A federal appeals court reviewing new financial interest and syndication rules adopted by the Federal Communications Commission expressed skepticism here Friday over whether the FCC acted properly in changing the rules.The three-judge panel of Richard Posner, Thomas Fairchild and chief judge William Bauer peppered lawyers from the FCC, Hollywood and the networks with intense questioning during a two-hour hearing. The Big Three networks and Fox Broadcasting are challenging the rules adopted last year by the FCC in a controversial 3-2 vote. The nets claim the rules are unnecessary in an era of increased viewing diversity; Hollywood and independent broadcasters say the regs are needed to prevent network abuses in the selection and scheduling of programs. Posner was the chief interrogator during the oral arguments and displayed a decided pro-network tilt in his questioning. Posner tried to pierce a claim long made by Hollywood: namely, that the fin-syn rules have helped to preserve the small independent producer. Yet, he said, “One of the things that has happened over the last 20 years is that the production community has become more concentrated.” That fact was missed by the FCC, he said. Posner also asked why the FCC conducted no surveys to determine the impact on the TV syndication market if network barriers to syndie entry were lifted. Judges Fairchild and Bauer were less combative in their questioning. However, Fairchild–who appeared to doze off briefly during the arguments–questioned the First Amendment implications of a provision in the new rules that prevent the webs from producing more than 40% of their prime time sked. ABC, CBS and NBC were represented jointly by D.C. attorney Louis Cohen, who hammered home the fact that the FCC tentatively decided in 1983 to eliminate the fin-syn rules. (Indeed, it took the intervention of President Reagan to block that tentative decision and preserve the rules in their entirety for another eight years.) Cohen said last year’s rule change “stunningly ignores past FCC findings that the threat to producers is not real.” But Cohen was forced to concede to Bauer that no Hollywood producers embraced the network call for eliminating the rules. “They (the producers) had every opportunity to appear (in support of the networks,)” noted Bauer. “This isn’t a secret case, right?” Cohen later suggested that producers remained silent for fear of “biting the hand that feeds you.” FCC attorney Mac Armstrong said the “absence of producer support (for the networks) was critical to the commission decision.” Diane Killory, who represented the Hollywood fin-syn coalition, said the “core issue” for the judges to decide is whether the FCC acted “arbitrary and capricious.” That was not the case, she maintained. But Killory was repeatedly interrupted by Posner, who questioned whether the FCC had proved nets are capable of abusing their power. Fox attorney William Reyner dismissed the FCC’s argument that the new rules promote programming diversity. “They don’t promote diversity. They impede it” by not allowing Fox to program above 15 hours a week before facing fin-syn restraints, he said. “New networks are part of the solution to be encouraged, not part of the solution to be contained,” said Reyner. But George Shapiro, an attorney representing indie TV stations, said that at some point, weblets such as Fox become strong enough to compete on equal turf with the Big Three. The 15-hour limit is an “issue … of line drawing” by the FCC, said Shapiro. Network lawyers, though refusing to predict they will prevail, were clearly pleased with the day’s events. The judges “asked all the right questions,” said NBC general counsel Rick Cotton.
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