Rather than helping out broadcasters so they can continue to provide arguably the best all-around TV service to everyone for free, outgoing FCC Chairman Tom Wheeler worked to constrain the growth of station groups, tried to undercut their retrans leverage by eliminating the syndex rules and failed to champion ATSC 3.0. It's a legacy that says that broadcasting should be tightly managed, but not encouraged.
Wheeler Leaves Misguided Broadcast Legacy
When President Obama personally announced in May 2013 that Tom Wheeler was to be his second-term FCC chairman, he made light of the fact that Wheeler was once a top lobbyist for cable and wireless. He is a member of both industries’ halls of fame, the president noted. “[H]e’s like … the Bo Jackson of telecom.”
As Wheeler now prepares to step aside to make way for the new administration and new chairman, I can assure you that he will not be inducted into the TV broadcasting hall of fame, even if there were such a thing.
Although he sometimes gave lip service to the value of broadcasting when the occasion demanded, I cannot think of a single Wheeler move to nurture or strengthen broadcasting, to make it better able to withstand the forces that have been grinding it down for the past 40 years.
If he had helped out broadcasting, he would have had solid public interest grounds to do so. The medium produces the best all-around TV service — news and entertainment and vital emergency information — and provides it indiscriminately to everybody, rich or poor, for FREE. All you need is a TV set and someplace to plug it in.
Instead, Wheeler stuck with the out-of-date Democratic playbook that says that broadcasting is so powerful and pervasive that the FCC must continue to regulate and constrain it as if it were still 1975. (When I say Wheeler here, I mean Wheeler and the two other Democratic commissioners who usually provided his necessary majority.)
Wheeler not only kept the onerous national and local broadcast ownership restrictions in place, he tightened them up (or tried to). In 2014, he banned joint sales agreements that broadcasters have been using to operate two full-power stations in markets where the rules say they couldn’t own them.
In a related action, Wheeler said two separately owned stations in a market could not jointly negotiate for retrans fees, even if they are jointly operated via JSAs and shared services agreements. He meant it, too. This year, he forced Sinclair into a $9.5 million settlement for violating the prohibition.
Fortunately for broadcasters, Congress and a federal court countermanded the FCC’s JSA action to some extent. As things now stand, broadcasters can keep their existing JSAs and resulting duopolies and even transfer them. However, they can’t create any new ones that run afoul of the ownership limit, and they still can’t negotiate for retrans fees for stations they operate, but don’t own.
On the national side, Wheeler eliminated the so-called UHF discount, affirming that no group could serve markets covering more than 39% of TV homes. He grandfathered the handful of groups that now exceed that limit, but said they must come into compliance should they want to sell out.
Wheeler also inexplicably insisted on keeping in place the broadcast-newspaper crossownership rule, a regulatory relic that is now threatening to outlive newspapers. Every day it remains on the books is an embarrassment to good government.
The cynics in the broadcasting establishment (and there are more than a few) believe that Wheeler’s hard line on ownership was not due to his trying to preserve diversity of “voices” or competition, but to his desire to squeeze the financial life out of broadcasters so that they would be more apt to sell their spectrum in his prized incentive auction.
This goes back to Clinton-era FCC Chairman Reed Hundt, who promulgated the notion that broadcasting is an inefficient and fundamentally undemocratic medium and that its spectrum would be better used by wireless carriers. The idea led directly to the incentive auction.
The Wheeler commission could have been even worse for broadcasters.
At one point, under a congressional mandate, Wheeler was considering regulating retransmission consent in ways that would have made it tougher for broadcasters to negotiate for higher fees. And on his own initiative, he tried to get rid of the network non-duplication and syndicated exclusivity rules, which undergird retrans.
He eventually dropped the retrans rulemaking, perhaps figuring he didn’t have statutory authority to do much. And he gave up on non-dupe and syndex in the face of stiff bipartisan congressional resistance.
Still, it was a bit of a close call. Without the ability to increase retrans fees, the broadcasting business goes from slow growth to no growth.
Also, the FCC’s dalliance with retrans “reform” created problems for broadcasters (and the public) by causing some cable and satellite operators to take harder lines in negotiations, figuring that an occasional retrans blackout of stations would trigger a backlash against broadcasters and help spur favorable action in Washington.
Like most other Democrats, Wheeler was not a stickler on broadcast indecency, long a thorn in the side of the industry. However, in 2016, he forced Schurz Communications to pay $325,000 as a condition of the FCC’s dismissing an indecency complaint against Schurz’s WDVJ Roanoke, Va., and granting the $443 million sale of its broadcast stations to Gray Television. It was bureaucratic extortion that denied Schurz due process.
Wheeler could have helped broadcasters by championing ATSC 3.0, the new broadcast standard that promises to transform the medium by increasing its capacity, integrating it with the internet and enabling its reception on smartphones and at home without rooftop antennas.
But he mostly chose to ignore it, perhaps fearing that it would discourage broadcasters from participating in his incentive auction. Broadcasters, consumer electronics manufacturers and other tech companies were on their own in developing the standard and a workable transition plan.
Broadcasters petitioned the FCC for a rulemaking to allow the use of 3.0 on a voluntary basis last April. We still haven’t seen it. He is simply leaving it for the next guy to deal with.
Wheeler has poured a lot agency resources into the incentive auction, a mechanism for buying spectrum from broadcasters and turning around and selling it to wireless carriers.
I guess you could count the auction as one of Wheeler signal accomplishments. Obama’s first-term FCC Chairman Julius Genachowski cooked it up, but Wheeler brought it to fruition, writing the complex rules, developing the equally complex software and finally getting it started late last summer.
But for many broadcasters it will be a bitter disappointment. Wheeler raised expectations high to insure that there would be widespread participation by broadcasters on the sell side.
But he badly misjudged the demand side. The wireless carriers have not shown up in the numbers or with great wads of cash that not only Wheeler, but just about everybody else thought they would. Rather than $40 billion or $45 billion flowing from wireless carriers to broadcasters in the auction, now the talk is of $20 billion.
The auction could fizzle out altogether, but probably not. So, some broadcasters will still cash in, but not as many as once supposed, and those who do may not get as much money as they once thought.
For most broadcasters, the incentive auction will not mean a fat check, but the hassle of having to move to their stations to new channels in the TV band repack that will follow the auction.
At least the government will pay for the migration out of auction proceeds, and so it becomes a way for broadcasters to upgrade their RF facilities for free. If they are smart, they will figure out a way to fold in some of the RF infrastructure changes they will need to implement ATSC 3.0.
Broadcasting isn’t the only FCC-regulated industry that will be happy to see Wheeler go. He stiffed his old comrades in cable, too.
The former head of NCTA failed to deliver much relief from broadcasters’ retransmission consent demands, imposed net neutrality regulations on operators’ lucrative broadband business and tried to force cable operators to allow third parties to offer competitive set-top-boxes and other TV navigation devices.
The current head of NCTA, Michael Powell, in May characterized the Wheeler years as a “relentless regulatory assault.”
But the man did have his fans, namely the beneficiaries of net neutrality (Google, Amazon, Netflix and other big broadband content providers) and the set-top-box initiative (Google).
I suspect plans are already being laid to welcome Wheeler into the Silicon Valley Hall of Fame.