8th Circuit Panel Questions FCC Ownership Rules in 2018 QR Oral Argument
The 8th U.S. Circuit Court of Appeals judges didn’t appear to greatly favor either side in arguments Wednesday on the FCC’s 2018 quadrennial review order, but broadcast industry officials and attorneys said they saw it as a positive sign that the panel apparently embraced the idea that broadcasting is under threat. Aren’t FCC rules intended to promote viewpoint diversity “short-sighted” if they lead to broadcasters going out of business and no longer offering news? asked Judge Duane Benton of FCC attorney James Carr. “Isn’t AM radio dying?” Benton asked at another point. “I hear they’re not even going to put it in new cars.”
Sign up for a free preview to unlock the rest of this article
Communications Daily is required reading for senior executives at top telecom corporations, law firms, lobbying organizations, associations and government agencies (including the FCC). Join them today!
The FCC didn’t appear to pull any punches in defending the 2018 QR order at oral argument Wednesday, though Chairman Brendan Carr was critical of the order as a commissioner. In another case earlier this year, the FCC backed off defending portions of the equal employment opportunity order, which the chairman voted against as a commissioner (see 2502040061). In that case, the FCC told the court that the agency was obligated to defend orders approved by the full commission until a quorum of commissioners decided otherwise. James Carr (unrelated to the FCC chairman), said Wednesday that the FCC was justified in tightening ownership rules on broadcasters and that Congress gave the agency discretion to regulate broadcasters.
The panel had pointed questions for Carr and Gibson Dunn’s Andrew Kilberg, who represented petitioners Zimmer Radio, Nexstar, NAB, Beasley Media and Tri-State Communications. “Do you see it as the commission’s job to protect broadcasters?” Benton asked Kilberg. In the most recent ruling on an FCC quadrennial review, the U.S. Supreme Court “gives a lot of deference to the FCC,” said Judge Bobby Shepherd. “Why doesn’t that rule this case?” Kilberg replied that the FCC isn’t entitled to deference when it violates administrative procedure rules by not considering the competition that broadcasters face. Judge Raymond Gruender pointed out to Kilberg that historically, the FCC has always defined broadcasters' competition only as other broadcasters. “Do we have the authority to force the FCC to redefine the marketplace, or is that something Congress has to do?”
Kilberg and Wilkinson Barker’s David Oxenford -- who represented a collection of midsize radio intervenors in the case -- argued that the FCC’s 2018 QR order disregarded evidence that broadcasters compete with internet platforms for audience and advertising dollars. “We're competing against digital media companies, and that's what the FCC should have been analyzing, not sending radio off into its own world,” Oxenford said. Carr said the FCC had considered and acknowledged the rising internet competition but didn’t agree that broadcasting faced a dire threat or that consolidation would help. The FCC focused on the public interest, not the “private interests of broadcasters,” he said. “Whatever might be the answer for solving their financial problem, further consolidation is not it.”
The panel repeatedly questioned both sides about the definition of competition used by the FCC and in the Communications Act. Shepherd asked Kilberg to define competition, while Benton pointed out to the FCC’s attorney that the preamble of the 1996 Telecommunications Act says it's intended “to promote competition and reduce regulation.” When Carr argued that the FCC QR order was aimed at serving the public interest by maintaining viewpoint diversity, Benton interrupted to raise the issue of competition. “Throughout most of this, I've not heard you discuss promoting competition, which Congress says you're supposed to promote.” Jenner & Block’s Jessica Ring Amunson, arguing in support of the FCC on behalf of cable groups, said the agency's tighter ownership rules promoted competition because they prevented broadcasters from gaining unfair leverage in retransmission consent negotiations.
Kilberg argued that the FCC had violated the intent of Congress’ creation of Section 202(h), the provision of the Communications Act that requires quadrennial reviews, because the 2018 order expanded local ownership rules. Carr responded that Congress said the FCC should “repeal or modify” rules, and the statute wouldn’t have used “modify” if the rules could only go one way. That led to the judges asking if they were still bound by any of the precedents of the 3rd Circuit’s repeated rulings on previous quadrennial review cases.
The 3rd Circuit ruled that the FCC had the authority to tighten or repeal rules in the quadrennial review, so the 8th Circuit respecting those precedents could be in the FCC’s favor, said Andrew Schwartzman, senior counselor for the Benton Institute for Broadband & Society, and Cheryl Leanza, who represents the United Church of Christ Media Justice Office. Schwartzman stressed that he wasn’t sure which way the panel ultimately leaned. “I am no more clear on the outcome of this case now than I was at 9 o'clock this morning,” he said.
The court’s eventual ruling on the QR isn’t expected to affect broadcasters as much as previous QR legal battles because the FCC is expected to deregulate broadcast ownership either way, broadcast and public interest attorneys told us. A ruling in the case “will help further refine the degree of deference” the FCC can expect in future quadrennial reviews and legal challenges, but it isn’t likely to prevent ownership deregulation, Schwartzman said.