On June 20, 2000, the Federal Communications Commission released its first Biennial Review Report on the Commission’s broadcast ownership rules. Report in the Matter of 1998 Biennial Regulatory Review, 15 FCC Rcd. 11058 (2000) ("Review"). The report was required by Section 202(h) of the Telecommunications Act of 1996, which directs the Commission to review all of its ownership rules biennially and to determine whether any of the rules are necessary in the public interest as the result of competition. Section 202(h) further requires the Commission to repeal or modify any regulation it determines to be no longer in the public interest.

    The 1998 Biennial Review was released more than two years after the FCC initiated the review proceeding. Frustrated by the FCC’s lack of response to Congress’s 1996 directive, Congress in 1999 required the FCC to conclude its 1998 Biennial Review by May 29, 2000. As released in June 2000, the 1998 Biennial Review addressed five major sets of rules: the national television ownership rule; local radio ownership rules; dual network rule; daily newspaper/broadcast cross ownership rule; cable/television cross ownership rule; and experimental broadcast station ownership rule. The Review also addressed constitutional issues raised by these rules. It made incremental progress toward furthering First Amendment principles by loosening, and proposing to loosen, some of the Commission’s restrictive rules.

    Notably, the Review reflects a 3-to-2 split among the commissioners along party lines. Chairman William Kennard and Democratic Commissioners Susan Ness and Gloria Tristani generally supported the cautious approach taken in the Review. Republican Commissioners Harold Furchtgott-Roth and Michael Powell favored much more extensive deregulation and submitted very strongly worded dissents criticizing the majority decision.

    The FCC acknowledged that the national television ownership rule, which prohibits one television broadcast station group owner from reaching more than 35 percent of the national audience, may not be in the public interest. Specifically, the Commission admitted that elimination of the rule may allow broadcasters to reap economic efficiencies; to air more news and public affairs; to increase minority ownership; and to promote the development of new broadcast television networks.

    Despite this, the FCC declined to eliminate the rule. The Commission based its decision primarily upon the fact that it has not had enough time to observe the effect of recent changes to the rule, and has not given the industry time to adapt to the changes. In addition, the Commission noted that consolidation is a feature of other video media, and that a change in the national audience-reach limit may influence the bargaining positions between broadcast television networks and their independently owned affiliates, to the detriment of the affiliates.

    Another aspect of the national television ownership rule is the UHF discount. Under the current national ownership rules, a UHF television station counts for only half of the reach of a VHF station. As a result, a VHF ownership portfolio will reach the 35 percent national television ownership cap with fewer stations than a portfolio that includes UHF properties. The Commission decided to retain the UHF discount. It found that UHF signals have more difficulty reaching cable headends and incur higher operating costs, and that one-third of American viewers rely on over-the-air reception.

    The FCC promised to reconsider the national television ownership rule when it conducts its next biennial review.

    The FCC proposed changing its definition of "radio market" under the FCC’s local radio ownership rules. These complex rules limit the number of radio stations that may be owned in the same service (AM or FM) and in the same geographic market. Under the FCC’s current rules, a local radio market is defined as the area encompassed by the principal community contours of the mutually overlapping stations proposed to have common ownership.

    To determine the total number of stations "in a market," the Commission counts all stations whose principal community contours overlap the principal community contour of any one or more of the stations whose contours define the market. To determine the number of stations any single entity owns in a given market, however, the FCC counts only those stations whose principal community contours overlap the common overlap area of all of the stations whose contours define the market.

    The Commission adopted on Dec. 6, 2000 a Notice of Proposed Rulemaking (NPRM) to change the definition of a radio market. The NPRM admits that the current method of defining a radio market has sometimes led to results that differ from commercial market definitions and economic reality. The NPRM asks for comments on a number of station-counting methods, and suggests eliminating its current market definition and instead relying on a commercially determined market definition, such as Arbitron. Definition of Radio Markets, Notice of Proposed Rulemaking, MM Docket No. 00-244, FCC 00-427 (rel. Dec. 13, 2000).

    As the separate statements issued by each commissioner show, there is wide variation in the commissioners’ opinions of how the definition should be reformed. Initial comments in this proceeding were due by Jan. 26, 2001, and reply comments by Feb. 12, 2001.

    The Commission acknowledged that the Telecommunications Act’s relaxation of local radio ownership rules in 1996 financially benefited the broadcast radio industry, but nonetheless declined to further modify the rules at this time. Instead, the Commission expressed concern about market consolidation since the rules were last amended. The Commission also expressed concern over the possible negative effect of such consolidation on viewpoint diversity.

    The Commission has proposed to eliminate certain portions of its dual network rule. The rule, which dates back to the late 1930s, allows a television broadcast station to affiliate with a network organization that maintains one or more broadcast networks, unless such networks are created by a merger between one of the four "established" television networks -- ABC, CBS, NBC, and Fox -- or a merger between one of these four networks and either of the two "emerging" networks -- WB or the Paramount Network (formerly known as UPN).

