NAB President Gordon Smith tells FCC Chairman Wheeler that his proposed crackdown on JSAs has already financially damaged the industry and could eventually cost jobs. “It’s time to take a step back and reevaluate,” says Smith in a letter to the chairman.
Smith: FCC Costing Broadcasters ‘Millions’
An FCC proposal to crack down on joint sales agreements has already “cost many millions of dollars of investment in the U.S. television broadcast industry,” will lead to “significant” job losses — and should be reconsidered, according to National Association of Broadcasters President-CEO Gordon Smith in a personal appeal to FCC Chairman Tom Wheeler.
“It’s time to take a step back and reevaluate,” says Smith, in a March 24 letter to Wheeler that was released to reporters today.
In his letter, Smith, who also said he met with Wheeler on March 21 to discuss the chairman’s proposed ban on JSAs, contends that a “particularly harmful” part of the chairman’s proposed crackdown — which has been scheduled for a March 31 vote by the FCC — would require existing JSAs to unwind within two years.
“These [JSA] agreements between businesses have already been blessed by the FCC itself for more than a decade,” Smith said in his letter, adding that the agency had approved 85 JSAs during FCC merger reviews since 2008.
“Small and medium-sized American businesses have relied detrimentally on the FCC’s determinations that those agreements were consistent with the public interest,” Smith continued. “Businesses must be able to trust the FCC — or any agency, for that matter — on matters that the agency has approved. Why would anyone invest in a regulated entity if they knew that the rules could change mid-stream and new rules would be applied retroactively?”
“The swift and negative reaction of investors has been stark and now the general emerging perception on Wall Street is that regulators, and not the women and men running broadcast companies, are going to diminish the broadcast television industry,” Smith continued.
Smith also urged Wheeler to embrace a compromise recently proposed by the NAB that would allow some JSAs to continue.
Under the compromise proposal, the FCC would carve out an exemption from the blanket ban, protecting those that broadcasters can show provide public interest benefits and meet a series of tests intended to limit one station from using a sharing agreement to control one or more additional TV stations in the same market.
“This way forward will give investors confidence that the commission will not be a 1970s-style heavy-handed regulator, but one that responds to market forces and seeks to encourage broadcasters, as well as wireless and cable companies, to compete and drive the American economy,” Smith said in his letter.
“I have no doubt that you did not intend curtailed investment and fewer American jobs to be the practical effect of the proposed rules,” Smith continued. “Given your investment background, I am confident that you understand the importance of encouraging investment and innovation in each of the telecommunications sectors. I suspect, therefore, that you are also concerned with the business community backlash ….”
Wheeler could not immediately be reached for comment.
In a March 24 letter to FCC Commissioner Mignon Clyburn, the Free Press watchdog group urged the agency to reject NAB’s proposed compromise. The “so-called compromise is merely a regurgitation of the existing standards that have led to runaway consolidation,” Free Press said in its letter to Clyburn, who is widely perceived to be the FCC’s swing vote on the JSA issue.
Under one key test in the NAB compromise proposal, a brokered station in a JSA deal would be required to retain control of at least 85% of station programming and keep at least 70% of the brokered station’s net advertising revenue.
In addition, the NAB proposal would require the licensee of the brokered station to retain “ultimate” control over rates charged for advertising and retain an “option to hire its own advertising sales staff or retain other sales services.”
Wheeler has proposed barring immediately the formation of new JSAs in which the broker station sells 15% or more of the ad time of the brokered station. Broadcasters with existing JSAs would have two years to unwind, unless they can persuade the FCC to give them a waiver to continue a particular station combination, under the Wheeler plan.