Broadcasters Find Strong Ally In FCC’s Pai

If FCC Commissioner Ajit Pai didn’t exist, broadcasters would be trying to invent him.

That’s because ever since Pai stepped in to fill a Republican seat at the agency last May, broadcasters have had a sympathetic set of ears at the agency.

Pai, who grew up in small-town Kansas, has been scoring major points with broadcasters with his spirited defense of joint sales and shared services agreements that have allowed TV stations to operate two stations in small markets — agreements that the FCC’s Democratic majority has been threatening to unwind.

He’s also launched a campaign to try to revive AM radio—an initiative he will be championing at the NAB’s annual convention in Las Vegas next month. “From Day 1 at the FCC, it was clear that Commissioner Pai is sincere, engaging and razor-sharp smart,” says Dennis Wharton, an NAB spokesman. “He’s also unafraid to challenge false claims about broadcasting, as his support for JSAs and SSAs demonstrates.”

In an interview with TVNewsCheck, Pai, a former FCC staffer who previously worked for Sen. Sam Brownback, now the Republican governor of Kansas, explains why he supports JSAs, provides his thoughts on where the agency is going with its media ownership rules and shares his insights on retransmission consent.

An edited transcript:

As part of an ongoing review of the broadcast ownership rules, the FCC’s Democratic majority is proposing to make joint sales and shared services agreements attributable going forward and to unwind existing ones within two years. You’ve made clear that you would leave the JSAs and SSAs intact. Why?

The argument to me is in many cases a JSA or an SSA has allowed media entities to consolidate operations, to cut costs and save money in a variety of ways that then allow them to invest more in the business. That could be more investment in newsgathering, and that could be more investment in equipment.

JSAs and SSAs are essentially ways for broadcasters to get around the duopoly rule that bars acquisitions of a second TV station in smaller markets. Are you assuming that if you don’t permit somebody to come in and rescue the third- or fourth-ranked station in a market that the station is going to die?

In some cases, it could come to that. It’s very difficult in smaller markets. But I think the more immediate impact would be just less effort in the more capital-intensive areas like newsgathering. If a company has to save costs, they just might not send as many reporters out into the field to investigate stories. They might just rely on content that is easier to produce and might not be as urgent to consumers.

Broadcasters want the FCC to leave JSAs and SSAs alone or, at the very least, give existing agreements grandfathered protection. Do you support the grandfathering?

If the choice is between attributing all of them retroactively and prospectively, and just attributing them prospectively, then obviously I would rather we do less damage.

My own preference of course would be for us to remove the attribution of those agreements  altogether. My strong preference would be for us not to engage in line-drawing between existing and prospective agreements.

Do you believe the FCC should consider loosening its duopoly rule to make it easier for broadcasters to buy second TV stations in smaller markets?

My preference would be for the [JSA/SSA attribution] proposal not to be in the order. Whether there’s some relaxation of the television ownership rules that needs to happen in smaller markets, that’s something I’d be interested in exploring. I’ve suggested publicly that we might want to consider relaxing the [duopoly] rule. I’m open to discussion.

Where will the FCC come out on the JSA issue?

I wish I knew. If I did, it would make our life in this entire proceeding a little easier. On grandfathering, I don’t know where my colleagues are on this issue right now. What I can tell you is the fact that people have been coming in and giving real examples of [where] JSAs and SSAs have had an impact. I think people are understanding now that attributing these agreements is not going to be costless. You will see a diminution in the market of local newsgathering and in some cases the presence of some of these operators. My hope would be that my colleagues would come to see it my way.

What’s the status of the FCC’s overall media ownership rule review?

Negotiations are still ongoing. As you know, the FCC recently decided to work with an outside group — the Minority Media & Telecommunications Council — to engage in a study on some diversity issues, which ideally would put us in a position to move the ball forward.

Will there be some sort of element in the final media ownership rule order to encourage minority ownership?

I certainly hope so. The media incubator and foreign investment relief proposals are ones that there generally seems to be support for. [Editor’s note: Under the incubator proposal concept, which has the support of the NAB and MMTC, a broadcaster that helps a “disadvantaged” entity get into the business would be able to buy another radio station that would otherwise be prohibited by the FCC’s ownership rule caps; the foreign ownership proposal would allow foreign investors to exceed the existing 25% equity cap on U.S. broadcast station ownership for stations owned by minorities and females.]

You are talking about letting foreign investors exceed the existing 25% cap?

Right. If access to capital is the problem, if that’s what’s standing in the way of [minority and female broadcast owners] expanding their operations or staying in business, it seems to me we should update our rules to allow them to have a new revenue stream, even if it comes from abroad.

Broadcasters are scared to death that the FCC may somehow tweak the rules to reduce their leverage in the retransmission consent negotiations with cable and satellite TV operators.  Is there a chance of that happening?

