FCC Puts Kibosh On New JSA Deals

As anticipated, the FCC today ruled by a 3-2 vote that TV broadcasters generally may not form new joint sales agreements in which one station sells 15% or more of the advertising time of another separately owned station in the same market.

Some broadcasters have been using JSAs exceeding 15%, usually in concert with shared services agreements, to operate second TV stations in markets where outright ownership is prohibited by agency rules.

Also under the new regulation, existing JSAs would generally be required to unwind within two years, unless the broadcasters involved can persuade the FCC that a particular arrangement genuinely serves the public interest.

The commission said the Media Bureau will consider waiver requests within 90 days of the closing of the record on the requests.

FCC Chairman Tom Wheeler said that the FCC has long imposed ownership limits to promote competition, diversity and localism. “Today, what we are doing is closing off what has been a growing end-run around” the limits.

In a related move, the FCC asked for comments on whether broadcasters should be required to fully disclose details about other forms of shared services agreements and whether additional regulations should be imposed on SSAs.

The FCC’s preexisting ownership rules prohibit TV stations in small and medium markets from owning more than one station. In large, they may own two as long as one of the stations in not among the market’s top four rated. In most cases, that means not one of the Big Four network affiliates.

Under the FCC’s new JSA regs, the Media Bureau “should be able to move quickly” on waiver requests for station sharing deals where there’s no “change of effective ownership,” Bill Lake, Media Bureau chief, said at the FCC meeting.

The bureau may also be able to move relatively quickly on waiver requests where there has been an “effective acquisition” but no “acquisition-related financial entanglement” between the sharing stations “to compromise or impair the independence” of either station, Lake said.

But where effective control has passed from one station to another in the same market under a JSA deal, “one would imagine that the required showing of necessity and positive impact on the public interest [for a wavier request] would have to be very high to overcome the various forms of entanglement,” Lake said.

FCC Commissioner Ajit Pai, who opposed the JSA crackdown and voted against the agency’s order, said the waiver standard was “vague and inchoate” and leaves “unbridled discretion” for the Media Bureau to grant or deny waiver requests.

“While I very much hope I am wrong, I fear that the substantial majority of requests will not meet with a favorable response,” Pai said.

NAB EVP of Communications Dennis Wharton responded to the commission’s action: “For a decade, Republican and Democratically-controlled FCCs have approved JSAs, which allow free and local TV stations to survive in a hyper-competitive world dominated by pay TV giants. That model is now declared illegal, based on the arguments of pay TV companies whose collaborative interconnect advertising sales practices make JSAs seem pale by comparison. It’s disappointing the FCC would take this action without first completing its 2010 statutorily mandated media ownership review. As the record before the commission clearly shows, the public interest will not be served by this arbitrary and capricious decision.”

Senate Commerce Chairman John D. (Jay) Rockefeller IV said in a statement: “I thank the FCC for answering my call to rein in the misuse of broadcast television sharing agreements, which has threatened the integrity of the FCC’s media ownership rules. Today’s action on joint sales agreements is a positive step forward, and I am pleased by the agency’s further inquiry into how it can monitor the possible impact other sharing agreements could have on consumers.”

Free Press President Craig Aaron praised the FCC decision: “For years, a small handful of powerful conglomerates has used outsourcing agreements to dodge the FCC’s ownership rules and grow their empires at the public’s expense. And for too long the agency has looked the other way as these companies have dominated the airwaves. While today’s vote focuses only on joint sales agreements, it signals that FCC Chairman Tom Wheeler is willing to break with the past and stop broadcasters from using shell companies to skirt the agency’s ownership limits. We do have concerns about how the FCC will apply waiver standards. The agency must ensure that its efforts promote diverse ownership and do not prevent diverse owners from exercising real control over the stations licensed in their names. Bending the rules to keep sidecars in place would relegate these licenses to permanent second-class status. We need to ensure that this vote leads to real diversity on the public airwaves.”

Martyn Griffen, government affairs associate at Public Knowledge, commented: “The commission’s JSA order will make it harder for broadcast stations to circumvent media ownership rules in small and medium-sized markets. The FCC’s actions are also a meaningful attempt to rein in programming costs. Instead of banding together with competitors to demand increased rates for their programming, local broadcasters should negotiate for carriage on pay TV systems on their own behalf. We applaud the FCC for closing this loophole in the media ownership rules.”

David Honig, president of the Minority Media & Telecom Council said: “MMTC recognizes, as has the commission, that there may be unique circumstances where a sidecar arrangement could serve the public interest. The commission has wisely left the door open to enable operators to demonstrate that their structure is an exception to the rule against ownership shams, such as the genuine incubation of a minority or woman new entrant, or the rare instance where a JSA or SSA is the only way to save a struggling station.”