The Eighth Circuit Court of Appeals handed down its decision last week on the appeals of the FCC’s December 2023 decision following its 2018 Quadrennial Review (see our summary here) to leave the local radio and television ownership rules largely unchanged.  The Court’s decision was a victory for television owners, declaring the restrictions on the ownership of two of the Top 4 TV stations in any market to be contrary to the record and ending that restriction unless, within 90 days, the FCC can show that there was in fact record evidence supporting the restriction.  The Court also provided a more sweeping victory to the industry, concluding that the Quadrennial Review proceeding was inherently a deregulatory one.  In the Quadrennial Review process, the FCC can retain the rules that it has or relax them based on the effects of competition.  It cannot tighten them, leading the Court to throw out the one new aspect of the 2023 decision – expanding the prohibition on a company acquiring a second TV network affiliation and moving it to a digital subchannel or an LPTV station (when the rule had previously applied only to moving that affiliation to a full-power station.)

While this decision gives the TV industry much to celebrate, the decision was not a total victory for the broadcast industry.  The radio rules remain unchanged, as do the TV limits that do not allow an interest in more than 2 TV stations in any market.  The Court had been urged to find that these rules were no longer supportable in light of competition from digital media.  The Court looked at the statutory requirement that the Commission review these rules every 4 years in light of competition, and decided to defer to the FCC’s policy judgment that the proper scope of competition to be analyzed at this time was the competition within the broadcast industry itself.  The Court deferred to the FCC’s findings that broadcasting’s unique local nature and its broad-based advertising reach (as opposed to the individually-targeted ads of digital competitors) made it different from digital media.  Therefore, the Court upheld the FCC’s findings that broadcasting was still a unique marketplace where the public interest required limits on how many stations one party can own in a market.  Certainly, most broadcasters, particularly in radio, would be surprised to know that they do not compete with digital – but that was the effect of the Court’s decision.

So, what’s next?  In a few places in the Court’s decision, there were statements that suggested that the judge’s view of competition might have been different than that of the majority of the 2023 FCC.  But, as Courts are to defer to administrative agencies on policy judgements (as opposed to judgements as to the meaning of a law, where a Court can substitute its judgement for that of an agency – see our article here), the Eighth Circuit decided to uphold the 2023 decision of the FCC as to the current state of competition.  But that is not to say that the FCC’s 2023 views on competition are written in stone and cannot be changed.  Clearly, a different FCC can review an updated record and conclude that the industry has in fact changed, and that digital companies do in fact compete with radio and local TV.  A new FCC, like the one that is currently in place, is permitted to conclude that the public interest demands that the rules be relaxed (or eliminated because they no longer serve any useful purpose).

As we wrote several months ago, there were two ways that ownership deregulation might come for local radio and TV.  One was through this Court decision which, except for the victory on the Top 4 issue, unfortunately did not occur.  The other is from the FCC itself. The FCC is supposed to be conducting its 2022 Quadrennial Review, which needs to be completed quickly so that a 2026 review can begin.  That means that the new Commission, headed by Chairman Carr who has in the past said that the radio ownership rules are a relic of another age and that the industry is at a “break-glass” moment where, to survive, it needs relief from burdensome ownership rules that apply to none of its competitors (see our articles  here and here, for instance, on the state of competition), is now in the position to step up and do its own review of these rules and to make the rules reflect today’s marketplace realities.

With the ball back in the FCC’s Court (once it resolves the question of whether it will offer any justification for the Top 4 rule in the 90 days provided by the Court), we expect a Notice of Proposed Rulemaking looking to significantly relax the local ownership rules – particularly those rules that apply to radio.  While the Court’s failure to throw out those rules pushes the timeline back a few months from what the industry may have preferred, we still expect that these proposals will be offered at some point this Fall.  And, given the “break-glass” moment that the Chairman has recognized exists for the industry, we would expect quick actions once the proceeding starts.  We are still bullish on changes to be effective in 2026 – let us hope that the FCC comes through.