FCC Takes Lid Off National Station Ownership

In a move that is expected to trigger another wave of station consolidation, the FCC today voted to allow station groups to exceed the nominal ownership cap that limits groups to coverage of no more than 39% of U.S. TV homes.

It did so by restoring the 50% discount on the coverage of UHF stations in calculating groups’ coverage.

“This will have the effect of increasing the cap well beyond the 39% level established by Congress in 2004,” said Democratic Commissioner Mignon Clyburn, who dissented in the 2-1 vote. In fact, she said, it will allow groups “to actually reach 78% of television households.”

In one of its last actions last year, the FCC under Obama-appointed Tom Wheeler had eliminated the discount. Ajit Pai, appointed to succeed Wheeler in January, announced his intention to reverse the action last month. Ion Media and Trinity Broadcasting had asked the commission to reconsider the Wheeler FCC vote.

The FCC also said it will launch a rulemaking later this year to look at the national ownership cap in its entirely and consider raising the cap with or without the discount.

Groups opposed to media consolidation might take the FCC to court to block the action.It’s under discussion, said Andy Schwartzman, of the Institute for Public Representation at the Georgetown University Law Center.

“Today’s disgraceful vote is a cynical political ploy to help large broadcast companies become larger, notwithstanding the lack of any sustainable legal rationale for doing so,” he said.

The FCC action opens the door for mergers involving groups that are bumping up against the cap without the discount. Sinclair, Nexstar, CBS and NBC all lobbied the FCC to restore the discount.

The immediate beneficiary may be Sinclair Broadcast Group. It is rumored to be in talks to acquire all or most of Tribune Media. With the discount, it will be able to move ahead with any such plans.

Sinclair’s coverage now stands at 38.6%. With the discount, it could grow to between 53.3% and 68% depending on the mix of UHF and VHF stations. The fewer VHFs, whose coverage is fully counted, the closer it can get to 68%.

The following chart shows the top 20 TV station groups ranked by their current coverage and show how big they could get if they buy only fully counted VHF stations (minimum actual cap) going forward or only discounted UHF stations (Maximum actual cap). Current actual and FCC coverage percentages come courtesy of BIA/Kelsey.

The numbers on the chart are all percentage except the last two columns.

Clyburn blasted the FCC’s action in a statement prior to her no vote and in a Q&A with reporters after the meeting.

She accused Pai of hypocrisy. While he professes the desire to eliminate outdated regulations, she said, he chose to snatch the UHF discount from “a regulatory crypt” to immediately allow the big to get bigger.

With its vote, she said, the FCC is “inviting all broadcast stations to actually distort the calculation of their national audience reach and take advantage of a loophole that allows owners to fail to count audience that the stations actually do reach.”

Pai defended his action by saying that the UHF discount and the leveling of the cap must be considered in tandem and that they will in the rulemaking later this year. Pai pointed out that he made the same argument when the Wheeler FCC first proposed eliminating the discount in 2013 and when it actually went ahead and did it last year.

The FCC, however, may have a problem in adjusting the 39% cap. Fellow Republican FCC Commissioner Michael O’Rielly, who gave Pai the second vote he needed to restore the discount, reiterated his belief that the FCC lacks the authority to change the cap. Congress set the cap and only it can change it, he said.