This is a reversal of a Supreme Court decision, which had overturned the Second Circuit's original decision that the policy was arbitrary and capricious. The Supreme Court told the lower court to take a second look at its decision.
But the court kept its direction:
"Under the current policy, broadcasters must choose between not airing or censoring controversial programs and risking massive fines or possibly even loss of their licenses," the court said. "It is not surprising which option they choose. Indeed, there is ample evidence in the record that the FCC's indecency policy has chilled protected speech."
In recent years, the FCC began enforcing so-called "fleeting" indecency incidents it had traditionally overlooked.
Fox and CBS look to be one of the immediate beneficiaries of the ruling.
The FCC cited Fox for a couple of incidents, both involving live awards telecasts. This includes fleeting remarks made by Cher and Nicole Richie in separate occurrences during the network's broadcast of Billboard Music Awards shows in 2002 and 2003. Although the FCC cited Fox, it didn't levy specific monetary penalties.
But the FCC did go further with a CBS incident -- the famous 2004 Super Bowl half-time show, which featured Janet Jackson's "wardrobe malfunction."
Fox has said it is pleased with the decision. It filed the original challenge to the FCC policy. Others joined the case, including NBC and ABC.
Dennis Wharton, NAB executive vice president, communications, said the NAB supports the court's decision and believes that "responsible decision making by network and local station executives, coupled with program blocking technologies like the V-chip, is far preferable to government regulation of program content."
But as it somewhat customary in these proceedings, the court activity probably won't end here. Chances are that another appeals court, or the Supreme Court, will make subsequent rulings.