The news that the association has given the FCC a week to reverse its tough new SSA stance reflects mounting frustration among broadcasters who are seeking FCC approval of deals that involve the alphabet soup of ownership rule work-arounds. I'll be watching next week in hopes its May 8 cease-and-desist deadline is more than bluster.
Good To See NAB Getting Tough With FCC
It’s unusual for a trade association to send a cease-and-desist letter to a federal regulatory agency, but that’s just what NAB did yesterday. It told the FCC to back off on its transaction-based regulation of shared services agreement by next Thursday, or else.
The NAB didn’t specify the or-else, but we can presume that it is a court challenge. Either that or the NAB intends to send a single-combat champion to duke it out with FCC Chairman Tom Wheeler right there on 12th Street SW.
The NAB contends that even though the FCC acknowledged in its March 31 order banning joint sales agreements that it has yet to build enough of a record to regulate SSAs, it has already begun to do so in the context of the station sales reviews based on a March 12 public notice.
In that notice, the FCC said it would “closely scrutinize” all deals that appear to circumvent local ownership limits through JSAs, SSAs, local marketing agreements and financial entanglements.
By encompassing SSAs, the notice is “fatally premature,” the NAB says in its threatening letter. The notice “cannot be squared with the March 31 decision, reflects unreasoned action and sends conflicting signals to broadcasters as to the rules of the game for sharing arrangements.”
The NAB’s action reflects mounting frustration among broadcasters who are seeking FCC approval of deals that involve the alphabet soup of ownership rule work-arounds. The deals were done in good faith and based on FCC precedent.
According to broadcasters and lawyers I’ve spoken with, the applications are, indeed, being closely scrutinized. Among other things, the FCC is imposing tough new conditions on SSAs — so tough, according to some, as to make them valueless.
To these broadcasters and their reps, the conditions seem not only “arbitrary and capricious” (those are legal fighting words), but also fluid. What seems to be satisfactory to the regulators one day is inadequate the next, they say. Getting approval of the deals has devolved into a running negotiation.
What’s unusual is that Wheeler’s office is directly involved in the negotiations, sometimes countermanding Media Bureau staff, they say. Unusual, but not surprising. With its crackdown on JSAs and SSAs, the Wheeler regime has completely undermined the Media Bureau, which had been routinely granting them for years.
By our count, deals valued at some $3 billion are lodged in the FCC bureaucracy because of JSA and SSA issues.
The biggest part of that total is the $1.6 billion attached to the merger of Media General and LIN. The parties tried to engineer that deal around the new thinking at the FCC. But who can say exactly what the thinking is? Both companies have pre-existing sidecar deals built on JSAs and SSAs that could gum up the works.
Media General and LIN can’t complain too much. They announced their deal just six weeks ago, understanding that it would take until early next year to get it through the FCC and past the antitrust regulators.
Sinclair, on the other hand, can gripe. It announced its $985-million purchase of Allbritton Communications last July — eight months ago. In the face of Wheeler’s zero-tolerance policy regarding sidecars, Sinclair vowed in March to spin off the Allbritton stations in Harrisburg, Pa., Charleston, S.C., and Birmingham, Ala., to a buyer who is really, truly and absolutely not related to it and it has hired an investment banker, Moelis, to find one.
That promise probably won’t be good enough to clear the deal. I suspect that the FCC will wait until it sees a rock-solid contract with that independent buyer. There’s not a whole lot of trust between Wheeler and Sinclair these days.
The most egregious case is Nexstar’s buy of Communications Corp. of America. As of last week, that $270 million deal has been pending for a year with no sign of resolution at the FCC.
According to Wheeler, he went after JSAs and SSAs because he wanted to bring back some order back to FCC ownership policy. In so doing, he is making a mess of the FCC’s ownership process.
I’m not privy to the NAB’s legal strategy for undoing the March 31 order on JSAs or the March 12 public notice. But yesterday’s threatening letter shows that it at least has one. I’ll be watching next week in hopes its May 8 cease-and-desist deadline was more than bluster.
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Given early actions on the ownership rules, retransmission consent and the incentive auction, Tom Wheeler has clearly shown that he is not a friend of broadcasters.
So what can broadcasters do, short of hiring Frank Underwood, a can-do Washington player whose initials say it all?
Here’s one idea that the TVNewsCheck staff has come up with. The NAB hires Commissioner Mignon Clyburn and puts her in to work on ownership policy. It gives her a three-year contract at, let’s say, $500,000 per year. So, for $1.5 million, it strips Wheeler of his third Democratic vote and his ability to do whatever he pleases.
Wheeler won’t have quite as much swagger if his vote count keeps coming up 2-2.
On anything meaningful, he would have to win over either Ajit Pai or Michael O’Reilly to get anything done. The March 31 order would have looked a lot different if either of the Republicans had any real say in how it was written.
But wouldn’t Obama just nominate another rubber stamp? He might, but you figure that NAB President Gordon Smith has enough juice in the Senate to hold up the nomination for a good long while. That job will be easier if the GOP takes control of the Senate this fall as it appears they may.
Now, if the NAB wants to have some real fun, it could also hire the other Democrat, Jessica Rosenworcel, or persuade some other lobby in town to take her on. After years in government, I’m betting she’s ready to make some real dough. That would put Wheeler in the minority and out of business.
Wheeler would still control the agenda, but so what? Remember, broadcasters win if the FCC never takes another vote on anything.