FCC Mulls Limits On SSAs, LNS Agreements

As many broadcasters had feared, the FCC is considering limiting TV broadcasters’ use of shared services agreements (SSAs), local news service (LNS) agreements and other contractual arrangements to operate or closely cooperate with second stations in small markets where the agency’s duopoly rule prohibits owning two.

The FCC yesterday launched a rulemaking whose thrust is generally deregulatory. It proposes to permit common ownership of newspapers and broadcast stations in the top 20 markets under certain conditions and to drop restrictions on the common ownership for TV and radio stations in all markets.

But it also proposes to keep in place the duopoly rule, which places limits on the common ownership of two stations to a market, and asks whether SSAs and similar agreements should count as ownership and be subject to the limits — that is, in FCC parlance, whether the agreements should be attributable.

Two of the four commissioners issued statements making clear that they are sharply split on the operating agreements.

That the FCC is taking a closer look at them is a “very positive development,” said Democrat Michael Copps, who is retiring at the end of this month and won’t be around to vote on the final rules next year.

“We have seen a proliferation of these types of agreements in recent years, in many cases to the detriment of independent content. Too often, we see exactly the same programming being shown on two or more channels, including the simulcast of identical newscasts.”

On the other hand, Republican Robert McDowell said he was “troubled” by the FCC’s closer look.

“These arrangements are used to reduce the costs of news production and any action taken to hinder such relationships may have unintended consequences, such as reducing the quality and quantity of local news and exacerbating the failure of more newspapers,” he said.

“We must be wary of taking actions in the name of promoting journalism, especially if they could have the opposite effect. As I have often said, journalism does not need the government’s ‘help.’ That very notion raises serious constitutional concerns.”

The duopoly rule prohibits common ownership of two top-four-rated stations in a market and combinations of any kind in a market that doesn’t have more than eight independently owned stations.

In practice, the rule generally prohibits the ownership of two Big Four network affiliates in small markets.

To get around the rule and create so-called virtual duopolies, broadcasters have devised SSAs and other arrangements that put one station in management control over another to one degree or another.

More limited in scope, LNS agreements generally involved two stations that have decided to work together in news gathering.

While the FCC doesn’t actually propose making such agreements subject to the duopoly rule, it asks enough questions about them to make it clear that it is thinking of doing just that.

Among them:

• “If we determine that LNS agreements and/or SSAs should be attributable, how should we define LNS agreements and SSAs and what attribution standard should we adopt?
• “If we adopt new attribution rules, should existing agreements be grandfathered? If so, how should the grandfathering be structured? If not, how long should broadcasters have to comply with the new attribution rules?
• “Instead of focusing on attributing certain named agreements (e.g., JSAs, LMAs, SSAs, LNS agreements) as we have in the past, should we adopt a broader regulatory scheme that encompasses all agreements, however styled, that relate to the programming and/or operation of broadcast stations?
• “Should we consider the impact of these agreements on other matters of commission interest, such as retransmission consent negotiations?  Or are these issues more appropriately considered in another context, such as the retransmission proceeding?
• “If we determine that these arrangements should not be attributable, should we adopt disclosure requirements? If so, what disclosure should be required? Such disclosures could help viewers determine the origin of news content and help the commission monitor the proliferation of such agreements and determine whether to revisit the issue of attribution.”

Labor unions, cable and satellite operators and public advocacy groups have all called on the FCC to crack down on the SSAs and the like. The labor unions and advocacy groups contend that the agreements reduce the number of independent voices in a market and degrade the quality newscasts.

Cable and satellite operators complain that broadcasters are using the agreements to jointly negotiate for retransmission consent fees and giving themselves an unfair advantage in those negotiations.

In meetings at the FCC and in the inquiry that preceded the rulemaking, broadcasters countered than the agreements keep weak stations on the air and result in more and better newscasts.

Broadcasters have also argued that the cable and satellite complaints about retransmission consent are better addressed in a separate proceeding.

While Free Press, an advocacy group opposed to media consolidation, generally condemned the rulemaking, it commended the FCC for looking into the agreements behind the virtual duopolies.

“The FCC must address the proliferation of secret deals to combine local newsroom operations in violation of the agency’s rules,” said Free Press President Craig Aaron in a statement. “Some broadcasters now control two, three or even four stations in one market, giving a handful of companies extraordinary influence over local debates, issues and news.

“Now is the time for the FCC to close the legal loopholes and rein in these so-called shared services agreements. Otherwise broadcasters will continue to undermine competition, destroy news diversity and cut jobs in local communities.”

The American Cable Association, which represents small cable operators, said it is “very pleased” with the FCC’s examination of the broadcasters’ operating agreements. “ACA has shown that coordinated negotiation of retransmission consent harms local competition and artificially increases retransmission consent fees, which consumers absorb in the form of higher rates.”

Despite tentatively concluding that the duopoly rule should stay in place, the FCC asked a host of questions about how the rule might be modify in ways that would make it possible for broadcasters to own combos in more markets.

In particular, it suggested establishing criteria for waivers of the rule. “We seek comment on whether adopting a waiver standard for small markets would promote more news offerings in these markets,” the rulemaking says. “In particular, we note that there is some evidence to suggest that markets with six or fewer stations may be less able to support four local television news operations.”