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Appeals court media ruling is left standing


The Supreme Court declined yesterday to hear appeals from newspapers and broadcasters seeking to restore new federal rules that would have eased restrictions on the number of media outlets a company can own in one market.

The decision is a setback for five media groups that petitioned the court, arguing that the Federal Communications Commission should allow more cross-ownership and consolidation in an industry increasingly fragmented by competition from cable television, satellite broadcasting and the Internet.

The petitioners included Sinclair Broadcast Group Inc. of Hunt Valley and Tribune Co. of Chicago, owner of The Sun. Both companies have built corporate strategies around funneling news and programming across multiple media sources in the markets they serve. Those strategies could be thrown into disarray by yesterday's ruling.

The justices, without comment, let stand a lower court ruling that said new FCC regulations loosening decades-old restrictions on media ownership were unjustified. That means the FCC will have to start over in its efforts to revise the rules.

The proposed changes, which have not taken effect, would have allowed a single company to own both newspapers and television stations in the same market - a move industry proponents say would help newspapers recover market share at a time when readers are increasingly getting their news from electronic sources. The regulations also would have allowed a single company to own more television and radio stations than is currently allowed.

Consumer groups and some lawmakers hailed the Supreme Court decision, saying that diversity in local media markets is essential in a functioning democracy.

"This preserves the current rules that prevent the monopoly local newspaper from controlling the most popular broadcast station in the same market and ensures that citizens get more diversity of viewpoints and more competition in local news and information," said Gene Kimmelman, senior director of public policy for the Consumers Union.

A representative for Sinclair, which owns or operates 62 stations nationwide, did not respond yesterday to messages seeking comment.

The company has been aggressive in pushing the bounds of ownership rules. In the 1990s, Sinclair used a regulatory mechanism called a "local market arrangement" to obtain the rights to operate numerous stations in cities where it already owned one station. In 2001, the FCC allowed Sinclair to buy a number of the stations it managed.

The FCC is looking into whether the company should be allowed to buy five other stations it manages, including WNUV in Baltimore, from Cunningham Broadcasting Corp., which is partly owned by the mother of Sinclair chief executive David D. Smith.

The Supreme Court ruling could spell particular trouble for Tribune, which has made a number of acquisitions from Los Angeles to New York in anticipation of looser ownership regulations. Tribune, for example, now owns both a major newspaper and a broadcast station in New York, Los Angeles and Chicago.

"Now they're going to struggle to hold on to those properties," said Mark Cooper, director of research at the Consumer Federation of America.

The newspaper publisher and broadcaster said it remains confident that regulations governing cross-ownership of newspapers and television stations will be relaxed as the FCC takes up the issue a second time.

"It is our firm belief that our readers, viewers and listeners, and the media industry will be well-served by swift resolution of this issue," the company said in a statement.

Other media groups that appealed to the court included the Newspaper Association of America; National Association of Broadcasters; Media General Inc. of Richmond, Va., an owner of newspaper and television properties; Gannett Co. of McLean Va., the nation's largest newspaper publisher; and CBS, Fox and NBC.

Industry analysts and media experts said newspapers have the most to lose under the old rules. Recent audits show that newspaper circulation is shrinking nationwide, and newspapers are having a harder time attracting national advertisers.

"The problem is that the newspaper industry is dying, and in order for these companies to stay in business they need to ... have the information coming out of both newspapers and television so that you get that ever-promising synergy that they talk about in business school," said Mara Einstein, assistant professor of media studies at Queens College in Flushing, N.Y.

The fault was with how the FCC approached loosening the rules, Einstein said. The agency reached too far, prompting a rebuke from the 3rd Circuit Court of Appeals in Philadelphia. The court said the FCC didn't adequately justify the rule changes, and the Bush administration decided in January not to appeal the decision. The government filed a brief opposing a Supreme Court review of the case.

"The only people who benefits is [the media companies]," Einstein said. "It doesn't benefit the consumer or the viewer, and certainly doesn't benefit us in terms of a democracy."

Broadcast licenses have historically been rationed because the broadcast spectrum is limited. But critics of the current rules say that rationale no longer holds up because consumers are bombarded with programming choices on cable, satellite and the Internet. That makes it tougher for any one media company to dominate the market, they say.

Industry analysts say the Supreme Court's refusal to hear the appeal likely won't be the last word on the subject. The FCC will likely look for ways to relax the rules incrementally.

"They will tackle ownership rules one by one rather than trying to do just one massive decision-making," said Philip M. Napoli, an economics professor who specializes in media regulations at Fordham University in New York. He said the FCC would have to do a better job of justifying its decisions this time, as spelled out in the lower court ruling.

New FCC Chairman Kevin J. Martin said, "I am now looking forward to working with all of my colleagues as we re-evaluate our media ownership rules consistent with the 3rd Circuit's guidance and our statutory obligations."

Andrew J. Schwartzman of the Media Access Project, a public interest law firm that was critical of the proposed ownership changes, said the FCC will probably leave in place most of the current rules restricting cross-ownership.

Schwartzman sued over the rules on behalf of consumer, religious and other organizations.

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