The FCC chairman has done much to advance his deregulation agenda but there’s one conspicuous exception — the local TV ownership rule that prevents ownership of two top-four stations in a market. To put such combos together, you have to get what amounts to a waiver and that can be costly and time consuming.
It’s fair to say that Ajit Pai, in just his first 15 months as FCC chairman, has already established his legacy as a bold deregulator — right up there with Mark Fowler of the Reagan days.
Among other things, he has dismantled the Wheeler FCC’s heavy-handed net neutrality regime; effectively raised the national TV ownership cap to as much as 78%; dashed the newspaper-broadcast crossownership rule, whose continued existence was an affront to rationality; and, at last count, launched eight rulemakings to relieve broadcasters of pointless bureaucratic obligations that add cost to their business and no value to their viewers.
There is one place where Pai waivered, lost faith in his own Kansas-nurtured, let-the-market-decide philosophy. That would be the local ownership rules.
Last fall, in the FCC’s omnibus ownership proceeding, the Pai-led FCC ruled that broadcasters can own two stations in a market of any size, but then it inexplicably choked.
It couldn’t quite let go of the ancillary rule that says the two stations cannot be among the market’s top four rated. Rather than junking it, it said it would keep the rule, but consider combos of top-four stations — in essence, combos of Big Four network affiliates — on a case-by-case basis.
It compounded the problem by not laying out simple, objective criteria for waivers as it has for “failed station” waivers over the years. Instead, the FCC offers vague suggestions, including that broadcasters support their arguments with at least three years of data on ratings, revenue and retransmission consent shares.
That’s quite a load, and out of character for an FCC ostensibly dedicated to lightening the regulatory onus.
The Independent Television Group, which believes that its small-market members are especially disadvantaged by the top-four rule, had tried to convince the FCC not to go the case-by-case route, arguing that waivers are “uncertain and inherently result in longer regulatory delays than application with bright-line rules. They also impose higher costs to develop and submit expert analyses to support exceptions.”
The imposition of the case-by-case approach is particularly perplexing because there is plenty of real-world evidence that top-four combos do not cause the trauma that critics of media consolidation claim, and actually do some good.
Over the years, broadcasters have become adept at exploiting a big loophole in the rules. They discovered that the FCC would allow them to operate second stations in markets through shared services and joint sales agreements as long as they didn’t flat out own them. So, all they had to do was set up third parties to passively own the stations.
As you know, there are now hundreds of these so-called sidecar duopolies and many are top-four combos. Yet, despite the hand wringing in Democratic circles, there is no mountain of evidence attesting to how they have ruined local TV news, given duopoly operators an unfair advantage or driven up ad rates.
In fact, there is credible testimony that the combos have bolstered local TV news, increasing its quantity and quality, albeit at the loss of voices or diversity of views. I understand the importance of diversity, but, in broadcasting, which mostly eschews opinion, the need for such diversity may be overstated.
By the way, I not sure why the FCC is still in the business of weighing the impact of combos on a market’s competitiveness. It should leave that to the antitrust regulators at the Justice Department, who are more expert and, as they have shown in their review of the Sinclair-Tribune merger, plenty tough in making sure nobody gets an unfair market advantage. They are requiring Sinclair to spin off stations in at least nine markets that the station group desperately wanted to keep.
To some extent, the case of the case-by-case waffle will solve itself. Broadcasters will propose combos of network affiliates and, one case at the time, the FCC will slowly establish the criteria for getting its approval.
This will take time. And, unfortunately, the first cases to show up at the FCC may come from Sinclair. It told the FCC last month that it will seek to hang on to top-four duopolies in two markets — Greensboro, N.C., and Indianapolis — by going through the case-by-case process.
Sinclair being Sinclair, those cases will be heavily scrutinized and the FCC may end up demanding more evidence of no harm and public interest benefits than it would if one of broadcasting’s Boy Scouts like Hearst or Meredith were going first.
Pai can fix all this.
He can use the first case that comes to the FCC to establish simple, objective criteria for winning FCC approval. This would somewhat undermine the agency’s stated intention to consider “variations” in markets though the case-by-case process, but Pai could probably get away with it.
Or, he could remedy it in the upcoming congressionally mandated quadrennial review of the ownership rules. In the past, this review has been a long and cumbersome process. But Pai could speed the proceeding by keeping it lean and focusing on just a few items, like the top-four rule and the radio subcaps.
If he doesn’t have the stomach for completely eliminating the rule, he has lesser options that would be a vast improvement on where we are now. He could limit the ban to top-two combos, he could establish those simple, objective criteria or he could create a presumption of favor of permitting the combos, thereby shifting the burden of proof to those who oppose them.
Let me add that, in this process, Pai should grandfather the existing JSAs and SSAs, but outlaw them going forward. Government by loophole is lousy government and, if Pai goes far enough in relaxing the top-four rule (and the national ownership cap in a separate proceeding that is already underway), the sidecars will be unnecessary.
So, Pai has the means to remove this smudge from his legacy. He just needs a little encouragement.