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Focus on Regulation

The Supreme Court’s Major Wireless Non-Decision Decision

Amid the historic results of the past Supreme Court term, industry watchers should not overlook the Court’s decision to deny certiorari and not hear the broadcasters’ appeal of the FCC’s 2008 cross-ownership decision.  Last year the Third Circuit upheld the FCC’s rules, which preserved most limits on how many stations one broadcaster could control in a market while loosening a bit the ability of a broadcaster to co-own a newspaper in the same market.  Broadcasters had hoped that the appeal would give the Supreme Court the opportunity to revisit its “scarcity of spectrum” justification for regulating broadcast ownership outside of traditional antitrust analysis.

Using the newspaper/cross-ownership rule as Exhibit #1, appellants said continued restriction on cross-ownership in the same market is unconstitutional because it singled out newspapers among all forms of mass communication for unequal treatment.  But more was at stake than the number of newspaper owners.  Had the court undone the basis for broadcast regulation by scuttling the scarcity rationale, other ownership limits would have been in peril.  The result could have been greater broadcast ownership consolidation, thereby making a broadcast license more valuable because the potential acquirer pool would be bigger.  (And, of course, a constitutional ruling would have bled over to the FCC’s “fleeting explicative” and “wardrobe malfunction” cases, which were reversed on procedural rather than first amendment grounds by the Supreme Court during this same term.)

Denial of certiorari is not a substantive declaration, but for the FCC, the result nevertheless was good news – and not only because its 2008 decision was upheld.  Rather, by limiting the broadcast spectrum any one licensee can hold in a market (and nationwide), the cross-ownership rules unintentionally keep the price of that spectrum lower than it might otherwise be for purposes of the FCC’s reverse auction rules.  Those rules, under development pursuant to legislation passed earlier this year, aim to entice some broadcasters to turn in their TV licenses for a share of auction proceeds when the spectrum gets reauctioned and reassigned to broadband wireless companies.

The potential reverse auction candidates are most likely to be single-station TV owners who are not market leaders and who might have been able to sell their stations to a more powerful in-market broadcaster.  The court’s decision not to review those cross-ownership rules keeps broadcasters in their 1927 Act regulatory box, despite all of the changes that have occurred in the video landscape in recent years.  More directly, it eliminates the possibility of a likely alternative buyer of a TV station, which lowers the price of the TV spectrum license and jettisons an alternative exit path for weak stations.