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Media companies and consumer groups met in federal appeals court Wednesday to sound off on Federal Communications Commission limits on media mergers. Appearing before the 3rd U.S. Circuit Court of Appeals in Philadelphia, critics argued that easing media ownership restrictions accelerates industry consolidation and harms media diversity. Media companies took the opposite tack, contending that new limits on mergers among radio, television and newspaper companies are illegal and urging the three-judge panel to abolish all restrictions on dealmaking. FCC lawyers, meanwhile, pressed the court to ignore all legal challenges. The court, which is tackling media ownership issues for the first time, appeared at least sympathetic to consumer activists challenging the media regulations. One analyst following the case said the judges’ questions to attorneys during the proceedings seemed to support arguments against a controversial index the FCC developed to measure media diversity. “The judges mostly stayed quiet and for the most part didn’t refute arguments by [consumer groups] that the diversity index was arbitrary and capricious,” he said. “That speaks volumes.” Since the six media ownership rules are all tied to the disputed diversity benchmark, any court decision to send the index back to the FCC for further consideration would effectively require the agency to rewrite all the limits. The FCC issued new rules in June permitting further TV broadcast outlet mergers while generally tightening restrictions on radio industry deals. It also lifted a ban on newspapers owning a broadcast outlet in most markets. The 3rd Circuit decided not to consider a rule limiting the percentage of U.S. households a single TV company may reach, leaving intact a 39 percent national TV cap established in January. Andrew Schwartzman, head of Media Access Project, a Washington public interest law firm leading the challenge to the rules, said the diversity index is flawed because it gives too much weight to the Internet. The Web is not a significant source of local news, a key benchmark of diversity, he argued. Glenn Manishin, an attorney representing consumer groups, contended that the index gives the Internet the same importance as the top eight TV stations in New York. Summing up this argument, Judge Thomas L. Ambro said, “Your assertion is that the [FCC] constructed theoretical models but in the real world these models don’t work.” Seeking to refute such views, Henk Brands, an attorney representing a coalition of network-owned broadcasters, argued that FCC media limits are no longer warranted because of the growing number of local and national media outlets. Schwartzman also asked the judges to give the FCC a timeline to implement revised media rules should they be remanded to the commission. He said the FCC has yet to finish revising cable ownership rules more than two years after the D.C. federal appeals court returned the regulations to the agency for further review. “We hope the court would watch over any decision to remand because we don’t want the decision to fall into a black hole,” Schwartzman said. The Philadelphia court on Sept. 3 ordered the FCC to put the media rules on hold as it considers the appeal. Observers said it could take the court several months to rule. �Copyright 2004, The Deal, LLC. All rights reserved.

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