The FCC’s Media Ownership Rules: Possibilities for a New Administration

The FCC’s Media Ownership Rules: Possibilities for a New Administration

November 10, 2020, Covington Alert

Following the election, media companies and broadcasters are considering what new policies and actions the Federal Communications Commission (“FCC”) might take once the Biden administration is in place. As we have previously discussed, although the FCC is an independent agency, its agenda will be controlled by the Chair that will be appointed by the President. A Democratic FCC is expected to chart a different course on a number of key policy issues than the current FCC has pursued under Chairman Pai. This is especially true of the FCC’s media ownership rules, which have been a point of contention for many years, with the FCC adopting different approaches under Democratic leadership as compared to Republican leadership. The current status of these rules is deeply uncertain in light of a pending Supreme Court case and ongoing FCC proceedings that consider whether further reforms are needed. This alert examines the possible actions that the new administration may take with respect to FCC’s media ownership rules.

Reforms to the FCC’s Media Ownership Rules Have Stalled

The FCC’s media ownership rules place various limits on the manner in and extent to which broadcast stations may be commonly owned within a local market. For example, these rules prohibit a single entity from owning a full-power broadcast station and a daily newspaper in the same market. Congress has directed the FCC to review these rules every four years and modify or repeal them in light of competitive changes to the media marketplace—a process known as the quadrennial review.

The quadrennial review process has been mired in litigation since the early 2000s. Each time the FCC has attempted to reform its media ownership rules through the quadrennial review process, the resulting rule changes have been challenged in court. And the same three-judge panel of the U.S. Court of Appeals for the Third Circuit has set aside each of the FCC’s quadrennial review orders.

As a result, the ownership rules have remained stagnant—even though many of these rules are decades old and were put in place in a dramatically different marketplace than that in which broadcasters, networks, and other media outlets operate today. 

This process repeated itself once again in connection with the 2014 quadrennial review cycle, the most recent to be completed. Under then-Chairman Wheeler, the FCC adopted an order in 2016 (the Second Report & Order) that largely left the media ownership rules in place—and effectively tightened some of those rules. Then-Commissioner Pai dissented from that order and, following the 2016 election and his elevation to Chairman, moved to overturn the Second Report & Order. The 2014 cycle culminated in a 2017 order under Chairman Pai, known as the Reconsideration Order, that modified the 2016 Second Report & Order in significant ways—including by relaxing several of the media ownership rules (including the local television ownership or “duopoly” rule) and repealing others (such as the newspaper-broadcast cross-ownership rule) entirely. As with the prior quadrennial reviews, groups opposed to deregulation challenged the Reconsideration Order in court, and the Third Circuit once again vacated the FCC’s reforms. As a result of this decision (Prometheus Radio Project v. FCC), the ownership restrictions modified or repealed by the Reconsideration Order went back into effect and remain on the books today.

However, unlike in prior quadrennial reviews, the FCC successfully petitioned the Supreme Court to review the Third Circuit’s decision. The Supreme Court granted the FCC’s petition in October 2020 (along with a companion petition filed by a coalition of affected industry members) and is expected to hear oral argument in January 2021, with a decision likely in May or June 2021. In parallel with those proceedings, the FCC has begun its 2018 quadrennial review process. Each of these pathways creates the possibility for reform.

The Supreme Court May Break The Deadlock

The Supreme Court’s decision to hear the media ownership case means that the 20-year deadlock may finally come to end. The fact that the Court agreed to hear the case is a strong signal that it may well reverse the Third Circuit (the Supreme Court reverses much more often than it affirms). That said, the real-world effect of a ruling reversing the Third Circuit’s decision would depend on the Supreme Court’s reasoning—in particular how the Court interprets the FCC’s statutory mandate to update its media ownership rules and whether that interpretation circumscribes the FCC’s ability to impose ownership limits going forward. A ruling overturning the Third Circuit’s decision on narrow or procedural grounds and returning the case to the Third Circuit would have a much less significant effect than a broad ruling reinstating the Reconsideration Order and putting an end to the Third Circuit’s long-running supervision of the quadrennial review process.

It is possible that a Democratic FCC could decline to continue defending the Pai-era Reconsideration Order, as Democratic members of the Commission (present and past) have suggested disagreement with that Order. However, this outcome strikes us as unlikely given the posture of the case. The Supreme Court almost assuredly will hear argument in the case prior to January 20, when President Biden will name one of the two current Democratic commissioners either acting chair or permanent chair of the agency. A reversal of the FCC’s position also would require coordination with the Solicitor General’s office, increasing the procedural complexity of such a maneuver and further lowering its likelihood.

The FCC’s Response Will Be Key

In the meantime, the FCC has begun the new 2018 quadrennial review cycle, but little progress has been made. In December 2018, the FCC issued a notice of proposed rulemaking (“NPRM”), initiating the process. The NPRM generally was light on details, instead seeking comment on a series of mostly open-ended questions. Importantly, the NPRM was issued before the Third Circuit vacated the Reconsideration Order. The NPRM is thus outdated in the sense that it proceeds from the basis that the ownership rules were recently reformed and considers only whether additional reforms are needed.

The FCC almost certainly will have to refresh the record before it advances the quadrennial review proceeding. In addition to the general passage of time since comments were filed in early 2019, the FCC will need to update its analysis of the media ownership rules to reflect their current status—i.e., in light of whatever action the Supreme Court takes with respect to the Reconsideration Order. A new Democratic FCC could use its notice to refresh the record as a means to reframe and refocus the questions under consideration to reflect concerns about media consolidation and ownership diversity.

Apart from the quadrennial review, a Democratic FCC could consider reforming other ownership-related rules—in particular, the national television ownership cap and the UHF discount (pursuant to which UHF stations are discounted by 50% when calculating compliance with the ownership cap). By statute, the national television ownership cap is not subject to the quadrennial review process and therefore must be considered in separate proceedings. The Obama-era FCC adopted an order eliminating the UHF discount without modifying the national television ownership cap. However, the FCC reconsidered that order under Chairman Pai and issued a further order reinstating the UHF discount (with then-Commissioner Clyburn dissenting). The FCC also opened a new proceeding to review the national cap and UHF discount together. But this proceeding, too, has stalled—the FCC sought comment in early 2018 and has not taken any action since. Thus, as with the quadrennial review, the FCC likely would seek to refresh the record before advancing any reforms to the national television ownership cap or the UHF discount. And history suggests that if the Democratic FCC seeks to revise these rules, it will be less inclined to loosen them and may even take steps to tighten them.

Whatever action the FCC takes, a key consideration moving forward will be the scope of the FCC’s authority to impose ownership restrictions following the Supreme Court’s decision. Parties on both sides—those seeking to loosen the ownership rules and those opposed to such changes—are likely to continue litigating the matter. Thus, there likely will be several opportunities for affecting and facilitating reforms to the FCC’s media ownership rules over the next four years.

If you have any questions concerning the material discussed in this client alert, please contact the following members of our Communications and Media practice.