Court strikes down cross ownership ban
By Bill McConnell
TVinsite Broadcasting &amp Cable
2/20/2002 12:31:00 PM
In a move that could fuel a tremendous new wave of media consolidation, federal judges threw out the ban on cable-broadcast cross-ownership Tuesday and ordered the Federal Communications Commission to either justify or eliminate the government’s 35 percent cap on one company’s national TV-household reach.
The decision was in response to suits filed by Fox Broadcasting Co. and Time Warner Inc. and later consolidated by the court.
Tuesday’s ruling could also make it difficult to maintain the local newspaper-broadcast cross-ownership limits, which the FCC is currently reconsidering.
One analyst predicted that the court’s decision will force the commission to significantly raise the ownership cap and cede much of its merger oversight to the Department of Justice and the Federal Trade Commission.
'The court decision points toward a shift in oversight of media ownership from prophylactic FCC rules to case-by-case analysis by antitrust authorities,' Legg Mason Wood Walker Inc.’s Blair Levin said.
The ownership cap will remain in place pending the FCC review.
This is in contrast to the same court’s decision to remand the FCC’s 30 percent cap on a cable company’s pay TV-audience share in March 2001. In that case, it immediately vacated the cap but gave the commission the option of reinstating it or imposing another limit later.
Both ownership-limit decisions are based on court findings that the FCC did not adequately explain a rationale for the specific limits.
In vacating the broadcast-cable cross-ownership rules, the judges said, the FCC failed to consider increasing competition from direct-broadcast satellite or to put forward any adequate reason for believing the rule remains necessary in the public interest.
The court also said the agency 'failed to consider the increased number of TV stations since the rule was imposed in 1970.'
Adding that the FCC could always try to reinstate the rule with a new justification, the court said it didn’t think vacating it would be too disruptive to the agency, although it added that the probability that the FCC could justify it was 'low.'
Time Warner, which has launched several local cable news channels, challenged the ownership limits on grounds that it might want to buy broadcast stations in markets where it operates cable systems, such as New York.
'We are very pleased that the court has vacated the cable-broadcast cross-ownership rule,' AOL Time Warner Inc. executive vice president and general counsel Paul Cappuccio said. 'That rule had long ago become an anachronism.'
The National Cable &amp Telecommunications Association, while not a party to the case, welcomed 'the increased flexibility' cable operators will obtain, a spokesman said.