How To Help Minorities And Save Duopolies

Republican FCC Commissioner Ajit Pai last week made a strong defense of joint sales and shared service agreements that allow broadcasters to operate second stations in markets where they are not allowed to own two under the current ownership rules.

That I liked.

What I didn’t like was Pai’s reminder that the Democratic majority still seems fixated on cracking down on virtual duopolies based on JSAs and SSAs and limiting broadcasters in medium and small markets to the operation of just one station.

“I have no doubt that those advancing this proposal have the best of intentions. But if their efforts succeed, I fear that the effects will be quite negative, especially in smaller markets,” he said..

“As broadcasters’ share of the advertising market has shrunk in the digital age, television stations must be able to enter into innovative arrangements in order to operate efficiently,” Pai continued. “JSAs and SSAs … allow stations to save costs and to provide the services that we should want television broadcasters to offer.”

The FCC’s three Democrats — Chairman Julius Genachowski, Mignon Clyburn and Jessica Rosenworcel — are under pressure from the anti-media-consolidation and ownership diversity advocates to curtail the virtual duopolies.

But all is not lost.

Clyburn is central to how the multifaceted ownership proceeding will turn out and her overriding interest is in promoting diversity. The former small-market newspaper publisher wants to see more minority and female owners of broadcast properties. And who can blame her?

After all these years, and various well-intentioned programs and policies, ownership by those groups is pathetically low. The number of African-American owners of full-power TV stations now hovers near zero.

To win over Clyburn, the NAB has floated an “incubator” program that has picked up the endorsement of the Minority Media & Telecommunications Council, a group that has labored to increase minority and female ownership over the years.

Under the plan, a broadcast company (“incubating entity”) that helps a minority or woman (“incubated entity’) acquire a station by providing certain financial support would itself be entitled to exceed any ownership limit by one station.

This is exactly what many TV broadcasters really want — the right to own a second station in every market, regardless of market size or network affiliation. They cooked up the JSAs and SSAs because the rules barred outright ownership.

Unfortunately,  although the NAB envisions the incubator program working in radio and TV, it has told the FCC it will settle for radio-only relief to make it palatable to those opposed to helping TV broadcasters amass more stations.

But there is another idea floating around Washington that might satisfy Clyburn while helping out the TV folks.

Broadcasters eager to double up in markets often bring in third parties and help them buy stations in the markets with the intention of operating them under JSAs and SSAs. The help usually comes in the form of loans or loan guarantees.

The idea is that the FCC would say that JSAs and SSAs are allowable only if the third parties are minorities and women. This would act as a powerful incentive for broadcasters to seek out such partners rather than the assortment of mostly white men we have today.

To guard against abuse, the FCC need to put strong language into its rules that insures that the duopoly partners have a real voice in station operations and programming. This is critical. Without it, we’ll end up with sham deals and fronts as we have in the past.

Participants in such a program would learn what it takes to finance and operate TV stations and acquire the track record necessary to eventually venture out on their own.

It may not work. But it’s worth a try. Rather than ban virtual duopolies, the FCC should see if they can use them as a vehicle for creating meaningful minority and female ownership in TV broadcasting, which should be everybody’s goal.

The FCC should give it two years — one for broadcasters to set up such arrangements and one to see if the minority and female owners have actual say-so operations and programming.

For the record, I understand that it is no longer legally correct to extend helping regulatory hands to minorities and women. But an FCC advisory group has come up with something called the Overcoming Disadvantages Preference. This is a race- and gender-neutral based preference for those who have had to overcome substantial disadvantage in trying to break into broadcast ownership. And the duopoly program I’ve outlined would be the perfect place to try it out.

So for every place in this column where I said minority and women, substitute Overcoming Disadvantage Preference holder.

All TV broadcasters interested in perpetuating virtual duopolies should get behind this the proposal and so should Clyburn. She has a real opportunity here to increase ownership by segments of our society that were not just disadvantaged, but essentially shut out from getting a broadcast license in the days when they were available for the asking.

All she has to do is seize it.

P.S. By softening its stance on duopolies, the FCC may be saving itself a lot of legal trouble down the road.  A Jan. 24 filing by Nexstar Broadcasting Group is nothing if not an outline of the grounds on which it would challenge in court any new rules limiting the use of the JSAs and SSAs. Nexstar has been built on its ability to put together and operate TV combos in medium and small markets.

Harry A. Jessell is editor of TVNewsCheck. He can be contacted at 973-701-1067 or [email protected]. You can read earlier columns here.