Plenty, say broadcasters.The impetus comes from liberal foes of big media, cable and satellite operators trying to slow the growth of retrans payments and possibly Wheeler’s own effort to promote broadcasters’ participation in the spectrum auction. “He’s trying to break apart broadcasters,” says one station group executive.
FCC Chairman Tom Wheeler’s campaign to crack down on joint sales agreements and other sharing arrangements is being driven by liberal watchdog groups, the pay TV industry — and, perhaps, the chairman’s desire to encourage broadcasters to cash in their channels during the agency’s incentive auction next year, broadcast sources say.
The initiative has triggered alarms among broadcast representatives in Washington who are now trying to derail it. “He’s trying to break apart broadcasters,” says one.
If Wheeler gets his way, the FCC will adopt a new agency regulation as soon as March that would bar broadcasters from forming new JSAs — deals under which one station sells ad time for another station in the same market.
The change in regulations would give holders of existing JSAs, or specifically those in which one station sells more than 15% of the ad time of the other, anywhere from 18 months to two years to unwind, with the length of the transition period still to be determined at deadline, sources say.
Wheeler also would seek public comment on what to do about other forms of shared services agreements (SSAs) between stations, the sources add.
Broadcasters have turned to JSAs and SSAs in large markets where the FCC’s local ownership rules say they may not own two Big Four affiliates and small and medium markets where the rules say they may not own two stations of any kind.
Wheeler’s predecessor at the FCC, Julius Genachowski, promoted a similar plan during his chairmanship. But Genachowski tabled the initiative, apparently because he couldn’t get the support of a majority of his agency colleagues.
“This is really going to have a deleterious effect on the marketplace,” saysone broadcast transactions attorney, who said that the chairman’s re-regulatory threat has put dealmaking on hold while broadcasters wait to see what the new regulations will be.
“You want to know what the rules are before you invest a lot of money in doing a deal,” agrees another transactions lawyer.
At least two TV station transactions have been stuck in a holding pattern at the FCC while agency officials rethink their JSA policies: Sinclair Broadcast Group’s $985 million acquisition of Allbritton Communications’ seven stations and Sinclair’s $90 million buy of the eight New Media Age TVs, sources say.
Wheeler appears to be taking much of his counsel about sharing arrangements from watchdog group representatives led by Free Press, who have been complaining long and hard that broadcasters are using JSAs and SSAs to get around agency regulations intended to limit how many media properties a company can own in the same market.
The groups say the resulting consolidation is undermining the FCC’s statutory obligation to promote localism, diversity and competition in the public’s behalf.
“Without being too self-congratulatory, we and the cable companies have shown that there’s something going on here,” say Matt Wood, policy director for the watchdog Free Press.
Pay TV industry lobbyists argue that the local station combinations give broadcasters undue bargaining leverage to get ever-larger retransmission consent payments from cable and satellite TV operators.
“Unless the FCC also says that joint retransmission consent negotiations are attributable, these stations could still presumably go on colluding,” says one cable TV industry lobbyist, who asked not to be identified.
Unhappy broadcasters who have built business plans and station purchases based on JSAs and SSAs point out that Wheeler used to be a cable lobbyist. “He’s picking us apart on behalf of cable,” says one broadcast executive.
A leading conspiracy theory that’s making the rounds of the broadcast industry has it that Wheeler may also be cracking down on JSAs because he wants to hurt broadcasters financially to make selling their channels during the incentive auction a more attractive alternative for them.
Wheeler has made clear that the incentive auction, which is intended to repurpose broadcast spectrum for smartphones and other wireless services, is a top priority, but few broadcasters have been showing any enthusiasm for cashing out of the business by offering to sell their channels.
But if Wheeler is putting the squeeze on JSAs to encourage auction participation, his aim may be misguided, because most existing station sharing deals are in mid-size and smaller markets, and the need for wireless spectrum is most pressing in the larger markets, broadcast attorneys tell TVNewsCheck.
In addition, the chairman’s axing of JSAs is expected to further alienate the broadcasters Wheeler needs to insure the auction’s success, says one broadcaster, who has a pending transaction at the FCC and asked not to be identified.
Says one broadcast attorney: “It’s not the first time the FCC has picked up a big gun and pointed it in the wrong direction.”
Sources say Wheeler is expected to be able to get the votes of his two fellow Democrats at the agency — Commissioners Mignon Clyburn and Jessica Rosenworcel. But at deadline, one FCC source says it was too soon to predict the vote with absolute certainty, because Wheeler’s proposal had yet to be officially committed to paper for his commission colleagues to study.
At deadline, Wheeler was declining comment on the details of his plan — or on why he wants to put the kibosh on station sharing arrangements that broadcasters insist are critical for keeping struggling smaller TV stations on the air.
Hoping to derail Wheeler’s plan, NAB President Gordon Smith and several of the broadcast association’s TV board members visited Wheeler and the other FCC commissioners at the agency earlier this month, defending JSAs and other sharing arrangements.
The broadcasters, according to lobbying disclosure forms filed at the agency, told the FCC’s commissioners that JSAs and SSAs serve the public interest by clearing the way for stations to offer news and public affairs programming they could not otherwise afford.
Added Dennis Wharton, an NAB spokesman: “NAB believes there is demonstrable evidence that JSAs and SSAs benefit the public interest by increasing local news and by providing a competitive balance to pay TV titans.” But sources say that Wheeler told the broadcast lobbyists that he still intends to curb JSAs.
Wheeler originally signaled his intent to increase agency scrutiny of station sharing arrangements during a town hall meeting in Oakland, Calif., early in January. “We’re going to look at that differently,” he said then. Wheeler has yet to publicly explain why he has decided to make a priority of targeting the deals.
Under existing JSA and SSA sharing arrangements, broadcasters are able to run most of the key operations for multiple stations in a market, except for the programming.
Broadcasters previously used LMAs, or local marketing agreements, to run all of the operations of multiple stations in the same market, including their programming. But the FCC barred the formation of new LMAs in 1999.
Hoping to get some sort of compromise going at the FCC and considering participating in the incentive auction, LIN Media executives pitched a plan at the agency in January under which broadcasters could own outright stations in small and medium markets where current FCC rules say they may not.
Under the proposal, the broadcaster with the ABC affiliate could buy the local CBS affiliate with the understanding that the broadcaster would sell off one of the channels during the incentive auction, then operate both stations on a single channel.
It’s the kind of channel sharing that Wheeler has been pushing to free up spectrum for the auction.
The broadcaster would cash in from the sale of one of the channels, then get must-carry protection covering the joint operation of both stations on the channel remaining.
Wheeler, like the NAB, has declined comment on the proposal.
But some broadcasters privately are concerned that the proposal could deprive them of spectrum needed to take advantage of new technologies.
“If you share channels, it would be difficult to do full HDTV on both channels,” says one broadcast industry source. “It also would be difficult to multicast or offer mobile TV and other new technologies — such as 4K and Ultra HDTV — in the future.”
LIN did not pitch any specific transactions, nor make any commitments, to the FCC, but only suggested that agency provision of relief from the ownership regulations might encourage station participation in the auction, says Courtney Guertin, a LIN spokeswoman, in a follow-up.
“We have not yet received any feedback from the commission,” she adds.