Wheeler: JSA Changes To Benefit Minorities

FCC Chairman Tom Wheeler told federal lawmakers Tuesday that his proposal to crack down on joint sales agreements is likely to result in more minority station ownership in the United States because it will lower the prices of TV stations currently held in JSAs.

JSAs have been undermining minority ownership, Wheeler said during a hearing before a House appropriations subcommittee, because they provide economies of scale that enable a broker station to pay more than an independent operator may be able to rationalize paying for the same property.

“One of the results [of the proposed JSA crackdown] … will be the opening up of broadcast licenses for minorities, women, small entrepreneurs, because they’re currently being sucked off the market,” Wheeler said.

The FCC chief also said the JSA crackdown — which is slated for a March 31 FCC vote — is intended to require broadcasters to publicly justify why any joint station operations might warrant a waiver from the FCC ownership rule that generally bars a broadcaster from owning more than one TV station in smaller markets.

During the congressional hearing, Wheeler’s minority ownership forecast drew a dissent from FCC Republican Commissioner Ajit Pai, who was also testifying during the session. Pai said that JSAs often provide efficiencies that keep afloat station operations that might otherwise go off the air in smaller markets.

“To me it strains credulity to suggest you could take away those efficiencies … and hope to have diversity embodied in this industry,” Pai said. “It’s simply not going to happen, given the current economic environment.”

Pai also said that some JSAs provide positive benefits.

Wheeler said the FCC waiver process would allow for the continuation of joint station operations that genuinely promote a public interest benefit after the March 31 vote.

However, he added: “The difficulty is that bad practices often hide behind the skirts of good people, and the reality that we’re facing here is that JSAs are being used to circumvent the commission’s rules.”

Wheeler also indicated that the crackdown was primarily aimed at broadcasters who have using JSAs to flaunt the FCC’s rules.

As one example, Wheeler cited an unnamed  broadcaster (sources speculated that he might have been referring to Sinclair Broadcast Group chief David Smith) who buys a station that’s in conflict with the FCC’s ownership rules but “gives it to his mother and then agrees to operate it and take all of the cash from it, and then buys another station, gives it to his former financial manager, and takes all of the revenue from it.

“We have a situation where public company broadcasters are saying to the SEC ‘we have control of these stations’ and saying to the FCC, ‘Oh, no, that’s a different company,’ ” Wheeler testified.

“What we’re trying to accomplish here is transparency, openness, a common set of rules — and indeed a waiver process that will make sure that [joint operations that provide genuine public interest benefits] get taken care of while at the same time we’re being faithful to our rules and our process.”

Also during the hearing, Wheeler said that 19 TV stations in the U.S. were owned by African Americans in 2006, while only four are today, and three of those four are under JSAs.