AT&T v. FTC Decision and Media Ownership Rules Review

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Robbie's Round-Up for the Week of August 29-September 2, 2016

Understanding the Decision in AT&T Mobility v. FTC
On August 29, the U.S. Court of Appeals for the Ninth Circuit announced its decision in AT&T Mobility v. The Federal Trade Commission. In the 2014 suit, the FTC alleged that between 2011 and 2014, AT&T had failed to make adequate disclosures about how it throttled subscribers on grandfathered “unlimited” data plans. When AT&T wireless data customers on these plans exceeded certain levels of data use, AT&T reduced their Internet speeds (also known as “data throttling”). The court ruled that because AT&T is a common carrier, the service provider cannot be held liable for the violations that the FTC brought in its case.

Concerns for Future Consumer Protection Regulation
The “chatarazzi” immediately raised concerns that this decision means that companies can evade FTC oversight simply by launching or buying a small telecommunications provider. If any part of its business can claim common carrier status, the company as a whole would be free from FTC oversight, because the FTC is explicitly forbidden by Congress from taking action against common carriers. If true, all public interest regulation would then fall to the FCC. But some claim the FCC is limited to regulating only the parts of telecommunication companies that actually deal with Internet and phone service. Between the FCC's inability to regulate much beyond the telecommunications-related units of a company and the FTC's newfound prohibition on regulating any part of a company that operates as a common carrier, the 9th Circuit decision creates a gap in consumer protection law, they claim.

But….is that true?
In his analysis, Harold Feld disputes some of the concerns raised above. He summarized the decision:

  1. The decision has nothing to do with the FCC’s determination to reclassify broadband as Title II. The court was extremely explicit on this point.
  2. There is no “gap in consumer protection” for broadband services – unless Congress or a future FCC reverses the Title II determination. As long as broadband remains a Title II service, the FCC can protect consumers from bad behavior by broadband service providers.
  3. Beyond the broadband world, the case has fairly broad and uncertain applications. Arguably, Google could escape FTC jurisdiction by owning Google Fiber, and Amazon could escape FTC jurisdiction by registering its truck fleet as a common carrier freight company regulated by the Federal Motor Carrier Safety Administration (FMCSA)

He writes:

“As of today, instead of two cops on the beat for broadband consumer protection access, we have one — the Federal Communications Commission. Fortunately for consumers, the FCC has been taking this job quite seriously with both enforcement actions and rulemakings. So while I consider it unfortunate that Ninth Circuit has cut out the FTC on non-common carrier related actions by companies offering a mix of common carrier and non-common carrier services, the only people who need to panic are Tech Freedom and the rest of the anti-FCC crowd.”

Broadcast Ownership Rules
On August 25, the Federal Communications Commission released a report and order closing its review of broadcast ownership rules which dates back to 2009. Risking an oversimplification, the media generally reported the FCC’s decision as “no change” in the rules. Technically, that’s not exactly true. So here, we briefly describe the rules that were under review – and the FCC’s decision on each. (As we tend to do at Headlines, we’ve liberally excerpted from the FCC’s Report and Order.)

1. The FCC’s Local Television Ownership Rule allows an entity to own two television stations in the same Nielsen Designated Market Area (DMA) only if there is no service area overlap – known as “Grade B contour overlap” -- between the commonly-owned stations, or at least one of the commonly owned stations is not ranked among the top-four stations in the market (top-four prohibition) and at least eight independently owned television stations remain in the DMA after ownership of the two stations is combined (eight-voices test).

  • The FCC decided that this rule remains necessary in the public interest, but also found it needed a slight revision. Now, an entity may own up to two television stations in the same DMA if: (1) the service areas – with a new digital television definition for these areas called digital noise limited service contours (NLSCs) -- do not overlap; or (2) at least one of the stations is not ranked among the top-four stations in the market and at least eight independently owned television stations would remain in the DMA following the combination. In calculating the number of stations that would remain post-transaction, only those stations whose digital NLSCs overlap with the digital NLSC of at least one of the stations in the proposed combination will be considered.

2. Local Radio Ownership Rule: An entity may own (1) up to eight commercial radio stations in radio markets with 45 or more radio stations, no more than five of which can be in the same service (AM or FM); (2) up to seven commercial radio stations in radio markets with 30-44 radio stations, no more than four of which can be in the same service (AM or FM); (3) up to six commercial radio stations in radio markets with 15-29 radio stations, no more than four of which can be in the same service (AM or FM); and (4) up to five commercial radio stations in radio markets with 14 or fewer radio stations, no more than three of which can be in the same service (AM or FM), provided that an entity may not own more than 50 percent of the stations in such a market, except that an entity may always own a single AM and single FM station combination.

  • The FCC decided this rule remains necessary in the public interest and should be retained without modification.

