US Appeals Court Opens Door to Consolidation With Ruling Against FCC Regulations

20 February 2002

In a ruling that paves the way for even greater consolidation in America’s media industry, an appeals court has ordered the Federal Communications Commission to review a controversial TV ownership cap and has struck down completely a ban on companies owning cable systems and broadcast stations in the same market.

The US Court of Appeals for the District of Columbia declared yesterday (Tuesday) that the FCC’s ruling in 1998 to maintain the cap – which prevents media groups holding more than 35% of the US television market – was “arbitrary and capricious and contrary to law.”

Writing on behalf of the court’s three-member panel, judge Douglas Ginsburg also revealed that the concurrent decision to do away altogether with the ban on ownership of TV stations and cable networks was made because “we think it unlikely the Commission will be able on remand to justify retaining it.”

In light of the ruling, the FCC is likely to relax the sixty-year-old ownership cap or remove it completely. The Commission’s current chairman Michael Powell attacked the limit in 2000 when the Clinton administration last upheld it. However, the FCC could still ask the Supreme Court to review the judges’ decision.

Some large media firms, such as Fox TV and Viacom [WAMN: 14-Feb-02], have already crossed the 35% threshold in expectation of its repeal. Indeed, these two firms were among the leading protagonists behind the lawsuit that led to Tuesday’s ruling.

Although the decision drew praise from the larger media groups, consumer organisations were not so keen. “This is a radical, ideologically driven court decision that will lead to an explosion of mergers the likes of which this country has never seen,” warned the Consumers Union’s Gene Kimmelman.

Such consolidation is likely to see broadcast networks step up their policy of taking over local affiliates.

Data sourced from: Wall Street Journal; additional content by WARC staff