When a federal appeals court returned several media ownership rules to the Federal Communications Commission last week, it was a "deep disappointment" to Chairman Michael K. Powell, who said the commission may have erred in trying to pass all of the controversial rules at once.
On Thursday, the U.S. Court of Appeals for the 3rd Circuit sent back three proposed FCC media ownership rules that would determine how many newspapers, television and radio stations companies such as Tribune Co. and Viacom Inc. can own. The proposed rules would have relaxed some standards, allowing one company to own a newspaper and television station in the same city for the first time in nearly 30 years, but would have tightened others, such as limits on local radio ownership.
The court said the FCC's justification for the new rules was flawed, though it agreed with some of the commission's deregulatory policies. The result: All of the new rules are stayed until the FCC decides whether to appeal the decision to the Supreme Court or submit rewritten versions to the appeals court.
In a wide-ranging interview yesterday -- the first he has given since the rules were sent back -- Powell lamented the lack of deference shown by the court to the FCC, the expert agency charged with devising the rules. Some of the proposed rules were substitutes for previous attempts to limit ownership that had been sent back by other courts. Having a court reject a second set of ownership rules calls the whole process into question, Powell said.
"The previous commission drew tighter lines, and the court said they could not justify those. This commission drew slightly looser lines, and we still couldn't justify those," said Powell, FCC chairman since 2001. "It may not be possible to line-draw. Part of me says maybe the best answer is to evaluate on a case-by-case basis. The commission may end up getting more pushed in that direction."
Last week's court ruling left national limits on media ownership intact, but rules on local media ownership would face legal challenges if the FCC tried to enforce them. In the interview yesterday, Powell appeared to waver between taking up each acquisition in a local market on its own merits or trying again to set rules that would apply to all mergers.
In writing the recent rules, commissioners faced the difficult problem of trying to graft mathematics onto social policy. In the end, the court didn't buy the FCC's approach, writing, "Most importantly, the Commission has not sufficiently justified its particular chosen numerical limits for local television ownership, local radio ownership, and cross-ownership of media within local markets."
It is the FCC's job to police the radio and television broadcast airwaves, which in theory belong to the public, and to make certain that rules governing media ownership ensure "localism, diversity and competition."
As a result, the FCC has tried to set limits on how many newspapers and television and radio stations companies may own, balancing the desire of big companies to grow bigger against the threat that a few companies will dominate the airwaves and choke out smaller voices.
Largely, the agency has failed. As a result, it has lost some of its authority to make media rules.
For instance, the FCC said one company may not own a group of stations reaching more than 35 percent of the national audience. The U.S. Court of Appeals for the D.C. Circuit said there may be no legal justification for any cap and sent the rule back to the FCC. In January, Congress took away the FCC's power to set the limit and set its own limit at 39 percent.
When Powell and the FCC media bureau began revising media ownership rules in 2002, as they were required by Congress to do, they said this time would be different. This time the FCC's approach was to inundate Congress and the courts with data, demonstrating with tables, charts, graphs and formulas how it arrived at its numbers.
On Thursday, the appeals court told Powell and the FCC, essentially, that its math was wrong.
Perhaps the toughest blow to Powell's expertise was the court's rejection of the FCC's "diversity index," a complicated formula devised to weight all of the media outlets -- television and radio stations, newspapers, cable channels, the Internet, etc. -- to which consumers are exposed. The FCC would use the diversity index when deciding which mergers to allow among different media outlets, such as television stations and newspapers.
The diversity index was modeled on the Herfindahl-Hirschman Index of market concentration that the Justice Department uses in antitrust cases. As a former Justice antitrust lawyer, Powell was well-acquainted with this device. Yet the court slammed the door on Powell's approach, saying it failed to take into account each media outlet's audience size, a major flaw.
"There is no question that what we were doing was completely novel," Powell said. "I do think we did it fairly well, but I think we had some areas of weakness. I'm willing to be self-critical. I think certain aspects could have been better explained." Still, Powell said he thinks the index is "defensible."
Not persuaded by arguments in favor of the rules, the court wrote last week: "A diversity index that requires us to accept that a community college television station makes a greater contribution to viewpoint diversity than a conglomerate that includes the third-largest newspaper in America also requires us to abandon both logic and reality."
Last week's ruling brings some form of closure to a tumultuous period of more than a year. A politically split FCC adopted the proposed rules on June 2, 2003, with Powell and fellow Republican commissioners Kevin J. Martin and Kathleen Q. Abernathy voting for them. Democratic commissioners Michael J. Copps and Jonathan S. Adelstein opposed them, saying they would allow big media companies to grow too big.
During the process, the FCC was flooded with millions of e-mails and postcards protesting the new rules, bringing together unlikely and bipartisan coalitions. Powell said yesterday it might have been a bad political idea to try to push all the rules through at once.
"I believed, as good government and good policy, bringing them together as a unified whole was a good instinct and idea," he said. "At the end of the day, it's worth some consideration as to whether they should be rolled up like that. It's hard to manage and very complex and creates all kinds of legal twists and turns. . . . Maybe it works better to take them individually, and that's one of the things I would consider going forward."
The rules may also have appeared poorly justified to the court because they were the product of a shaky coalition, according to several sources within the FCC who spoke on the condition of anonymity because of the political sensitivity of the issue. Powell stood between Democrats Copps and Adelstein, who thought the proposed rules were too deregulatory, and Republican Martin, who thought they were not deregulatory enough. Powell needed Martin's vote to pass the rules, and certain elements of the diversity index may have been pushed too far to justify further deregulation, sources said.
Then there was the issue of court shopping.
The chairman has said he followed the direction of the U.S. Court of Appeals for the D.C. Circuit, which told the FCC it should pursue a more deregulatory course, saying it had to justify keeping ownership limits rather than justify jettisoning them.
Opponents of the proposed rules sued to stop the proposed rules and keep tighter limits in place. But they chose not to bring the case before the D.C. appeals court, which they said they thought would not be sympathetic to their cause.
Instead, the Prometheus Radio Project -- a Philadelphia community radio organization that led the complaint -- filed its appeal in several jurisdictions across the country. When this happens, a lottery picks the court that will hear the case. Prometheus rolled the dice, and Philadelphia was chosen.
"I still believe we would have had a very different result if it had gone to the D.C. Circuit," Powell said. "That's why those who opposed it were so aggressive about going to a different court."
It's too early to say what the FCC will do next, Powell said. Copps read the court's decision as a repudiation of what he considered the Republican majority's media deregulation. He called for a series of nationwide public hearings and more studies before the agency takes another run at the rules. "The rush to media consolidation approved by the FCC last June was wrong as a matter of law and policy," Copps said.
Powell said yesterday that he is still digesting the rules but found some promise in the court's decision and suggested opponents claimed a larger victory than was actually won.
"The court wants more explanation for the lines we drew," he said. "Yes, we failed to convince them on the first try. But we were not sort of way out of whack the way people portrayed it."