Part of U.S. media ownership rule overturned

WASHINGTON Thu Jul 7, 2011 3:10pm EDT

WASHINGTON (Reuters) - A federal appeals court has overturned part of a 2008 loosening of U.S. media-ownership rules that made it easier to own a newspaper and a broadcast outlet in a single market.

The U.S. Court of Appeals for the Third Circuit said on Thursday that this cross-ownership portion of the Federal Communications Commission's order had failed to meet notice and comment requirements set out by law.

The court's narrow ruling on procedural grounds left most of the 2008 order intact along with the FCC's authority to preserve media competition, a blow to proponents of fewer ownership restrictions such as the National Association of Broadcasters.

"At first glance the ruling appears to be a defeat for the broadcast/newspaper industries," said Stifel Nicolaus analysts in a note to clients.

In late 2007, the FCC narrowly approved a loosening of its three-decade-old restrictions on ownership of a newspaper and broadcast outlet in the 20 biggest U.S. cities, over the objections of consumer groups and some lawmakers.

The decision by then-FCC Chairman Kevin Martin, with the support of his two Republican colleagues, was challenged by public interest groups seeking greater competition and diversity in the industry.

Media owners, for their part, argued that the FCC had failed to go far enough to lift ownership caps.

A long list of broadcast and newspaper groups joined the challenge to the FCC rules, including News Corp's Fox, CBS Corp, Sinclair Broadcast Group, Gannett Co, Belo Corp and Media General.

But the appeals court decision left intact most other elements of the FCC's order, including rules limiting the number of TV stations and radio stations a company can own in a market, depending on market size and other factors.

Also preserved were waivers for dozens of newspaper-broadcast ownership combinations in specific markets.

"We view this as much more of a glass half full since we have four rules that got affirmed and only one that got reversed, and on a procedural ground," an FCC lawyer told Reuters.

The FCC is currently working on a congressionally-required review of its media ownership rules that is conducted every four years. It was not immediately clear if the FCC, now chaired by Julius Genachowski, would seek to revive the overturned rule.

Broadcasters have argued that the competitive landscape has vastly changed since the FCC ownership rules were adopted decades ago, due to competition from cable and satellite-delivered services.

"NAB believes that modest reform of rules to allow free and local broadcasters to compete successfully in a universe of national pay TV and radio platforms is warranted," said NAB spokesman Dennis Wharton in response to the court ruling.

Free Press, one of the public interest groups that had objected to the looser cross-ownership stance, welcomed the court's action.

"The court wisely concluded that competition in the media -- not more concentration -- will provide Americans with the local news and information they need and want," said Corie Wright, policy counsel for Free Press.

(Reporting by Jasmin Melvin; Editing by Tim Dobbyn)