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FCC Turns Sights To Local Station Ownership

After loosening national ownership regulations, expectations are high that the FCC will move to allow two stations in every market regardless of whether or not they are network affiliates. Under one scenario, action could come as early as this summer.

The FCC is expected to clear the way as soon as this summer for broadcasters to own up to two or more TV stations in most if not all markets — even if two of the stations are Big Four network affiliates, broadcast industry sources say. 

Ajit Pai, the Trump administration’s FCC chairman, and his fellow GOP commissioner Michael O’Rielly, who now constitute the FCC’s majority, have already made clear their support for deregulation.

Both dissented last year when the commission, then led by Obama-appointed Democrat Tom Wheeler, refused to loosen the local ownership rule. “The regulations … are as timely as rabbit ears, and it’s about time they go the way of those relics of the broadcast world,” Pai said in his dissent.

Although sanguine the FCC will deliver the relief, industry sources are unsure how and when.

Pai’s office declined to comment for this story.

The current TV station ownership rule bars broadcasters from combining two of the top-four-ranked stations in a market, which are usually the ABC, CBS, Fox and NBC affiliates, and prohibits them from acquiring second stations regardless of rank in markets with fewer than eight independently owned stations.

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Broadcasters have become adept at circumventing the rule through the use of joint sales and shared services agreements (JSAs and SSAs) that allow broadcasters to operate, but not own, second stations in markets and enjoy the resulting efficiencies.

Perhaps encouraged by last year’s dissents of Pai and O’Rielly, the NAB and Nexstar petitioned the FCC in December to reconsider the Wheeler FCC order affirming the local ownership rule as well as the ruling that stations operated through JSAs should be attributed — that is, counted as owned stations under the ownership rule.

NAB argued that the FCC should allow broadcasters to own more than one station in all markets “subject to the limits of antitrust law.” Nexstar simply asked to be allowed to own two stations in all markets.

Both also called on the FCC to reverse the decision making JSA stations attributable.

Broadcasters and their Washington reps have high hopes that the FCC will grant the wishes of NAB and Nexstar. Some that it might go even further.

“It would not surprise me at all if they just threw out the local ownership rules,” an industry executive said. “Just let the antitrust rules control, and leave it at that.”

A source close to the issue said that DOJ guidelines currently bar common ownership of TV stations where a broadcaster would get more than about a 40% combined share of the local broadcast TV advertising market revenue. The Justice Department has required station spinoffs in markets where that threshold would have been passed.

But broadcasters have urged the DOJ to expand its definition of the local advertising market to include radio, cable and internet ads, not just broadcast TV ads. The effect would be to permit broadcasters to buy more stations in a market.

The FCC essentially has three ways it can proceed in easing its local ownership rule, agency watchers say.

The slowest, and least favored route for industry execs, would be for the FCC to put off action on local ownership until after it launches its congressionally mandated quadrennial review of all ownership rules sometime next year.

The fastest would be to simply rule on the Nexstar and NAB petitions for reconsideration without seeking further public comment.

However, the consensus among insiders appears to be that the FCC, in the interest of building the best possible legal case for the courts, will put out the proposals for a fresh round of comments, either in a public notice or a notice of proposed rulemaking. By doing so, the FCC could address court concerns about the impact the ownership rules have on viewpoint diversity.

“There will be court challenges, and the better record you build the more likely you are to weather a court of appeals challenge,” said Elliot Evers, a managing director for the investment banking firm MVP Capital. “They need a further record on everything,” Evers continued. “If he [Pai] finds support in the record and in the facts, which is pretty easy to find, I do think he will eliminate lots and lots of things.”

Broadcasters and the FCC should expect resistance from groups opposed to media consolidation.

“Our view is that the Third Circuit [federal court of appeals in Philadelphia] has told the FCC that it can’t repeal or modify the local ownership rules without looking at the impact that could have on minorities and women,” said long-time advocacy group leader Andrew Schwartzman.

Assuming the FCC Republicans deliver, the local media market deregulation will come on the heels of another major move by the Trump administration FCC to relax the national TV ownership cap by restoring the so-called UHF discount.

The discount, which was eliminated by the Obama administration FCC, says broadcasters have to count only half of a UHF TV station’s reach toward the 39% cap on U.S. coverage set by the FCC’s national TV ownership rule. With the discount back in place, a single broadcaster can own UHF TV stations reaching 78% of TV households.

