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One of the benefits of practicing law in a multifaceted law firm is the opportunity to work with lawyers in every area of law. It is always a good learning experience, as you get to explore the often hazy areas of law that dwell at the nexus of multiple practice areas. For example, many communications facilities, and particularly towers, create both environmental and communications law issues. Over the years, we have worked on numerous matters involving RF radiation and bird strike issues at transmission tower sites. Issues like that involve multiple governmental agencies and protocols, and it is great to have a mix of lawyers with the right experience to address the various aspects of such a problem.

I therefore read with interest an Advisory published today by Pillsbury Intellectual Property lawyers Jim Gatto, Cydney Tune, and Jenna Leavitt. While not directed specifically at communications companies, it discusses an IP matter that is certainly relevant to such companies. Like most businesses, those in the communications sector use a lot of off the shelf software. However, communications companies also license a lot of specialized software (e.g., traffic systems for ad placement), and often have to hire coders to adapt the software to their specific needs or to create entirely new software for highly specialized tasks. Sometimes, such entities have new software created because they are not satisfied with what is commercially available.

As a general rule, when you hire a contractor to produce a “work for hire”, the copyright in that work remains with you rather than the contractor. However, in their Advisory with the catchy title Work Made for Hire Doctrine Does Not Generally Apply to Computer Software, the authors note that software does not fall under the types of works considered work for hire. As a result, the copyright in the software would remain with the contractor (even if the parties had agreed it would be a “work for hire”) unless proper contracts are put in place to alter that result. The Advisory goes into detail on how this works and what the implications are, but suffice it to say that many communications companies may be surprised to learn that they don’t hold the copyright in their own software.

This is not just an issue for large companies with complex computer systems and extensive programming. It applies just as readily to a small market radio station that asks a college student to design its website. Without the proper agreements in place, the copyright would remain with the student rather than the radio station. Now might be a good time to consider what software you have had contractors produce for your operation, and whether you know who actually owns it.

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For those tired of having their dinner conversations interrupted by others’ cell phone calls, or watching movies in a theater by the light coming off the screens of nearby texters, technology has provided a solution. Unfortunately it is illegal.

In a recent decision, the FCC fined a company called Phonejammer.com $25,000 for marketing jamming equipment in the U.S. through its website, www.Phonejammer.com. The FCC discovered the violations when its field agents, responding to complaints from a cellphone service provider in Dallas, and a County’s Sheriff’s office in Florida, traced the interference in each case to a local business, and discovered that the proprietor had purchased and was operating a Phonejammer unit acquired through the website. Unfortunately, the FCC’s decision does not indicate the type of businesses that were using the Phonejammer, so it is not clear if they were restaurants, theaters, or just businesses tired of their employees texting their friends all day.

Under the Communications Act, it is illegal to sell jamming equipment because of the harm done, both intentionally and otherwise, to electronic communications. While putting an end to loud cell phone calls in upscale restaurants, or to students texting in class, might sound appealing to managers of such places, the interference to communications cannot easily be confined to just that location. Of course, the problems with jamming are not limited to just unintentional interference to nearby areas. There are similar issues affecting the business location seeking to jam calls. You can imagine what would happen if a patron had a heart attack on the premises and the emergency response was delayed when other patrons’ cell phone calls to 911 couldn’t get through.

Because of these concerns, the U.S. has always strictly prohibited the marketing of jamming devices, and not even police are permitted to use jammers. To appreciate the extent of the government’s concern with jamming, note that jamming equipment is not permitted even in prisons, where smuggled cellphones have caused unrelenting headaches for prison officials, with some inmates continuing to manage criminal enterprises via cell phone while still in prison.

That may be about to change, however. The Senate last year passed S.251, the Safe Prisons Communications Act of 2009, to permit targeted jamming of cell phone service within prisons. While it has not yet been approved by the House of Representatives, support for the idea has been strong. As with most well-intentioned ideas, however, the question is what unintended consequences will be involved, particularly if the jammers are not carefully monitored and regulated. For example, will a highway that passes a prison inevitably be a cellular dead zone for passing commuters, or will the technology, once permitted, be refined to largely eliminate unintended interference (if that is possible)? Again, it may be a minor annoyance to lose a call when driving by a prison, but a serious traffic accident in that area can make reliable cell phone service a life and death issue.

