Warner subsidiary Time Warner Entertainment filed suit against the rule, claiming it was arbitrary and limited the company’s first amendment speech rights.