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The FCC’s Legacy on Media Ownership: Now with More Failure!

On August 10,  2016, the Federal Communications Commission released The Second Report and Order which concluded the agency’s long proceeding–launched in 2010 and renewed in 2014–dealing with media ownership rules. This order represents yet another failure–and lost opportunity–within the agency’s 13-year legacy of failure in addressing the problems of the consolidation and the sharply diminished minority ownership of broadcast stations that resulted from the 1996 Telecommunications Act.

In terms of radio, the Act changed the face of the industry in the U.S. I discussed these industry and regulatory changes on this Radio Survivor Podcast from February (in short, all nationwide ownership caps were lifted, and local ownership limits were raised). But our story today is the one, 20 years in the making, where we dissect the FCC’s most recent failure on media ownership policy.

As part of its delegation within the 1996 Telecommunications Act, the agency is periodically required to review its media ownership rules. This process, which was originally assigned a two-year time period (a biennial review), was engaged in by the agency in 1998, 2000, and between 2002-2003. Taking a wait and see approach in 1998, then reviewing agency rules in 2000, the FCC’s first substantive move to evaluate media ownership came in June of 2003, when the agency, under then Chairman Michael Powell, released a new methodology for calculating ownership limits called the “Diversity Index.” It was released without a public comment period and with fundamental logical flaws. No part of it was intended to slow or reverse the massive consolidation that happened. Citizens who had watched their local radio stations be absorbed by conglomerates between 1996 and 2003, and a diverse coalition of public interest groups, moved to oppose the FCC’s decision.

After a multi-district panel handed the case to the Third Circuit Court of Appeals (typically agency decisions are reviewed by the D.C. Circuit) the Prometheus Radio Project became the lead plaintiff challenging the FCC’s 2003 ownership rules. In 2004, the Circuit handed down the first remand, finding the new rules to be flawed, and sending the agency back to the drawing board. The primary reasoning the court expressed was the lack of evidence to support the agency’s decision making. I talked on this lack of evidence at a presentation at the “What is Radio” conference in Portland in 2013.

In the meantime Congress granted the agency an extension of time on the required reviews, extending the deadline to four years (a quadrennial review). The next scheduled review was launched by the agency in 2006. Late in 2007–in the midst of a second release that made a joke of the Administrative Procedure Act’s requirements–the Commission made changes to just one rule, the Newspaper-Broadcast Cross Ownership rule, which was first implemented by the agency in 1975. With the standing remand from the 2004 decision lingering, the agency also released a decision in a related, but separate, docket dealing with promoting ownership by women and minorities.

The two proceedings were wrapped together, and came under the jurisdiction of the Third Circuit to review the FCC’s proposals, under the remand from 2004. (That’s law nerd speak to say that the FCC had to go back to the court to show their work.) Unfortunately for the FCC, the agency still hadn’t done that earlier homework ordered by the court, and in 2011 the Circuit handed down a second remand. The agency was clearly ordered by the court to come up with a viable plan to deal with the steep decline in minority ownership of stations. The Court wrote:

“The FCC‘s own failure to collect or analyze data, and lay other necessary groundwork, may help to explain, but does not excuse, its failure to consider the proposals presented over many years. If the Commission requires more and better data to complete the necessary… studies, it must get the data and conduct up-to-date studies, as it began to do in 2000 before largely abandoning the endeavor. We are encouraged that the FCC has taken steps in this direction and we anticipate that it will act with diligence to synthesize and release existing data such that studies will be available for public review in time for the completion of the 2010 Quadrennial Review.”

Once again the FCC retreated to lick its wounds. The second remand essentially paralyzed the agency’s second quadrennial review launched in 2010. Unable, and largely unwilling, to produce the type of empirical evidence the court was asking for, the agency kept delaying the process. As four years came and went, the agency then “wrapped” the 2010 review into the one required in 2014, continuing to employ a delaying tactic.

The agency’s next big move was an attempt to get the issue (and all the Court’s remands) out of the Third Circuit and back to the DC Circuit Court of Appeals, which is presumed to be friendlier to federal agencies in general.  After that gambit failed, the FCC was dragged kicking and screaming back into the Third Circuit Court in April 2016 (oral argument here). Eventually even the FCC’s lawyer had to promise that the agency would draft a media ownership rules order this year. Not surprisingly, in short order, the Third Circuit ordered the FCC to quit lollygagging and complaining at get the work done:

“The FCC presents two arguments for why we should not order relief. Both fail… By [its own] logic, the Commission could delay another decade or more without running afoul of our remand. Simply put, it cannot evade our remand merely by keeping the 2010 review open indefinitely.”