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Last week, we listened to FCC Chairman Julius Genachowski speak at the National Association of Broadcasters convention in Las Vegas. One topic he made a point to discuss was the recent Petition filed by cable and satellite companies arguing that the retransmission consent process is unfair, and asking the government to intervene in private contractual disputes to decide how broadcasters can and cannot negotiate carriage deals, including mandating arbitration of disputes and requiring stations to permit “interim carriage” of their programming while negotiations are ongoing. However, the issue is not stations “yanking” their signals from cable and satellite operators while negotiations drag on, but the failure of operators to secure the right to retransmit the programming when their current retransmission agreement expires, as the Communications Act requires. Indeed, it is the same basic contractual process that cable and satellite operators go through when seeking to extend carriage of non-broadcast networks, except that non-broadcast networks wield nationwide control over access to their programming, whereas broadcasters wield such control only in individual markets.

While the Chairman did say in his speech that the marketplace is the “preferred method” for resolving disputes that come up during negotiations, he also referenced the Petition’s claim that broadcasters were to blame for a rise in cable fees, stating: “Some ask: Is free TV really free when cable rates go up because of retransmission fees?”
However, that rhetorical question is just that — rhetorical. Free TV can only survive as free TV if it is financially able to produce/compete for the programming also sought by non-broadcast networks. The only way that is possible in a 500-channel world is for broadcast stations to have the dual revenue stream (advertising and retransmission fees) enjoyed by their non-broadcast competitors. Only by being financially viable can broadcast stations remain as a free alternative for those wishing to “cut the cable” or “dump the dish.” In fact, as digital multicasting allows stations to deliver multiple free programming streams, free TV becomes a more attractive option and a more effective check on rising cable rates.

Unlike a cable network, a broadcaster can never “yank its signal” from the public when retransmission negotiations falter and what often seems to be missing from the debate is that the public does not “lose” a TV station’s signal when it is dropped by a cable system during a retransmission consent dispute because the signal is available to viewers for free over the air. The law merely prohibits a cable or satellite operator from reselling broadcast programming to viewers if the operator itself is unwilling to pay the going rate for it. In that regard, it is no different than any other business transaction, except that the public can always choose to “avoid the middleman” and obtain the programming directly from the television station (for free) by using an antenna. In this context, and particularly in light of the extreme rarity of program disruptions occurring during retransmission negotiations, cable and satellite operators have a difficult challenge making the case that carriage negotiations with broadcast stations are significantly different than carriage negotiations with cable networks.

The fundamental difference between these negotiations is mostly one of degree — broadcast programming tends to regularly be among the most popular programming, making it more valuable to those wishing to resell it to their subscribers. However, broadcast programming will only remain popular if broadcasters continue to earn the revenues necessary to produce and purchase such programming. A cynical observer might therefore conclude that the desire to prevent broadcasters from receiving a share of subscription revenues commensurate with audience ratings is only partially about reducing cable and satellite systems’ operating costs, and just as much about keeping those revenues out of the hands of those who compete with cable and satellite for ad sales and audience. Systems overpaying for fringe cable networks while underpaying for far more popular broadcast programming harms free local TV without any countervailing benefit (unless you are the owner of a fringe cable network).

Also, the problem with forcing interim carriage during negotiations (aside from the fact that its a violation of the Communications Act) is that the continued availability of a station’s programming for retransmission is not, as cable/satellite operators frequently claim, an unfair “bargaining chip” used by broadcasters in retransmission negotiations — it is the entire point of the negotiation. Requiring that broadcast programming continue to be made available at last year’s rate during negotiations, as the Petition urges, provides cable operators with an obvious incentive to drag out the negotiations as long as possible rather than bring them to a rapid conclusion and begin paying the current rate. Imposing an interim carriage requirement would actually destabilize retransmission negotiations, as broadcasters would be forced to declare the negotiations terminated in order to end the interim carriage and hopefully force the cable/satellite operator back to a serious negotiation. Encouraging cable/satellite operators to delay negotiations long past the expiration of their existing retransmission agreements, and then forcing broadcasters to declare an official end to the negotiations as the only way of ending lower cost interim carriage and forcing a serious offer from the cable/satellite operator, is inherently more likely to result in carriage disruptions than the current process.

