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The Federal Communications Commission and the U.S. solicitor general will not seek Supreme Court review of a lower court ruling that voided proposed agency rules easing limits on media industry mergers. The decision, which was confirmed by representatives at the FCC and the Department of Justice, is a major blow for outgoing FCC Chairman Michael Powell, who had championed the so-called media ownership rules, as well as for many large media companies hoping to expand through acquisitions. In dispute was the FCC’s June 2003 rewrite of media merger regulations. The commission relaxed restrictions on deals by agreeing to let a company own a maximum of three TV stations in large markets, instead of two, and in some cases to own two TV stations, instead of one, in midsize markets. In addition, a company was freed to own a newspaper and broadcaster in the same market. Amid mounting cries over the risks of media consolidation, however, consumer activists, backed by smaller and independent media concerns, challenged the rules and won. In June 2004 a federal appeals court in Philadelphia ruled that the FCC had failed to justify its overhaul of the media regulations. The 3rd Circuit also stayed the regulations and ordered the agency to review them. Many telecom and Capitol Hill observers had expected acting Solicitor General Paul Clement to appeal the lower court decision. Clement had twice asked the Supreme Court to give him more time to decide whether to appeal the decision. In addition, industry players Media General Inc., Sinclair Broadcast Group Inc. and Tribune Co. have submitted an appeal to the Supreme Court, but Dana Frix, telecom and media partner at law firm Chadbourne & Parke in Washington, said the Court is unlikely to take the case in the absence of the solicitor general’s appeal. “This will cast a shadow on the Powell legacy,” Frix said. FCC Commissioners Michael Copps and Jonathan Adelstein, who have opposed the agency’s effort to clear the way for media consolidation, welcomed the decision. But they expressed concern that large media companies could press the FCC to modify the ownership rules to enable broadcast industry consolidation. “I think there are companies out there who want to game the process by having the commission write quick rules, one by one and under the radar scope, and accomplish piecemeal what they couldn’t get whole,” Copps said. “The American people are not served by a stealth airwaves grab.” Frix said the FCC is likely to take several years to develop new media rules because of controversy over the issue. Indeed, one legislative observer speculated that White House concerns over reigniting a political firestorm may have played into Clement’s decision not take the media fight to the next level. Key lawmakers, including Senate Commerce Committee Chairman Ted Stevens, R-Alaska, and Sen. John McCain, R-Ariz., loudly attacked the FCC’s initiative and introduced legislation to overturn the regulations. In a compromise, these lawmakers agreed to set a 39 percent cap on the percentage of U.S. households any single television company may reach. The FCC had sought to lift the limit to 45 percent, which would have permitted more acquisitions by companies such as News Corp. and Viacom Inc. Copyright �2005 TDD, LLC. All rights reserved.

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