In the wake of the Trump FCC’s action, Sinclair Broadcast Group has already proposed to up its coverage from just below 39% to 72% through a $3.9 billion acquisition of Tribune Media.

Sinclair, which is hoping to file its Tribune deal application at the FCC later this month, has a major stake in the agency’s resolution of the duopoly issue because the group broadcaster and Tribune have about 14 overlapping markets and Sinclair wants to keep all the stations the rules will allow, a source close to the issue said.

Industry critics are challenging the Trump FCC’s UHF discount decision in the Court of Appeals in Washington, which on June 1 stayed the FCC decision “to give the court sufficient opportunity” to review the request for stay.

The effect of easing the local rule would be immediate. It would facilitate the merger of large groups with overlapping stations and it could touch off a round of deals and swaps among groups trying to double up in markets.

One industry executive told TVNewsCheck that if the duopoly restrictions are eliminated, controlling parties to many existing JSAs may be able to exercise boilerplate options to acquire the JSA stations.

This source also noted that if the duopoly rule is eliminated or significantly relaxed, there will be less of a need for JSAs in the future.

Regardless of the deregulation’s timing, Patrick Communications’ broker Greg Guy said that some broadcasters are planning deals in anticipation and have already been enhancing their market positions through JSAs and other mechanisms. “You’ll see many of these deals triggered immediately because they’re all teed up and ready,” he said.

NAB has also asked the FCC to eliminate the newspaper-broadcast crossownership rule, which bars broadcasters from buying daily newspapers in their markets. Many industry observers think the rule should be an easy target for deregulation.

“Frankly nobody cares about that,” said MVP’s Evers. “The only reason I believe NAB pounds on that is it doesn’t offend anybody in their constituency. So that’s an easy win for them.”

“If this had been done 10 years ago, the impact would have been much more significant,” added Guy. The relevance of newspapers to the local media marketplace has been on the wane. “Too little, too late.”


Comments (21)

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Joe Jaime says:

June 7, 2017 at 8:44 am

This would be a great help for small market stations.

Gregg Palermo says:

June 7, 2017 at 8:52 am

How many major cities have competing newspaper dailies and how has that absence of print voices affected the public interest? Broadcasting was unlucky enough to have its laws written in the 1920s at the height of Federal laws rather than the 1700s when freedom was better respected.

Ricardo Celis says:

June 7, 2017 at 9:08 am

What’s the need for the this? When 3.0 arrives broadcasters will have the tech to better compete for ad revenue with local cable operators and google/FB. Cable/satellite distributors are now under fire from digital options, meaning lesser market penetration while broadcasters are included in digital play…meaning a competitive advantage. One could argue that increased ownership in a market and the potential for decreased voices/POV only harms broadcasters as consumers will seek new/varied sources of information outside the tv ecosystem. Counting on the impact that increased ownership will have on women and minority ownership as a means to derail this move will fall absolutely flat.

Shenee Howard says:

June 7, 2017 at 9:11 am

The FCC needs to explain their position. This is about control of voice in media markets. Not free enterprise. Sinclair will not be happy until they control almost all broadcasters to promote their positions. It begins to smack of state broadcaters and propoganda. And even though most areas now have a single newspaper (which outside of major metro markets was already the case) there is still alternate voices via internet, other papers in the state, and broadcasting. Who represents the consumer in all this, especially considering the stations receive a license to broadcast in the PUBLIC interest?

    Debra Rein says:

    June 7, 2017 at 9:28 am

    Dude, the liberalism in your head is starting to cause you to become paranoid. Don’t be scared of freedom. It’s not the end of the world. You can’t control and regulate everything into your submission. Your moniker is FreeRightsUSA but you preach control and domination through government regulation. Think about your name and look at your posts.

    John Livingston says:

    June 8, 2017 at 12:34 am

    Your wrong FreeRightsUSA your bias is blinding doubt that you don’t care what NBC, CBS, ABC they are bias since they are liberal and think liberals are good conservatives bad. Media isn’t ever going to be state run propaganda by Sinclair or any media company.

