Chicago-based Tribune Co. and other media businesses were thrilled when the FCC proposed the much-anticipated changes to its strict cross-ownership rules in 2003. The new rules would have allowed a company to own both a newspaper and a TV station in the same market, which was previously prohibited–opening the floodgates for media companies to expand their businesses.

But almost immediately after the FCC proposed its changes, several public interest groups filed suit. In Prometheus Radio v. FCC, consumer advocacy groups such as the Consumer Union and the Consumer Federation of America claimed the agency's changes would limit sources of news within a market. In June 2004, the 3rd Circuit Court of Appeals ruled in the plaintiffs' favor, prohibiting the FCC from making the changes. In its decision, the court said the FCC had failed to show the changes were necessary.

In June, Tribune and several other media companies suffered a setback when the Supreme Court refused to hear their appeal of the lower court's decision. Now the issue is back at the FCC, which said it would take another shot at revising the rules. But some experts say it's anyone's guess as to when the commission will implement those new rules.

This issue is especially pressing for Tribune, which currently owns both a newspaper and a TV station in several markets. In Connecticut, for example, Tribune owns The Hartford Courant newspaper and two TV stations, WTXX and WTIC. The FCC had previously ordered Tribune and other media companies to sell any stations they owned in markets in which they also owned newspapers, or vice versa. But in 2001, the commission granted waivers to those companies, pending the implementation of new cross-ownership rules.

“The problem is those exemptions are going to come up for renewal in the not-too-distant future, and the commission is going to have to respond to them,” says Carter Phillips, Tribune's lead counsel on the case. “These issues had been sitting around at the FCC for years before we got the first set of rules. It's almost impossible to say how and when the agency will deal with this now.”

Sign Of The Times

Media companies believe the FCC's rules are in dire need of an overhaul. They argue the rules are antiquated and were created when viewers had very limited access to news sources. Today, they have access to news 24 hours a day on the Internet, as well as on cable and satellite television stations.

“These rules go back to the 1970s–the early days of TV broadcasting regulations,” explains Andrew D. Lipman, a partner at Swidler Berlin in Washington, D.C. “Back then market penetration needed to be limited.”

Several decades ago, some communities, for instance, only had one TV station and one newspaper. Some argued it was dangerous to allow the same company to own both forms of media, thereby monopolizing the community's sources of news. In response the FCC created rules prohibiting that and the Supreme Court supported that decision.

“Those rules were upheld on a prediction of what the market would look like in the future,” says Phillips, a partner at Sidley Austin Brown & Wood in Washington, D.C. “At that time, there seemed to be the potential for risk.”

But with the advent of cable in the 1980s, and satellite TV and the Internet soon thereafter, the number of news outlets skyrocketed, even in small markets. “Now there is no place in this country that doesn't have access to channels in the double digits,” Phillips says.

Furthermore, companies that own cable stations aren't subject to the FCC's rules. They are free to own as many stations as they wish.

“This rule only applies to newspaper,” Phillips explains. “It is absolutely a per se rule that a company cannot own a newspaper and a TV station in the same market.”

Media companies also argue they will be better at reporting the news if allowed cross-ownership because a newspaper and TV station could share resources. That, they say, would allow them to operate more efficiently.

“We are candidly serving our public interest obligations to the community by improving as much as humanly possible the quality of public news,” Phillips says. “So when the time comes for the commission to take a look at what it has meant to have integrated newspaper-broadcast offerings, the only conclusion it can draw is that this is a wonderfully positive development.”

But opponents of the new rules see it differently.

Driving Diversity

While the Internet and cable TV may provide more options for consumers to receive news, some argue these new outlets offer little local news coverage. And that was the basis for the FCC restrictions in the first place.

“Go look at Google and Yahoo news. You see mostly national headlines,” says Glenn B. Manishin, who represented the public interest groups before the 3rd Circuit. “You don't see anything about local political races, for example.”

And the same goes for cable, says Manishin, a partner at Kelley Drye & Warren in Washington, D.C. “There are hundreds of cable and satellite TV stations out there. But how many of them offer local news and information?” he says. “'Sex and The City' isn't local news.”

The public interest groups involved in this case believe the media companies' desire to relax these rules has little to do with trying to operate more efficiently.

“Tribune has argued if they were allowed to buy TV stations, then they could supplement TV news with print news, and they would be more efficient in providing more local news,” Manishin says. “But the bottom line is they just want to continue to get bigger and acquire more and more stations.”

Until the FCC revises the rules, media companies are in limbo. While they are restricted from acquiring any more TV stations, whether they have to sell the ones they currently own under the FCC's waiver will probably have to be decided by the FCC when those waivers come up for renewal.

“I'm hoping at some point the FCC will at least adopt some rules on a case-by-case basis that will allow us to make the argument that we are promoting the public interest by offering newspaper-broadcast integrated programming,” Phillips says. “But to try to guess what the commission will do is a fool's errand.”

