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A federal appeals court decision has likely thrown the brakes on any advancement being made at the Federal Communications Commission as part of the current quadrennial ownership review process. Agency insiders had already said it was unlikely the Commission would move forward until the Third Circuit Court of Appeals ruled on legal challenges to the last round of revisions. Now with a decision to block those from taking effect, and the FCC planning to appeal the ruling, doubts have been cast on when the current quadrennial review may produce any changes.

The Third Circuit court said Monday that the changes adopted by the agency in November 2017 – which included abolishing the newspaper-broadcast and TV-radio cross-ownership bans and relaxing several television ownership restrictions – were not adequately justified in the rulemaking process that spanned two administrations. Judge Thomas Ambro said the agency’s analysis that led to the regulatory rollback was “so insubstantial” that it failed to provide to the Philadelphia court a “reliable foundation” supporting the conclusions.

“It has not offered any theoretical models or analysis of what the likely effect of consolidation on ownership diversity would be,” Ambro wrote. “Instead it has confined its reasoning to an insubstantial statistical analysis of unreliable data—and, again, has not offered even that much as to the effect of its rules on female ownership.” That conclusion means that if the FCC tries to restore the revisions, it would require deeper analysis and study of the broadcast sector beyond what was leaned on in the most recent proceeding.

“Needless to say, today’s decision will require us to go back to the drawing board on our underway 2018 quadrennial review, which relies upon much of the same analysis as the orders vacated by the court today,” said Commissioner Geoffrey Starks. He thinks the FCC has relied on “bad data and shoddy analysis” to justify relaxing restrictions on how many radio and television stations a company can own. The proof, he said, is the courts have now blocked that move four times. “Today’s opinion is clear: the FCC’s approach to setting our media ownership rules needs a dramatic overhaul,” said Starks.

Legal Fight Intensifies

Despite the latest setback, the FCC had allies on the Third Circuit and FCC Chair Ajit Pai seized on comments made by Judge Anthony Scirica’s dissent, which said the FCC’s decision was “well-reasoned.” Pai said the Commission plans to appeal the Third Circuit’s decision, slamming the judges for once again putting a roadblock in front of change. “It’s become quite clear that there is no evidence or reasoning—newspapers going out of business, broadcast radio struggling, broadcast TV facing stiffer competition than ever—that will persuade them to change their minds,” he said.

Pai’s decision to appeal has the support of Republican Commissioners Michael O’Rielly and Brendan Carr, both of whom voted in favor of the changes last year. “The benefits of a modern approach to media regulation are worth fighting for,” said Carr.

O’Rielly has repeatedly taken aim at the Third Circuit and he said Monday that the latest decision is a “classic case of judicial activism” with judges legislating from the bench. “Despite the market wreaking havoc on traditional business models, we have a court nonetheless trying to preserve 1970s regulations,” said O’Rielly, who added, “I implore the chairman and the administration to take this decision to the U.S. Supreme Court.”

A Divided Radio Industry Waits

The Commission voted last December to launch the current quadrennial review, examining many of the fundamental guidelines that make up the government’s media regulations. Unlike previous quadrennial proceedings, the FCC has approached this latest iteration as a way to ask lots of questions. The Notice of Proposed Rulemaking proposal (MB Docket No. 18-349) doesn’t include a single conclusion. Even so, the agency opened the debate with a question of how far to go, not whether to conclude another quadrennial review with little or no change to radio limits.

To date there’s been no consensus among broadcasters about how far the industry would like to see the FCC go. The National Association of Broadcasters has proposed an owner be allowed to operate up to 10 stations in the top 75 markets with no cap on ownership in markets smaller than that. It’s also suggested the FCC should abolish any ownership limits on AMs. A group of 10 radio companies, including Alpha Media, Connoisseur Media, Emmis Communications, Midwest Communications, Mid-West Family Stations, Neuhoff Communications, NRG Media, Perry Publishing and Broadcasting, Townsquare Media and Zimmer Radio, have thrown their support behind the NAB’s proposals.

The NAB said it was “disappointed” with the Third Circuit’s decision, calling the changes approved by the FCC “measured.” And despite the likelihood that it will mean further delay in any additional reforms, NAB backs an appeal. “We strongly encourage the FCC to appeal this misguided decision so that broadcasters can compete on an even playing field with tech giants and pay TV conglomerates,” spokesman Dennis Wharton said.

But illustrating a split among broadcasters, some radio groups including iHeartMedia and Salem Media Group have expressed doubt about whether bigger would be better for the radio industry.

Meanwhile in Washington, the court ruling took some pressure off of consolidation critics in Congress who think the courts are helping achieve their goals without the burden of passing any legislation. Energy and Commerce Committee Chairman Frank Pallone (D-NJ) and Communications and Technology Subcommittee Chairman Mike Doyle (D-PA) said in a joint statement that the Third Circuit decision “validates” their concerns about the impact on women and minority ownership. “Rather than doubling down on its misguided approach, we urge the FCC to start anew and review its media ownership rules to ensure they reflect the great diversity of our nation,” they said.