3. The FCC’s Newspaper/Broadcast Cross-Ownership Rule (NBCO) prohibits common ownership of a daily newspaper and a full-power broadcast station (AM, FM, or TV) if the station’s service contour encompasses the newspaper’s community of publication. The rule’s primary purpose is to promote viewpoint diversity at the local level.

  • The FCC concluded that regulation of newspaper/broadcast cross-ownership within a local market remains necessary to protect and promote viewpoint diversity. The FCC continued to find, however, that an absolute ban on newspaper/broadcast cross-ownership is overly broad. Accordingly, the adopted a new rule that generally prohibits common ownership of a broadcast station and daily newspaper in the same local market but provides for a modest loosening of the previous ban on cross-ownership consistent with the view that an absolute ban may be overly restrictive in some cases. The FCC says that the benefits of the revised rule, outlined below, outweigh any burdens that may result from adopting the rule.
    • Revision: The FCC modified its geographic scope to update its analog parameters and to reflect more accurately the markets that newspapers and broadcasters actually serve. Specifically, in light of the fact that the transition to digital television service has rendered obsolete the rule’s reliance on an analog contour to determine when the newspaper/television cross-ownership restriction is triggered, the FCC now defines the geographic scope of that restriction using a television station’s digital principal community contour (PCC). More importantly, in order to focus the application of the rule more precisely on the areas served by broadcast stations and newspapers, the FCC revised the trigger of the NBCO Rule to consider both the contour of the television or radio station involved, and whether the station and the newspaper are located in the same Nielsen DMA or Audio Market. The FCC also adopted an explicit exception to the NBCO Rule for proposed mergers involving a failed or failing broadcast station or newspaper. The FCC will consider waivers of the NBCO Rule on a case-by-case basis and grant relief from the rule if the applicants can show that the proposed merger will not unduly harm viewpoint diversity in the market.

4. The FCC’s Radio/Television Cross-Ownership Rule prohibits an entity from owning more than two television stations and one radio station within the same market, unless the market meets the following size criteria:

  • If at least 10 independently-owned media voices would remain in the market post-merger, an entity may own up to two television stations and four radio stations.
  • If at least 20 independently owned media voices would remain in the market post-merger, an entity may own either: (1) two television stations and six radio stations, or (2) one television station and seven radio stations.
  • In all instances, entities also must comply with the local radio and local television ownership limits.
  • The FCC concludes that the Radio/Television Cross-Ownership Rule continues to be necessary given that radio stations and television stations both contribute in meaningful ways to promote viewpoint diversity in local markets. The FCC also concluded that the rule continues to play an independent role in serving the public interest separate and apart from the local radio and television ownership rules, which are designed primarily to promote competition. Accordingly, given the important policy interests at stake, the FCC retained the cross-ownership rule in order to ensure that consumers continue to have access to a multiplicity of media voices.
    • The FCC modified the rule only to the extent necessary to update its references to two analog television service contours that became obsolete with the transition to digital television service. First, consistent with the update to the NBCO Rule, the FCC will use a television station’s digital PCC instead of its analog Grade A contour when determining the rule’s trigger. Second, the FCC will use a television station’s digital NLSC instead of its analog Grade B contour when counting the number of media voices remaining in the market post-merger.

5. The FCC’s Dual Network Rule permits common ownership of multiple broadcast networks but prohibits a merger between or among the “top-four” networks (specifically, ABC, CBS, Fox, and NBC).

  • The FCC found that the rule continues to be necessary to promote competition and localism and should be retained without modification. Top-four broadcast television networks have a distinctive ability to attract larger primetime audiences on a regular basis, which enables the top-four networks to earn higher rates from those advertisers seeking to reach large, national mass audiences consistently. By reducing the number of choices available to such advertisers, a combination among top-four broadcast networks could substantially lessen competition and lead the networks to pay less attention to viewer demand for innovative, high-quality programming. The FCC also found that the Dual Network Rule remains necessary to preserve the ability of affiliates to influence network decisions in a manner that best serves the interests of their local communities, thereby maintaining the balance of bargaining power between the top-four networks and their affiliates.

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Election 2016

Quick Bits

Weekend Reads (resist tl;dr)
coffee iconFCC’s Clyburn Makes the Most of Her ‘Outsider’ Status (Morning Consult)
coffee iconThe Internet revolution has not reached all of us (Larry Downes, Washington Post)
coffee iconBroadband for All Starts With More Public Wi-Fi (Bloomberg Editorial)
coffee iconDeals Stoke Criticism Over U.S.’s Plan to End Internet Oversight (Wall Street Journal)

Events Calendar for Sept 5-9, 2016
Sept 8 -- Community Connectivity Initiative-Webinar Series, NTIA
Sept 8 -- Improving Rural Call Quality and Reliability, House Subcommittee on Communications and Technology
Sept 9 -- Fueling the Broadband Economy, New America panel

ICYMI From Benton
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By Robbie McBeath.