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Courts and Congress Blunt FCC's Media Relaxation

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The assault on the Federal Communications Commission's landmark relaxation of media-ownership rules intensified last week, with a court blocking the new rules and a key U.S. Senate committee voting to keep TV networks from getting bigger. The blows came as networks and the FCC itself boosted efforts to sell Congress and the public on regulations that increasingly seem to be in jeopardy.

The 3rd U.S. Circuit Court of Appeals in Philadelphia issued its stay on Wednesday; the Senate Appropriations Committee cast its unanimous, bipartisan vote on Thursday, the day the new rules were to go into effect. The upshot: Last week, which might have begun a new era of corporate station-swapping, ended with the FCC stymied. The agency announced it temporarily would accept no new applications to transfer ownership of TV or radio stations.

Privately, agency officials admitted they were unsure how to handle pending applications. Those could include the likes of Paxson Communications' sale of KPXJ-TV in Shreveport, La. The sale to KTBS-TV was announced on June 17, barely two weeks after the FCC's ownership vote, which allowed bigger networks and eased restrictions on owning two stations in smaller markets. Chairman and CEO Lowell "Bud" Paxson said the transaction "demonstrates the keen interest in our broadcast stations heightened by the FCC's new rules." On Friday, Paxson declined comment on the sale's status.

Before the federal judges on Wednesday, Media Access Project lawyer Andrew Jay Schwartzman pointed to Shreveport as an example of a deal allowed under the new FCC rules but not under the old rules. The three-judge panel bought Schwartzman's argument, ruling "alleged harms from industry consolidation" could not be reversed if the rules were to be nullified later. By contrast, they said, "there is little indication" a stay would harm the FCC or Fox, NBC and Viacom, which are taking part in the litigation.

Immediate reaction was muted. "We are disappointed," said an FCC rep, who added that the agency "looks forward to a decision by the court on the merits." That is unlikely to come for at least six months. The case before the judges is complex, with litigants that include big-media opponents who fear consolidation (such as the Prometheus Radio Project, the low-power FM advocates who won last week's stay) and companies that say the rules remain too restrictive. "In short, a complicated situation gets more complicated, and the expected set of deals, particularly those in local markets, get pushed back," Legg Mason analyst Blair Levin said in a research note.

If the message for the marketplace was muddled, the message for politicians was clearer: The FCC's rules are vulnerable. Senate appropriators with little public discussion decided to limit networks to owning stations that can reach 35 percent of the national audience, down from the 45 percent decided by the FCC. Senators explicitly used language identical to that used in the House, which acted in defiance of Republican leaders defending the FCC's deregulation. The idea was to insulate the cap from pressure by House leadership during the legislation's last stop in Congress—the negotiations to meld the two chambers' bills. "We've taken the issue out of conference," said Sen. Ted Stevens, R-Alaska, the appropriations chair. Activists took heart. "There is enormous momentum building to overturn all the FCC's rules," said Gene Kimmelman, public policy director for Consumers Union.

Fox, NBC, Telemundo, ABC and Viacom tried to slow that momentum, buying ads in Capitol Hill newspapers to tout a new poll they said demonstrates public support for keeping regulators away from TV. Their message comes late in a debate that shifted into a higher gear with the FCC's deregulatory vote of June 2. "While we knew it would be controversial, we didn't anticipate that," FCC Chairman Michael Powell admitted last week on C-SPAN's Washington Journal. "I think we'll have to get more sophisticated in the art form of public dissemination." Sophisticated salesmanship may not be enough to rescue the new ownership rules.