Like homeowners in a buyer’s market, cable and satellite operators are no doubt unhappy that market conditions are currently less in their favor compared to the “good old days”, but that hardly makes the market “broken” or “unfair.” Trying to fix something that isn’t broken is a surefire way to break it badly, and it is the public that would be forced to pick up the pieces.

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Blair Levin, who headed the FCC’s Omnibus Broadband Initiative (OBI) for the past year and who was the principle architect of the National Broadband Plan, announced yesterday that he’s leaving the FCC on May 7 to join the Aspen Institute, a large and prestigious think tank.

Levin created the OBI from scratch. He moved in to the FCC, but he hired many new staff. He adopted new procedures for gathering public input, including blogging, “staff workshops”, and what amounted to frequent cold calls to people in business and academia to solicit views and information. The OBI was not your father’s FCC proceeding!

Levin also drew a dauntingly broad scope for the effort, and the OBI staff continued to expand that scope almost until the last minute. The proceeding, and the Plan, addressed broadband technology, deployment, services, adoption, financing, and usage. It asked how broadband affects other institutions and industries, from broadcasting, cable, wireless, and voice services to education, politics, energy and the environment, to name just a few.

Levin’s efforts drew enthusiastic support from some quarters and criticism from others. Some disliked his unorthodox procedural approach and others welcomed it. Some who agreed with his positions questioned his procedures, and vice versa. Whatever one thinks of the procedure or the recommendations, the National Broadband Plan is a remarkable document – comprehensive, polished and beautifully written and presented.

The most polarizing issue was a proposal to reallocate broadcast spectrum for wireless broadband use. I’ve questioned some aspects of the broadband plan, especially whether proponents of more broadband spectrum have really made their case. But I’ve been awed by Levin’s ability to “shake things up” in a town where the status quo can last for decades.

Reactions to Levin’s announcement have been as mixed as views of the National Broadband Plan. I’m disappointed to see him go. Levin is one of the smartest, hardest working, most effective, and best-intentioned people to work at the FCC (and that’s a big club). I disagree with some of his views, but I’ve never doubted his sincerity or the honesty of his motives.

Levin didn’t start the debate over broadcast spectrum – that began in the 1980s – and it won’t end on May 7. But he focused the issue and gave it legs. The country is now having a debate about the future of broadcasting that would have seemed unthinkable a year ago.

I’m an optimist — perhaps a delusional optimist. But if downsizing the nation’s broadcasting service is suddenly thinkable today, maybe real deregulation of broadcasting, including much-needed ownership reform, is also thinkable. The FCC’s Future of Media proceeding essentially asks that question.

I’ve harbored hope that ongoing engagement on “the spectrum issue” will eventually lead to grounds-up rethinking of the broadcast ownership rules. Broadcast regulation needs some serious shaking up, and the constituencies around many of those regulations are honed in the art of the status quo. Levin demonstrated an uncanny ability to reset people’s conceptions about what is and isn’t achievable. Broadcasters could use some of that energy focused on ownership rules which artificially limit their participation in a digital broadband future. He’s leaving, but perhaps someone will learn from Levin how to pull off something as ambitious as repealing anachronistic broadcast regulations. I hope so. And I hope the Aspen Institute knows what it’s getting into!

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Death, taxes … and FCC annual regulatory fees. Its that time of year again and the FCC has issued its latest annual Notice of Proposed Rulemaking containing regulatory fee proposals for Fiscal Year 2010. Those who wish to file comments on the FCC’s proposed fees must do so by May 4, 2010 with reply comments due by May 11, 2010.
For one of the few times in recent history, the annual fee amount the FCC is proposing to collect is actually less than the amount from a previous year. Consistent with this, and with a few exceptions, most of this year’s fees are the same or less than last year’s fees for all AM, FM, and television stations, as are the fee amounts for LPTV, Class A, translator, booster, and broadcast auxiliary licenses.

One big change in this year’s fee proposals is the elimination of the exemption for digital stations to pay fees now that the DTV transition has ended. Going forward, all digital full-service television stations will be required to pay a full license fee, including those stations that were operating pursuant to digital Special Temporary Authority as of October 1, 2009. It is also important to point out that the Commission is proposing to charge only a single fee for each low power or Class A facility simulcasting in both digital and analog.

The Communications Section will shortly be publishing a full Advisory on the proposed Reg Fees, including fee tables and charts for you to use to calculate your payments that will be due later this year.

