Broadcasters See Appeal as Better Plan Than Complying With 3rd Circuit

The appeal route, though uncertain, is seen as more likely and viable than an FCC attempt to comply with the 3rd Circuit's directive to gather statistical evidence about the effect of FCC policies on minorities and women, several broadcast attorneys told us. “It's hard to get statistics that could satisfy the court,” said Pillsbury broadcast attorney Scott Flick. ”They could gather all that information and the court could say it's not good enough.” “It's not done,” said Neuhoff Communications CEO Beth Neuhoff. “A lot could happen.”

The FCC cemented its opposition to the court decision with an order Tuesday approving a long-stalled Gray Television transaction that includes creating a new top-four combination in Sioux Falls, South Dakota.

The agency's top-four approval process is among the rules reset by Monday's opinion, but that opinion won't technically take effect for a few weeks. “The mandate in that case has not yet issued, so the 2010/2014 Quadrennial Review Order on Reconsideration remains in effect,” said Tuesday's order approving Gray's buy of several stations from Red River Broadcasting. “Furthermore, the Commission intends to seek review of that decision.” The order said the top four waiver would be merited even under the FCC's prior rules.

Before Tuesday's order, Gray's more than a-year-old application had been seen as indefinitely stalled (see 1904090063). The timing and content of Tuesday's order appear to be a deliberate poke at the 3rd Circuit, said several attorneys.

Commissioner Jessica Rosenworcel tweeted similar thoughts Tuesday. “This is brazen. It will infuriate the court. And it saddens me that the agency has so little respect for the rule of law,” Rosenworcel said. “To double down and release an order that consolidates ownership using rules that were invalidated just a day after the Prometheus decision isn't legitimate policymaking, it's a tantrum by the majority commissioners,” said University of Minnesota School of Journalism assistant professor-media law Christopher Terry. Gray and the FCC declined to comment.

Appeals are uncertain, but that's a better route to restoring the rule changes knocked down by the 3rd Circuit than following the court's direction to gather evidence, nearly every broadcast attorney interviewed said. It's not possible to satisfy the court's requirements, they said. “The idea the FCC can appeal its way out of the longstanding and unanswered remands is just proof of what the 3rd Circuit has said all along: the agency refuses to admit media ownership policy is not producing the results the FCC says it does,” said Terry.

Though united in support for an appeal, broadcast industry officials are divided over whether that appeal should be to a full panel of the 3rd Circuit or to the Supreme Court. If the FCC pursues an en banc appeal, it would have to wait for that appeal to be resolved before seeking cert with SCOTUS, attorneys said. That could take a while, and time is a factor, Flick said. If the appeals process lasts until after the 2020 presidential election, the current FCC could be replaced with one less favorable to media deregulation. Attorneys' and industry officials' opinions also varied on whether an en banc appeal or cert is a more likely option. The case's long history and repeated iterations with the same panel of judges repeatedly reaching the same conclusion are seen as unusual characteristics that could make a successful appeal more likely, several broadcast attorneys said.

The 3rd Circuit opinion greatly muddles expectations for the 2018 quadrennial review (QR) order, which radio broadcasters hoped might roll back local radio ownership rules, broadcasters and attorneys said. “It's a real curveball,” Entercom CEO David Field said in an interview, saying the industry was still trying to get its arms around the court decision.

Neuhoff said the decision doesn't remove the possibility of deregulation but delays it. “It's a timing issue,” she said. Other industry officials said the matter is more uncertain. With an appeal in the works, the 2018 QR order is likely indefinitely on hold, one broadcast attorney said. Even before the court's opinion, radio ownership deregulation wasn't a given, said Fletcher Heald broadcast attorney Matthew McCormick. Several broadcasters -- including industry giant iHeartRadio -- opposed the NAB-backed deregulation plan, McCormick said.

Rolling back broadcast deregulation isn't the best way to increase ownership diversity, Neuhoff said. “It's going to have the opposite effect,” she said. The National Association of Black Owned Broadcasters was a party to the case and challenged the FCC's incubator order, but the 3rd Circuit opinion went further than anticipated, NABOB President Jim Winston said. “Our objective was to improve the incubator program, not to eliminate it,” he said. Winston wants to find a way to bring back incubators and for broadcasters to help the FCC address the issues raised by the court, he said. “A major industry push to bring back the tax certificate could solve a lot of the problems about which the court was concerned.” Luis Morales of Real Media Group said a lack of ownership diversity in broadcasting is why his company's station is the only Spanish language religious AM station in Massachusetts.

The FCC action approving Gray's deal before the court's mandate takes effect could be replicated for other transactions, a broadcast attorney said. Cox Media Group Executive Vice President Bill Hendrich wouldn't comment on whether Apollo's buy of Cox stations could take this route, but some broadcast attorneys suggested it as possible. The FCC's rushing out a large transaction such as Apollo/Cox is unlikely, said a broadcast industry official. Such a large transaction is more likely to be approved using the FCC's waiver process, the attorney said. Tuesday's order approving the Gray transaction emphasized the agency's discretion to waive its own rules: The FCC's “discretion to proceed in difficult areas through general rules is intimately linked to the existence of a safety valve procedure for consideration of an application for exemption based on special circumstances,” the order said, quoting a 1969 D.C. Circuit ruling.