Brian Bussey says:

June 7, 2017 at 9:22 am

thousands of kids are graduating from college and like me, a few decades ago, eager to get their 1st TV job. station groups only want to double up to lay people off. You never see the savings plowed back into news and local programming. Those savings go straight to stock holders. Do any TV station groups still allow their employees to buy their company stock in their 401k plans.? If the base line employees are not able to buy the stock then why are the company executives allowed to buy the company stock? Consolidation has done nothing but concentrate income into the executive offices. Has any station employee seen any of the millions in retrains money flowing into the stations ? Medical benefits could be free and the stations would still be very healthy financially. TV stations still broadcast over publically owned airwaves and always will. They are not like other businesses and should not be able to treat their staffs like other businesses.

    Hugh Haynie says:

    June 7, 2017 at 10:14 am

    No one owes you anything. Work somewhere else.

    Debra Rein says:

    June 7, 2017 at 10:26 am

    They can buy the stock just like I can buy the stock. It’s called the stock exchange. Do you feel someone should be given stock just because they work there? I HOPE U MAKE IT with that attitude that someone owes you something more than a paycheck for doing a job.

    Don Richards says:

    June 7, 2017 at 12:33 pm

    The millions of dollars in retrans money is going right out the door to the networks who are extorting stations and groups. That money just passes through the coffers of even the largest broadcasters.

    John Bagwell says:

    June 7, 2017 at 12:44 pm

    And the portion that they do get to keep is making up for the decline in core advertising.

Snead Hearn says:

June 7, 2017 at 9:43 am

I see this as free enterprise and not control of voice. I really do not see Sinclair anymore of a threat of promoting their position than ABC, CBS, and NBC (I am sure neither of these networks have shown any political preference). 🙂 Small and midsize markets should benefit from this change.

Teri Green says:

June 7, 2017 at 10:13 am

Yeah lack of competition is ALWAYS a good thing. Seriously what did he do pick this guy out of a bunch of good ones?

alicia farmer says:

June 7, 2017 at 10:42 am

If It’s OK in the NYC market for Rupert Murdoch to own NY Post, WNYW-TV, WOR-TV, Wall Street Journal, and Fox “News” – then this ship sailed long ago. Additionally – let’s get real about local market TV news consolidation. Does it really matter when news content is 80% crime, car wrecks, and weather hype?

yin yu says:

June 7, 2017 at 11:03 am

Pai and O’Rielly need to re-take Econ 101. As a Republican, it disgusts me that the FCC is looking out for the corporate media cartel in such a shameless way. This is clearly anti-competitive, anti-free market.

    Debra Rein says:

    June 7, 2017 at 11:34 am

    So tell me who benefits from a floundering number 4 station in the market. It’s a flow through of network programming and junk TV during the day and that is all. There is so little local content, events, local issue coverage, on these number 3 and 4 stations. What does it hurt to shore them up, give the market another profitable avenue to broadcast local issues. Would you rather give paid programming plus 3 hours of network prime to the audience? When did profit become such a bad word? Is this from having 8 years of the Obama administration being supported by the national media that has made the country feel profit is bad?

Matt Hortobagyi says:

June 7, 2017 at 1:27 pm

Not sure Enron has anything to do with this.

Ashley Dieck says:

June 7, 2017 at 2:49 pm

Am I crazy or could this Sinclair-Tribune deal fall apart soon (today?) with DC Court blocking the UHF Discount. I am not an attorney but opposition case looks strong. UHF stations counting for only 50% audience is ridiculous. If court kills UHF discount, then what?

    Debra Rein says:

    June 7, 2017 at 3:48 pm

    Latek from GTN spoke today at the Stephens conference and thought that this was all a bunch of noise. Said he thinks this stay would be thrown out possibly as early as this week. So, no, I don’t think the deal is in jeopardy. He thought even if the stay was kept in place through this court that the higher court would throw it out.

John Livingston says:

June 8, 2017 at 12:37 am

I think the Top 4 rule should stay that no TV station owner can have 2 top 4 stations in a market unless it’s a small market and depending on midsize market. Otherwise keep the rule as is if they do away with that rule Sinclair can own WWMT & Fox17 doesn’t have to be de facto anymore with the shell game.

CURT TRUMAN says:

June 8, 2017 at 11:31 am

There are two components , Currently, acquiring 2 of the top 4 networks in a market and 8 voices left after a duoply, are not allowed. The FCC is a spectrum traffic cop. The FTC decides what is anti competitive. Why Congress let the FCC into regulating free speech and other first ammedment rights, is something that should have never happened even if it goes back 90 years. It is a refreshing to see the undoing of 90 years of FCC regulating beyond their constitutional limits.


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