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Like many other FCC license holders, broadcast stations constantly navigate numerous laws and regulations while filing a multitude of reports and applications by required deadlines. Many of these are required quarterly, but some are annual, biennial, quadrennial, or octennial (once every eight years, and the only time I’ll get to use that word this year). While stations are usually very good about completing their quarterly reports, the less frequent reports require a special level of attention or they can be forgotten in the rush of business.

In the past few months, I have noticed a surge in calls from stations wanting to talk to a lawyer because they have belatedly discovered that they failed to create multiple reports over the past few years. I’ve received these types of calls regularly for more than two decades, but the accelerated pace of these calls definitely caught my attention. When a station calls the lawyer in a panic after making this discovery, the lawyer’s first job is to talk them down off the ledge. In the case of small station groups, you are often talking directly to the owner, who is rightly concerned about the direct financial impact of fines and license renewal challenges. With larger groups, it is often a GM worried about his or her future employment if the problem spins out of control. Fortunately, if addressed promptly, the damage can be greatly limited or avoided.

What is interesting, however, is that the common thread in nearly every one of these calls was the downsizing of the station employee “who did all that” before the problem commenced. While the recent “mega-recession” resulted in downsizing in nearly every industry, the precipitous drop in advertising revenues caused tremendous downsizing in the media industry. As downsizing usually requires that one person do the work formerly handled by multiple people, it is not surprising that a report that is required to be filed once a year, or only during odd-numbered years, gets lost in the mix. Of course, the loss of institutional memory is always a problem when an employee departs. However, the problem is intensified in a downsizing, where the departing employee is not too happy with the soon-to-be-former employer, and is probably not feeling very enthusiastic about training their successor.

As a result, while it is always wise to vigilantly monitor regulatory due dates and keep them on a multi-year calendar, it is equally important to ensure after a downsizing that there remains one employee who is clearly charged with ensuring that the required reports/filings are timely completed. You also need to ensure that employee has not just the responsibility of getting the job done, but the training and resources to make it happen. A top-notch conscientious employee who has no idea what an EEO Midterm Report is, and when that particular station’s report is due, is of little use.

Focusing a little bit of attention on that issue now will save you loads of distraction later when you try to undo the damage. Keep in mind that where a missed report may result in a fine, a missed license renewal application (the “once in eight years” filing for broadcasters) has caused the FCC to delete the station from its database and charge the licensee with illegal operation for the time it operated the station after its license expired. It’s best not to find that out firsthand.

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This week saw generally positive news for television broadcasters on the broadband front. First, the U.S. Court of Appeals for the D.C. Circuit ruled that the FCC does not currently have authority to regulate the network management policies of Internet providers. Aside from the fact that the Court’s ruling challenged the FCC’s ability to require Internet providers to treat all network traffic equally, i.e., to apply “net neutrality,” the decision also calls into question key aspects of the FCC’s ambitious National Broadband Plan, many of which assumed the FCC had broad authority to regulate the Internet. Because the Court struck at the very heart of the National Broadband Plan, the Court’s decision may undermine other aspects of the plan, including its controversial proposal to reclaim 120 MHz of spectrum from television broadcasters that we discussed in a previous post.

Another shifting wind came in the form of Verizon CEO Ivan Seidenberg, who publicly stated he does not believe there is going to be as great a spectrum shortage as the FCC predicts, and that “confiscating [TV] spectrum and repurposing it for other things, I’m not sure I buy into the idea that that’s a good thing to do,” and adding “I think the market’s going to settle this. So in the long term, if we can’t show that we have applications and services to utilize that spectrum better than the broadcasters, then the broadcasters will keep the spectrum.”

It is unclear whether the Commission will appeal the Court’s decision, and broadcasters still have a long way to go before they can breathe easier about their spectrum being repurposed for auction to wireless companies. Still, after being forced headfirst into a gale force national debate over the “best use” of their spectrum, any calming of those winds is certainly welcome.

