Broadcasters Expect FCC QR Appeal to SCOTUS, Unsure on 3rd Circuit Remand Fallout

An FCC appeal of Prometheus IV at the Supreme Court is expected by agency and industry stakeholders. Left unclear is how the rules restored by 3rd U.S. Circuit Court of Appeals will affect the industry in the meantime, said broadcasters and broadcast attorneys at a Media Bureau event on industry trends Thursday. They said the agency shouldn't wait on the uncertain appeal to deregulate broadcast ownership. Wednesday evening, the 3rd Circuit declined the regulator's request to reconsider the case (see 1911200063)

"Blood” of dying stations will be “on everybody's hands if we don't get relief from these outdated, rusty shackles,” said Connoisseur Media CEO Jeff Warshaw. He referred to current broadcast ownership regulations. The FCC declined to comment on the case.

The FCC has 90 days to file with the Supreme Court, blogged Wiley Rein's Ari Meltzer and Eve Reed, who represented broadcasters in the case. Other parties, such as NAB, are able to seek cert, attorneys said.

Opinions differ on prospects of the high court choosing to hear the case.

SCOTUS typically “will not agree to hear a case if there is not a circuit split or a strong dissent demonstrating that the case is of imperative public importance,” said Reed and Meltzer. “Retention of jurisdiction by the same panel of the same appellate court for more than 15 years has made a circuit split impossible.” But “the FCC’s petition for rehearing did not even merit a response by the public interest petitioners; the appeal is not a good prospect for certiorari,” emailed United Church of Christ attorney Cheryl Leanza, who argued for public interest groups in Prometheus IV. FCC arguments for cert would be procedurally based at best, emailed Christopher Terry, University of Minnesota School of Journalism and Mass Communication assistant professor.

The 3rd Circuit's mandate takes effect Wednesday unless there's a stay, attorneys said. The mandate will restore the eight-voices test, the prohibition on newspaper/broadcast cross-ownership and other rules. “Nobody knows” exactly what the restoration of those rules means for broadcasters, said Joseph Di Scipio, Fox senior vice president-legal and FCC compliance, during a panel. It's unclear if the FCC or another entity would seek a stay to block the rules from returning pending a SCOTUS appeal, attorneys said.

The agency shouldn't wait on a chancy appeal process or an uncertain 2018 quadrennial review order, Warshaw said: The FCC should instead break proceedings out of the 2018 QR and approve them on their own, where they're less likely to get sucked into further iterations of the Prometheus case. Warshaw pointed to FCC-proposed relaxation of local radio subcap limits, which he said are preventing radio groups from attaining the scale needed to grapple with digital competitors. “Please take your foot off our throats; you will eventually kill us,” Warshaw said.

Industry lawyers said in interviews there's no explicit legal barrier to the FCC's approving a subcap rule on its own, especially since a record is established. Not everyone agreed. “The FCC’s entire previous quadrennial order was vacated, it is unclear why anyone would think that the FCC should break out smaller pieces of the new docket,” Leanza said. “Detaching rules is just going to lead to more court,” Terry said.

Most radio panelists said their industry's in trouble.

Revenue in Beasley Media's radio markets declined 30 percent over 10 years, said CEO Caroline Beasley. “We can't sit there and just see that pie shrinking,” she said. “Technology companies are eating traditional media,” said Alfred Liggins, CEO of Urban One. Capitol Broadcasting CEO James Goodmon said the panel was one of the “saddest” he had ever seen, and TV station owners will be making similar comments if five years if they don't adapt to the changing market. The radio business “is shrinking, and will continue to shrink” until it becomes nonviable, Warshaw said.

Competition from technology companies for advertising dollars was a focus of radio and TV executives. The industry hasn't done a good enough job of convincing ad agencies of radio's importance, said Hartley Adkins, iHeart president-integrated revenue strategy. The “fragmented distribution” brought by streaming media has created constant competition for audience and for the purchasing of content, said Di Scipio and Brett Jenkins, Nexstar chief technology officer. The only defense against the scale of competitors such as Facebook and Google is to expand and focus on local content, nearly every broadcaster said.

Network relationships with larger broadcasters can squeeze out smaller groups, said Goodmon. As networks and broadcasters grow, pressure increases to give affiliations to big groups that are affiliate partners in other markets and have more-favorable retransmission consent deals, Goodmon said. Nexstar can lose out on affiliation deals, Jenkins said.

Digital versions of broadcast content complicate matters, broadcasters said. In radio, customers who switch from broadcast to digital versions of that content cost stations money, because of licensing costs and the way Nielsen counts broadcast listeners versus digital ones, said Liggins. “Analog dollars” become “digital dimes” he said. For video, local station owners typically don't see revenue from streaming services such as Hulu or YouTube, said Goodmon: Networks have deals with streaming services, not affiliates.