    Although it declined to consider mergers between the ìBig Four,î the Commission has concluded that the dual network rule, as it applies to WB and the Paramount Network, may no longer be in the public interest. The FCC reasoned that allowing such common ownership may create substantial economic efficiencies -- such as decreasing advertising costs and creating a wider availability of diverse programming -- without unduly harming competition or diversity. Because the emerging networks are subsidiaries of large, well-established producers of television programming, the Commission reasoned that merger with the ìBig Fourî would likely produce an economically efficient network (given the complementary inputs of program production and broadcast networking) without unduly harming diversity of viewpoint or competition.

    Concurrently with the Review, the Commission issued a NPRM to consider the effect of such a merger on programming diversity. The Commission accepted comments through early October 2000, but did not issue a final rule in 2000. The NPRM expresses reservations about the effect on diversity of eliminating part of the dual network rule, and requests comments as to what safeguards could be imposed to lessen any possible reduction in diversity that a change in the rule might bring. The Bush Administration will likely affect both the timing and the substance of the Commissionís action. Those familiar with the Commission suspect that a Republican majority on the Commission may be more sympathetic to easing or eliminating the existing restrictions.

    The FCC announced that it will initiate a rulemaking proceeding to consider whether to narrow the current newspaper/broadcast cross ownership rule. First imposed in 1975, the rule bars acquisitions that would result in common ownership of a broadcast station and daily newspaper in the same market. The FCC acknowledged that the media marketplace has changed significantly since the rule was adopted, but stated that it remains unconvinced that local markets are diverse and competitive enough to make the newspaper/broadcast cross ownership rule obsolete.

    With respect to diversity, the Commission expressed concerns that: (1) new media do not provide local news, public affairs information, and viewpoint diversity comparable to newspaper and broadcast coverage; (2) not all new media are as widely available to local consumers as are newspapers and broadcast stations; and (3) the efficiencies enabled by media combinations do not necessarily increase viewpoint diversity. The FCC stated that it seeks a more complete record on the rule’s impact on competition, and specifically on whether: (1) beneficial efficiencies rely on co-located combinations; (2) non-attributable joint ventures could achieve the same goals of efficiency; and, (3) newspaper/broadcast combinations create meaningful economic benefits for advertisers and consumers.

    The Commission, recognizing that sufficient diversity and competition may often remain if a newspaper/broadcast combination is permitted, announced that it will issue a NPRM to consider modifying -- but not eliminating -- the newspaper/broadcast cross ownership rule to address situations in which the rule may not be necessary to protect diversity and competition. Despite its understanding of the rule’s flaws, the Commission declined to consider wholesale repeal. The Commission did not take any public steps toward initiating a rulemaking proceeding on these rules in 2000.

    The Commission affirmed its support of the current cable/television cross ownership rule. The rule prohibits common ownership of a cable system and television broadcast station where the predicted Grade B contour of the television broadcast station overlaps (in whole or in part) the service area of the cable system. The Commission decided to retain the rule to protect competition in the market for delivered video programming. The FCC believes that cable is the "gatekeeper" to local markets for delivered video programming, and thus that cable system operators have the incentive and means to discriminate against their competitors with respect to carriage and channel positioning.

    The Commission also stated that, although direct television (DTV) has the potential to enable broadcasters to better compete with cable in the MVPD market, DTV is only in its initial stages; the FCC noted, however, that cable/DTV competition may ultimately provide a basis for modification of the rule. The Commission also stated that it will retain the cable/television cross ownership rule to protect viewpoint diversity in the market for delivered video programming. The FCC believes that broadcast and cable television are the only participants in the market for local news and public affairs video programming.

    The Commission eliminated the rule banning multiple ownership of experimental broadcast stations, finding that its elimination will not adversely affect the Commission’s twin goals of diversity and competition. The ban had prohibited, with certain narrow exceptions, ownership of two or more experimental broadcast stations, unless a showing was made that the program of research required a licensing of two or more separate stations. The Commission stated its belief that, since other rules adequately prevent entities from using the experimental stations for commercial purposes, repeal of the experimental broadcast station cross ownership rule will not adversely affect diversity and competition.

    The FCC’s interest in promoting diversity by manipulating ownership requirements raises significant First Amendment concerns. To impose diversity on the media marketplace of ideas, the government must necessarily suppress the free expression of certain speakers by denying them an opportunity to own additional media outlets of their choosing. Those who own a certain type of outlet or a certain number of outlets become, in effect, a disfavored class of speakers whose further speaking opportunities are proscribed by the FCC.

    The Commission’s historic justification for this reduced level of First Amendment protection for broadcasters has been the scarcity rationale, i.e., the idea that broadcast frequencies are uniquely scarce and must be controlled by the government. That rationale, however, has been demolished in recent years.

    In his dissent to the 1998 Biennial Review, Commissioner Furchtgott-Roth recognized that the "rules impose heavy burdens on speech in potential contravention of the First Amendment." Commissioner Furchtgott-Roth stated that the ownership limits "have become constitutionally outmoded" because they do not justifiably infringe on speech. Specifically, because "broadcasters face such a fierce array of competitors ... their previously supposed ability to influence the content and control the flow of information is greatly diffused." Review, Dissenting Statement of Harold Furchtgott-Roth, at 80. Additionally, the number of broadcasters has grown tremendously since the ownership limits were adopted. "In sum, over time, as alternative means of communication and even other broadcasters have proliferated in the marketplace, the burdens imposed on broadcasters by these restrictions have increased dramatically relative to the benefits that they produce." Id. at 81.