While all this is good news for broadcasters, the FCC certainly isn’t giving up and going home. Just today, the FCC released its “Broadband Action Agenda” setting the timing for more than 60 rulemakings and other notice-and-comment proceedings, including a rulemaking involving broadcast spectrum reclamation scheduled for the Third Quarter of 2010. While the FCC’s authority over the Internet may be up in the air, it continues to exercise vast authority over broadcasters. One dark scenario (for everyone) is that the FCC rushes forward and reclaims broadcast spectrum, only to have its National Broadband Plan collapse before being implemented. In that situation, the damage to the public’s broadcast service would be done, the spectrum would still be auctioned, but likely with reduced demand (and excessive supply) driving down auction revenues for the government, and the public ending up no closer to the broadband nirvana envisioned by the FCC’s proposal.

Stay tuned, as this is a story that will be unfolding for quite a while.

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Death, taxes, and ownership reports: all three are unavoidable, but broadcasters had a brief respite from the last one. That respite has now come to an end.

One of the joys of being a broadcast licensee is filing biennial ownership reports detailing the extended ownership structure of each station. These reports used to be called Annual Ownership Reports and were filed, appropriately enough, annually. In an effort to reduce the amount of paperwork flowing between licensees and the FCC, the requirement changed in 1999 from an annual to a biennial one. That created endless confusion, as any particular station’s filing deadline was generally dictated by where it was located. Radio stations in one state would file by April 1 of odd-numbered years, while radio stations in a different state would be required to file by June 1 of even-numbered years. In fact, even TV and radio stations in the same state were required to file in different years.

Because of exceptions to the general rule on filing deadlines (too boring to discuss here), even the FCC had difficulty determining whether a station had been properly filing its ownership reports on time. As a result, the FCC adopted new filing rules in May 2009 establishing November 1 of odd-numbered years as the national ownership report filing date for all commercial broadcast stations. It also introduced a new form requiring more detailed information than in the past, required formerly exempt entities to file reports, and required that the information be entered electronically and repeatedly into the FCC’s filing system for each attributable owner in the ownership chain.

Previously, licensees with complex ownership structures would create a single exhibit describing the complete ownership structure and other media ownership interests, which was then attached to the ownership report for every entity in the chain of ownership. Because the new electronic ownership report form would not allow such attachments, stations (well, let’s be honest; station’s lawyers) were required to reenter the data for each and every ownership report. The reports for even midsize station groups could take months to complete. Initially, the FCC postponed the filing deadline (twice!) to give licensees time to fill out the voluminous reports, but as the FCC’s electronic filing system started to whimper from the volume of data being entered, the FCC postponed the deadline until the form could be reworked to solve the worst of the problems. For those interested, you can read our advisories and alerts from the time here, here, here, here, here, and here (you begin to appreciate the scope of the problem!).

A few hours ago, the FCC announced that a revamped ownership report form is now available which resolves the repetitive data entry issue by incorporating a spreadsheet that, once filled out, can be copied into multiple ownership reports. With the availability of the new form, the FCC also announced that all commercial broadcast stations, including Class A and LPTV stations, must file their reports on the new form by July 8, 2010. For those interested in the details of the new Form 323 and spreadsheet, you can read our Client Alert on the new form, and ponder whether a similar eight month postponement of death or taxes might also be possible.

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The fact that you are reading this tells us that you have found your way to CommLawCenter.com, our effort to simplify the gathering of information and resources relating to the communications industry, particularly regarding its legal aspects. CommLawCenter is an effort to step outside the normal confines of law firm websites and memoranda to address breaking news more directly and quickly by bringing everything under one roof. In structuring the site, we have tried to make it as flexible as possible so that it can improve where possible and adapt where needed. As it grows, we hope that you become a part of it, contributing your thoughts and advice on its continuous refinement.

But first, a bit of background: the core of Pillsbury’s communications law practice is a group of attorneys who have practiced together for many years. Most of us began our practices at a communications law boutique named Fisher Wayland Cooper & Leader. Fisher Wayland, as it was popularly known, was founded in 1934 as one of the nation’s first communications law firms by Ben S. Fisher of the Federal Radio Commission – the predecessor agency of the FCC.

The creation of the Federal Communications Commission that same year marked a new approach by the federal government to regulating the rapidly expanding segments of the communications industry. Since that time, communications technologies have improved and multiplied at an amazing pace, with Fisher Wayland, and now Pillsbury, lawyers involved at every turn: the launch of FM radio, broadcast television, cable television, satellite distribution, cellular telephone service, space-based consumer entertainment technologies, and an explosion of Internet-based communications services in recent years. In recognition of this, USA Today once described Fisher Wayland as “among the most venerable” of communications law firms.