Chicago-based Tribune Co. and other media businesses were thrilled when the FCC proposed the much-anticipated changes to its strict cross-ownership rules in 2003. The new rules would have allowed a company to own both a newspaper and a TV station in the same market, which was previously prohibited–opening the floodgates for media companies to expand their businesses.

But almost immediately after the FCC proposed its changes, several public interest groups filed suit. In Prometheus Radio v. FCC, consumer advocacy groups such as the Consumer Union and the Consumer Federation of America claimed the agency's changes would limit sources of news within a market. In June 2004, the 3rd Circuit Court of Appeals ruled in the plaintiffs' favor, prohibiting the FCC from making the changes. In its decision, the court said the FCC had failed to show the changes were necessary.

In June, Tribune and several other media companies suffered a setback when the Supreme Court refused to hear their appeal of the lower court's decision. Now the issue is back at the FCC, which said it would take another shot at revising the rules. But some experts say it's anyone's guess as to when the commission will implement those new rules.

This issue is especially pressing for Tribune, which currently owns both a newspaper and a TV station in several markets. In Connecticut, for example, Tribune owns The Hartford Courant newspaper and two TV stations, WTXX and WTIC. The FCC had previously ordered Tribune and other media companies to sell any stations they owned in markets in which they also owned newspapers, or vice versa. But in 2001, the commission granted waivers to those companies, pending the implementation of new cross-ownership rules.

“The problem is those exemptions are going to come up for renewal in the not-too-distant future, and the commission is going to have to respond to them,” says Carter Phillips, Tribune's lead counsel on the case. “These issues had been sitting around at the FCC for years before we got the first set of rules. It's almost impossible to say how and when the agency will deal with this now.”

Sign Of The Times

Media companies believe the FCC's rules are in dire need of an overhaul. They argue the rules are antiquated and were created when viewers had very limited access to news sources. Today, they have access to news 24 hours a day on the Internet, as well as on cable and satellite television stations.

“These rules go back to the 1970s–the early days of TV broadcasting regulations,” explains Andrew D. Lipman, a partner at Swidler Berlin in Washington, D.C. “Back then market penetration needed to be limited.”

Several decades ago, some communities, for instance, only had one TV station and one newspaper. Some argued it was dangerous to allow the same company to own both forms of media, thereby monopolizing the community's sources of news. In response the FCC created rules prohibiting that and the Supreme Court supported that decision.

“Those rules were upheld on a prediction of what the market would look like in the future,” says Phillips, a partner at Sidley Austin Brown & Wood in Washington, D.C. “At that time, there seemed to be the potential for risk.”

But with the advent of cable in the 1980s, and satellite TV and the Internet soon thereafter, the number of news outlets skyrocketed, even in small markets. “Now there is no place in this country that doesn't have access to channels in the double digits,” Phillips says.

Furthermore, companies that own cable stations aren't subject to the FCC's rules. They are free to own as many stations as they wish.

“This rule only applies to newspaper,” Phillips explains. “It is absolutely a per se rule that a company cannot own a newspaper and a TV station in the same market.”

Media companies also argue they will be better at reporting the news if allowed cross-ownership because a newspaper and TV station could share resources. That, they say, would allow them to operate more efficiently.

“We are candidly serving our public interest obligations to the community by improving as much as humanly possible the quality of public news,” Phillips says. “So when the time comes for the commission to take a look at what it has meant to have integrated newspaper-broadcast offerings, the only conclusion it can draw is that this is a wonderfully positive development.”

But opponents of the new rules see it differently.

Driving Diversity

While the Internet and cable TV may provide more options for consumers to receive news, some argue these new outlets offer little local news coverage. And that was the basis for the FCC restrictions in the first place.

“Go look at Google and Yahoo news. You see mostly national headlines,” says Glenn B. Manishin, who represented the public interest groups before the 3rd Circuit. “You don't see anything about local political races, for example.”

And the same goes for cable, says Manishin, a partner at Kelley Drye & Warren in Washington, D.C. “There are hundreds of cable and satellite TV stations out there. But how many of them offer local news and information?” he says. “'Sex and The City' isn't local news.”

The public interest groups involved in this case believe the media companies' desire to relax these rules has little to do with trying to operate more efficiently.

“Tribune has argued if they were allowed to buy TV stations, then they could supplement TV news with print news, and they would be more efficient in providing more local news,” Manishin says. “But the bottom line is they just want to continue to get bigger and acquire more and more stations.”

Until the FCC revises the rules, media companies are in limbo. While they are restricted from acquiring any more TV stations, whether they have to sell the ones they currently own under the FCC's waiver will probably have to be decided by the FCC when those waivers come up for renewal.

“I'm hoping at some point the FCC will at least adopt some rules on a case-by-case basis that will allow us to make the argument that we are promoting the public interest by offering newspaper-broadcast integrated programming,” Phillips says. “But to try to guess what the commission will do is a fool's errand.”