Court Rejects Request To Stay UHF Discount

Today, the U.S. Court of Appeals for the D.C. Circuit denied the emergency stay motion filed by public interest groups that sought to prevent the FCC from implementing its decision to reinstate the so-called UHF discount that the groups claim will “make it easier for the nation’s largest television ownership groups to acquire additional stations, and crowd out diverse and local voices.”

A stay would have prevented the UHF discount from going into effect while the court hears the case on its merits.

Restoring the UHF discount to its national ownership rule, in effect, raises the limit on household coverage of TV station groups from 39% to 78%.

The decision is good news for Sinclair Broadcast Group, which needs it to implement its proposed agreement to buy Tribune Media for $3.9 billion and assumption of debt. That deal would increase Sinclair’s household reach to 72%.

Sinclair issued a statement following the court’s announcement: “We are pleased that the court denied the motion for an emergency stay of a rule that had been in effect for decades. We remain confident that the court will conclude on the merits that the UHF discount should remain in place until a thorough review of the current ownership rules is completed.”

The FCC had urged the court to deny the stay, saying the public interest groups’ request fell “far short” of meeting the criteria for a stay.

Last year, the FCC, led by Democratic Chairman Tom Wheeler, voted to eliminate the discount, lowing the cap. But that action was reversed in April by the Trump-appointed Republican Chairman Ajit Pai.

Before the Wheeler action, the FCC said in opposing the stay, “the ownership cap and the UHF discount used in calculating coverage “operated together for more than three decades, and they are … ‘inextricably linked.’ “

Commenting on the court’s ruling, Wells Fargo analyst Marci Ryvicker said: “This is clearly a positive for the proposed Sinclair-Tribune transaction, in our view, which may now proceed through the typical FCC approval process. Recall, the companies expect the transaction to close in 4Q 2017.”

And, she added: “While we are not legal experts, the better news is that the denial of a stay likely indicates that [the groups] will not win the full case on the merits. Recall that one of the major factors the court considers when deciding on stay is the likelihood that the petitioner’s win the case on its merits. Further, in its decision the court specifically stated that ‘petitioners have not satisfied the stringent requirements for a stay pending review.’

“Bottom line: We view this as a clear near-term positive for the broadcast stocks as it removes one of the major overhangs the space has faced over the last few weeks.”

The groups seeking the stay included Free Press, the National Hispanic Media Coalition, Cause, Media Alliance and United Church of Christ. They were represented by the Institute for Public Representation at Georgetown University Law Center.

“This case is far from over,” said Professor Angela J. Campbell, Director of the Communications and Technology Clinic at Georgetown University Law Center’s Institute for Public Representation. “Most stay motions are denied. The court’s unwillingness to grant our motion doesn’t change the fact that we have strong legal arguments against Chairman Pai’s unseemly rush to allow the nation’s largest broadcasters to become even larger.”

NAB EVP of Communications Dennis Wharton commented: “The FCC’s order eliminating the UHF discount was made without a comprehensive review of broadcast media ownership rules. NAB supports the Court’s decision denying the stay request.”