WASHINGTON - Media companies hoping to expand their TV station holdings and to own TV stations and newspapers in the same markets suffered a setback yesterday when the Bush administration decided to abandon its challenge of a ruling that blocked the relaxation of media ownership rules.
The Justice Department will not ask the Supreme Court to review a decision last year by a federal appeals court in Philadelphia that sharply criticized the attempt to deregulate and ordered the Federal Communications Commission to reconsider its action.
The decision is a final slap at Michael K. Powell, the departing chairman of the FCC, who had advocated the changes. Powell announced last week that he would be stepping down in March.
It also throws into question the future of properties owned by Tribune Co. and Media General Inc., which made acquisitions in anticipation of further deregulation. Tribune's media acquisitions in Los Angeles, New York, Hartford and South Florida would violate the old rules, as would Media General's in Florence, S.C., and Panama City, Fla.
They would have to request exemptions from the current rules from the FCC to keep all those properties.
Deregulation of the rules had been advocated by most of the broadcast television networks and many large media companies, including News Corp., Tribune, Gannett Co. Inc. and the New York Times Co. Tribune owns the Chicago Tribune, The Sun, Los Angeles Times, Newsday and other newspapers.
The networks have been hoping for rules that would allow companies to expand the number of television stations they can own, giving the networks a greater share of the lucrative television station business.
Under a law passed by Congress last year in response to Powell's proposal, one company can own stations that reach 39 percent of U.S. homes. Powell had wanted to increase that to 45 percent from the old rule of 35 percent.
Big media companies want to expand the number of markets where they can own both newspapers and TV and radio stations.
In the last few days, some of those media companies, most notably Tribune Co., pressed the Justice Department to challenge the appeals court ruling, said lawyers involved in the case. Some of those companies said they planned to appeal the ruling themselves, but they have little chance of success without the support of the Justice Department.
Critics say there has been too much media concentration, leaving readers and viewers with fewer sources of news and information. They say further consolidation would stifle creativity and lead to a decline in local news coverage.
The Supreme Court had set next Monday as a deadline for the parties to file their initial papers in the appeal.
Officials said one reason the administration decided not to seek Supreme Court review is that some lawyers were concerned the case could prompt the justices to reconsider related First Amendment issues in a way that could undermine efforts by the commission to enforce indecency rules against television and radio broadcasters.
Over the past year, the FCC has issued a record number of fines, and has been pressed by some conservative and other advocacy groups to be more aggressive.
If, as expected, the appeals court decision stands, the rules would be sent back to the commission for further consideration. Lawmakers and some officials predicted that whoever succeeds Powell would be unlikely to embark on a course of wholesale deregulation of media in light of the political furor that the plan provoked. But they also said the agency could reconsider and relax a smaller number of the rules.
In a bitterly partisan vote in 2003, the commission voted 3-2 to approve a package of deregulatory measures drafted by Powell that had rolled back decades of ownership restrictions.
All told, the relaxation of the rules would have allowed a company in the largest cities to own as many as three television stations, eight radio stations and a cable operator, as well as a newspaper.