Fox Television Stations v. FCC
National Television Station Ownership Rule
&
Cable/Broadcast Cross-Ownership Rule
Background
The TCA of 1996 repealed, overrode, or
eased the following:
Telephone/Cable Cross-Ownership
Cable/Broadcast Cross-Ownership
Cable/Network Cross-Ownership
Restrictions on National Radio Ownership
Restrictions on Local Radio Ownership
Dual Network Rule
Background
The TCA of 1996 also directed the FCC to:
Eliminate the cap upon the number of television
stations any one entity may own.
Increase to 35 from 25 the maximum percentage
of American households a single broadcaster may
reach.
Review its ownership rules every two years in
order to continue the process of deregulation. TCA
of 1996 § 202(h)
TCA of 1996 § 202(h)
In March 1998 the FCC began it’s first
review via an NOI ending in June 1998.
By Fall 1999, the review had yet to be
completed.
On May 26, 2000 the FCC announced
their decision.
Retain the NTSO and CBCO.
The National Television Station
Ownership Rule (NTSO)
What is it? What is its purpose?
Prohibits any entity from controlling
television stations the combined
potential audience reach of which
exceeds 35% of the television
households in the U.S.
Promoting diversification of
ownership in order to maximize
diversification of program and
service viewpoints
Prevent undue concentration of
economic power
The Cable/Broadcast Cross-Ownership
Rule (CBCO)
What is it?
Prohibits a cable television system from
carrying the signal of any television broadcast
station if the system owns a broadcast station
in the same local market.
What is its effect?
Prohibiting common ownership of a broadcast
station and a cable television system in the
same local market.
Retention of the NTSO
Why keep it?
Observe the effects of recent changes to the
rules governing local ownership of TV stations.
Observe the effects of the increase in the
national ownership cap to 35%
Preserve affiliates bargaining power vis-a-vis
their networks allowing them to better serve
their local communities
Prevent increased concentration in the national
advertising market
Prevent the potential for monopsony power in
the program production market from enlarging.
Retention of the CBCO
Why keep it?
Prevent cable operators from favoring their own
stations.
Prevent discrimination against stations owned
by others.
Further the goal of diversity at the local level
since it contributes to the diversity of viewpoints
in local markets by preserving the voices of
independent broadcast stations.
Effects of Retention
Viacom’s acquisition of CBS brought its
audience reach to 41%.
Preventing Fox from going forward with an
acquisition that would enable it to reach more
than 40% of the national audience.
Preventing Time Warner from acquiring TV
stations in markets where it already owns a
cable system.
Hinders Time Warner’s WB Network from
competing with networks that own stations in
major markets.
The NTSO Rule and the Court
Networks argued NTSO was arbitrary
and capricious because:
Irrational
Not necessary in the public interest
Failed to explain change in position
Networks argued FCC failed to comply with
202(h).
Networks argued FCC failed to address 1984
Report.
Violates the First Amendment
Arbitrary and Capricious
35% Cap less justified than limitation in Time
Warner II.
Court: Time Warner II does not control
No reason why necessary for public interest.
Court: No valid reason that necessary to
safeguard competition. No explanation why
change from irrelevancy of diversity in 1984. No
explanation why NTSO furthers diversity. Reasons
given in the 1998 Report do not support retention.
Retention is Inconsistent
Court: Maintaining National Ownership Cap not
inconsistent with other deregulation decisions.
Other Arguments Against NTSO
FCC failed to comply with 202(h).
Court: FCC did not even address
meaningfully the question Congress
required it to answer since no evidence
given.
FCC failed to address the 1984 Report.
Court: The FCC may change its mind but it
must explain why it is reasonable to do so.
NTSO and First Amendment
Red Lion scarcity rationale not valid.
Court: We’re not in a position to overturn Red
Lion.
NTSO does not mitigate scarcity.
Court: NTSO increases different voices heard
nationally.
NTSO subject to intermediate scrutiny.
Court: NTSO is not content-based.
NTSO Fails Rational Review
Court: Not unreasonable for Congress to prefer
having more voices heard in the aggregate.
The CBCO Rule and the Court
Time Warner contends the CBCO is
arbitrary and capricious because:
It does not promote competition as
reasoned by the FCC.
It does not promote diversity as reasoned
by the FCC.
Competition
FCC: Discrimination by offering joint advertising
sales and promotions. Incentive not to carry or
to carry undesirable stations.
Time Warner: No evidence given why joint
advertising is discrimination. FCC has declined to
impose must-carry rules. Must-Carry provisions
ensure access; DBS makes discrimination
unprofitable; no reason by FCC why change
from 1992; Rule does little to cure alleged of
incentive to discriminate.
Court: FCC failed to justify its retention of the
CBCO.
Diversity
FCC: Cable/TV combo. would represent
consolidation of only participants in video
market for local programming.
Time Warner: 202(h) precludes consideration
of diversity; Increase in number of local
stations renders marginal increase too slight;
Retention of CBCO cannot be reconciled with
TV Ownership Order.
Court: FCC diversity rationale woefully
inadequate.
Conclusion
NTSO was remanded to the FCC for
further consideration whether to repeal
or modify.
CBCO was vacated.