I wouldn’t expect any substantial FCC action in the near term. We are very well apprised as to the importance of this issue to both sides. Unfortunately, under the Communications Act our authority is relatively limited. We have the ability to apply the “good faith” standard. But in practice it is very difficult for the FCC to enforce that standard in real time for a whole variety of reasons. For one, the statute doesn’t give us expansive authority to dictate the outcome.

Can’t you define what “good faith” is on a case-by-case basis?

Theoretically we could do that. There’s a March 2011 NPRM [proposed rulemaking] that is still pending, soliciting comment on the question of whether we can infuse more meaning into the good faith standard. So if the chairman chooses to move ahead with that, I would approach the issue with an open mind. But I am not aware of any movement on that NPRM.

Do you have any sympathy for cable’s and satellite’s argument that broadcasters have all the leverage here, and that rising retrans fees lead to rising fees for consumers?

I understand where they are coming from. MVPDs all complain about it. And obviously we want to be able to have a regulatory framework that allows consumers to enjoy these great services at ideally lower prices. But the difficulty comes for us from an agency perspective [in] that we’re not in the room when these are negotiated, and it’s very difficult for us in real time to understand what the actual situation is with regard to negotiating leverage.

Is there some limit to how far these negotiations can go with the blackouts and complaints about rising fees before the government has to step in?

The first crack at this issue is going to have to be taken by Congress … because unless they do, once again our authority is relatively limited.

What do you think of cable’s complaints that broadcasters are using JSAs and SSAs to band together to get bigger retransmission consent fees from cable operators? Is that a concern?

I’ve heard that concern from a number of cable operators. And obviously from an antitrust perspective, one of the things you think about collective action is whether that would be pro-competitive or anti-competitive. And I don’t have enough facts about particular cases to know whether or not that is the case. I always ask, whenever this pops up, can you give us some concrete facts. I understand the concept of course. But it helps to have concrete facts.

Instead of just vague assertions?

Right. I haven’t formed a judgment one way or the other.

Do you have any personal concerns that media violence may be feeding the gun violence that is rampant these days?

I think of this issue not so much as a regulator but as the parent of a young child. My son is only 18 months old and he is beginning his career of media consumption, so I am keenly aware of what he sees on TV and hears on the radio could affect the way he interacts with the world.  I’m not sure if there’s a scientific foundation yet for establishing a link between media violence and behavior but I think that’s something that Congress has a great interest in and I stand ready to work with them as a resource if they want to explore the issue further.

Does the FCC need some guidance from Congress on violence before the agency could do anything?

I believe so.

What do you personally think about media violence? Is there too much violence on TV?

I don’t know whether it has an impact. People argue that particular programs are really violent, and particular video games are really violent compared to the analogs from yesteryear, and it’s certainly not something I personally choose to watch for that reason — that it’s excessive. And I don’t think it would be something appropriate for my son to watch.

How about indecency?  That’s something you do have a statutory obligation to oversee?

In the wake of last June’s Supreme Court decision [FCC v. Fox Television Stations], the onus is now on us to decide on how to proceed, and whether the chairman chooses to reexamine our existing policies and tackle the backlog of complaints is something we’ve been interested in. My own hope is that we would start to reduce that backlog and cut down on the number of pending complaints.

But is the concept of cracking down on indecency of great personal interest to you, part of the agenda you brought with you to the commission?

There are all sorts of really important things on our plate and I don’t want to diminish the importance of indecency regulation compared to some of the other things, but right now there’s not something pending before me.

What do you think of the chances that the FCC’s incentive auction will be a success?

It’s too soon to say. We’re in the first quarter of a four-quarter game. It’s obviously a very complicated process. No other country in the world has ever conducted a reverse auction with a forward auction and repacking in the way that Congress has given us the authority to do.

You’ve said you think the FCC can hold this incentive auction by June 30, 2014. Is that realistic?

It’s a very aggressive proposal for a deadline but I do think it’s important for us to have a date in mind. It’s more important for us to get it right than to get it done right now. But that said, I think we should have a goal in mind of getting it done, because in part I think there’s an overhang of uncertainty over broadcasting and wireless that could get resolved the sooner we get through the auction.

You’ve gotten a lot of favorable attention from broadcasters in part because you are going to head a panel on AM radio at the NAB convention in Las Vegas next month. Many have already written off AM. What’s your interest in AM and what do you hope to achieve here?

From a crass personal perspective, I grew up listening to AM radio so I have an interest in the band thriving. Obviously the AM band faces a lot of challenges, but it’s been almost 23 years since we’ve reexamined some of our rules here. It’s overdue for a fresh look, especially with some of the technical advances that have been taking place. I’m optimistic that better days are ahead for AM.

What can the FCC do here?

That’s one of the things I would love to explore with the panel. I’ve been looking forward to talking about some of the technical challenges and some of the policy ones too. It’s not easy. As far as I can tell, it’s really struck a nerve because most people have forgotten about AM radio. So the mere fact that somebody is even talking about it has raised a great deal of interest.