At the time of the decision I wrote the following:

Unfortunately for us, that outcome might be a complete tear-down of the FCC’s structural scheme (essentially ownership-based approach) to media regulation. While I am not a fan of the current approach, at least it is an approach with rules. The agency’s failure to act may undermine those rules to the point of total repeal, which in turn, would open the doors to another round of ownership consolidation with essentially no controls on what could be owned by a single media organization. That is a terrifying reality, and one the court explicitly says it may resort to:

“Equally troubling is that nearly a decade has passed since the Commission last completed a review of its broadcast ownership rules–Several broadcast owners have petitioned us to wipe all the rules off the books in response to this delay—creating, in effect, complete deregulation in the industry. This is the administrative law equivalent of burning down the house to roast the pig, and we decline to order it. However, we note that this remedy, while extreme, might be justified in the future if the Commission does not act quickly to carry out its legislative mandate.”

And my friends, that’s where we find ourselves, with an FCC that has chosen not to act. In fact, a cry out for the status quo would have actually been better than what the FCC has done. In terms of radio, the primary issue is the numerical limit rule, allowing up to eight stations under common ownership in a single market. The previous remands from the Court demanded evidence to support this rule or to modify it. Instead the agency simply says the rule is good enough, but still fails to supply any empirical evidence to support the decision:

“…we find that retaining the existing rule nevertheless promotes opportunities for diverse ownership in local radio ownership. This competition-based rule indirectly advances our diversity goal by helping to ensure the presence of independently owned broadcast radio stations in the local market, thereby increasing the likelihood of a variety of viewpoints and preserving ownership opportunities for new entrants.” (Paragraph 125)

When I say the agency is doing nothing–keeping the rules that made radio what it is today in the face of evidence to the contrary–I mean exactly that. Note in this paragraph, the FCC relies only on competition to justify the rule, saying that the other two key elements of media ownership policy, localism and viewpoint diversity, don’t matter. Note how the agency also concludes without any supporting empirical evidence (you might start to notice a theme here) that the policy fosters minority ownership:

“In the Order, the Commission finds that the current Local Radio Ownership Rule remains necessary in the public interest and should be retained without modification. The Commission finds that the rule is necessary to promote competition. The radio ownership limits also promote viewpoint diversity by ensuring a sufficient number of independent radio voices and by preserving a market structure that facilitates and encourages new entry into the local media market. Similarly, the Commission finds that a competitive local radio market helps to promote localism, as a competitive marketplace will lead to the selection of programming that is responsive to the needs and interests of the local community. However, the Order does not rely on viewpoint diversity or localism as a justification for retaining the rule. The Commission finds also that the Local Radio Ownership Rule is consistent with the goal of promoting minority and female ownership of broadcast radio stations. The Commission ultimately concludes that these benefits outweigh any burdens that may result from the decision to retain the rule without modification.”

So despite an obvious order to resolve issues related to minority ownership, the FCC is going back to the plan that the Court told the agency was simply unworkable in 2011. This, even in the face of evidence that suggests that minority ownership creates content diversity (you know that the long-stated and court-supported goal of ownership policy.)

The FCC writes:

“In addition, we do not believe that Media Ownership Study 7, which considers the relationship between ownership structure and the provision of radio programming targeted to African American and Hispanic audiences, supports the contention that tightening the local radio ownership limits would promote minority and female ownership. While the data suggest that there is a positive relationship between minority ownership of radio stations and the total amount of minority-targeted radio programming available in a market, the potential impact of tightening the ownership limits on minority ownership was not part of the study design, nor something that can be reasonably inferred from the data.” (Paragraph 127)

But not content with ignoring evidence that demonstrates a clear path for the agency to develop a minority ownership policy, the agency decided to give the Third Circuit the middle finger.

“…We disagree with arguments that the Prometheus II decision requires that we adopt a race- or gender-conscious eligible entity standard in this quadrennial review proceeding or that we continue this proceeding until the Commission has completed whatever studies or analyses that will enable it to take race- or gender-conscious action in the future consistent with current standards of constitutional law.”

This is a curious position for the FCC to adopt. The Court very clearly ordered the Commission to fix standards related to minority ownership:

The eligible entity definition adopted in the Diversity Order lacks a sufficient analytical connection to the primary issue that Order intended to address. The Commission has offered no data attempting to show a connection between the definition chosen and the goal of the measures adopted—increasing ownership of minorities and women. As such, the eligible entity definition adopted is arbitrary and capricious, and we remand those portions of the Diversity Order that rely on it. We conclude once more that the FCC did not provide a sufficiently reasoned basis for deferring consideration of the proposed SDB definitions and remand for it to do so before it completes its 2010 Quadrennial Review.

Punting again on these issues, going so far to reinstate rules already remanded, the agency has invited a strong response from the Third Circuit. The FCC lacks empirical evidence to support its rulemaking here, and that’s not a new issue when it comes to media ownership. But even the competition ideology, which has dictated the agency’s actions since 1996, has been undermined by the economic marketplace the FCC has come to rely on to justify its actions. One need not look further than the smoldering husks of Clear Channel, a monster created by the very Local Radio Ownership rule the agency is now defending. There can be no doubt that the Legacy of Failure, now 20 years old, is complete.

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