Times change, however, and nowhere is that more true than in the communications industry. As the industry moved toward integration and consolidation, communications law boutiques needed to provide an ever-broader array of services to these expanding clients, leading many of them to merge with large and diverse firms capable of tackling any legal issue imaginable.

Why are we telling you this? Well, it was ten years ago today that Fisher Wayland merged into Shaw Pittman Potts and Trowbridge, and five years ago today that Shaw Pittman merged into Pillsbury. The result is a truly national (actually, international) firm whose lawyers remember well that it is the personal relationships (and cool technology) that make communications such a personally rewarding field in which to practice. It is therefore fitting that we are launching CommLawCenter on this anniversary. From snail mail, to fax, to email, to web distribution, to this site, our efforts to keep clients and friends informed over the past 75 years have been an ever-evolving process. CommLawCenter will allow that audience to access our content more quickly and easily than ever before. We hope you will visit us regularly, and whether you look at it as Pillsbury v.2.0 or Fisher Wayland v.4.0, that you join us at CommLawCenter as we continue to explore what the next iteration of the communications industry will look like.

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In the latest chapter of what seems like a never ending saga of the Commission’s effort to adopt new ownership rules, the U.S. Court of Appeals for the Third Circuit recently lifted its stay of the FCC’s revised cross-ownership rules adopted in 2007, which immediately allows the FCC to presume that common ownership of a daily newspaper and a broadcast station in the Top 20 television markets is in the public interest. The Court’s decision, for the first time since 1975, effectively allows the common ownership of a full-power broadcast station and a daily newspaper in the same geographic market.
In 2003, the Chairman Powell-led Commission undertook what was ultimately a highly controversial review of all of its broadcast ownership rules. With respect to newspaper/broadcast cross-ownership rule, the Commission concluded that newspapers and broadcast stations do not compete in the same economic market and that continuation of the cross-ownership ban made no sense except in the smallest markets. Before the re-write of the broadcast rules took effect, it was challenged by various parties in the Third Circuit. The Court, in the well-known Prometheus Radio Project decision, stayed the effectiveness of the re-written rules. Despite the stay, the Court actually agreed with the Commission that a blanket ban on broadcast/newspaper cross-ownership was no longer warranted, so the Court remanded the FCC’s ownership limits back to the agency for further justification.
In response to the Court’s order, the Commission in 2007, this time led by Chairman Martin, once again decided that a complete newspaper/broadcast cross ownership ban did not make sense. It fashioned a rule that presumed that waiver of the ban is waived in the public interest in certain limited circumstances. The FCC said that it would review combinations involving a daily newspaper and either one radio station or one television station in the Top 20 markets on a case-by-case basis, and presume that they were in the public interest, so long as, in the case of television/newspaper combinations, the television station was not a Top-4 ranked station, and at least 8 independent “major media voices” would remain in the market. Combinations in markets outside of the Top 20 would be presumed to not be in the public interest, unless a showing could be made that overcame the presumption.

Again, before that rule could take effect, it was appealed and the Third Circuit continued to stay it. When the leadership of the FCC changed again in 2009, the new Chairman Genachowski-led Commission told the Court that relaxation of the newspaper/broadcast cross-ownership ban adopted by the previous Martin-led Commission does not necessarily reflect the view of a majority of the current Commission. The leadership also asked the Court to continue to hold off ruling on the Martin Commission’s version of the rule until this Commission could complete its Congressionally-mandated review of the broadcast ownership rules in 2010. Despite that request, the Court lifted its stay and ordered that initial briefs in connection with the Martin Commission revisions to its ownership rules be filed by May 17, 2010.

As a result, the FCC’s relaxed newspaper/broadcast cross-ownership rule adopted in 2007 is now in effect. Broadcast/newspaper combinations can now be reviewed and granted on a case-by-case basis in accordance with the standard described above. However, before trying to enter into a new cross-ownership combination, interested parties should keep in mind that the current Commission is on record as being wary of the Martin-era version of the rule, so any hope that the current Commission is in a hurry to review any proposed combos might be misplaced. They should also realize that the Martin-era rule is subject to the Third Circuit’s review, and that it is unclear precisely how, and when (if ever), this rule’s more than thirty-five year saga will end.