Wheeler On Wrong Side Of Regulatory History

Since I first began paying attention to the FCC in the late 1970s, the trend in telecommunications regulation has been toward easing the regulatory load and trusting more in the marketplace. It’s been a powerful trend, benefitting not just broadcasting, but cable, satellite and other telecommunications companies as well as the American public.

So, even though we all knew it was coming, the FCC vote on Monday came as a jolt.

After nearly four decades of gradually and carefully loosening the rules governing how many TV stations a broadcaster may own and where it may own them, FCC Chairman Tom Wheeler and his two Democratic colleagues decided to more strictly enforce the local ownership rule, which forbids broadcasters from owning two stations in small and medium markets or from owning two top four stations in large markets.

They did that by reversing the FCC’s 10-year-old policy of allowing broadcasters to operate (or at least enjoy the economies of) second stations through joint sales and shared services agreements in markets where they could not own them outright.

They threw out 10 years of precedents, and they did so in a punitive way. No existing deals would be grandfathered and no pending deals would be approved. Broadcasters with JSAs would have two years to unwind them.

In his well-argued dissenting statement, Republican Commissioner Ajit Pai lambasted the majority for failing to grandfather existing arrangements.

“This is not how we usually do things. When the commission adopted its newspaper-broadcaster crossownership rule, it grandfathered existing … combinations ‘because of the disruption and losses which could be expected to attend divestiture.’ The same is true here.”

And as far as one can tell today (the text of the FCC order hasn’t been issued), the FCC majority also failed to provide clear, concise and objective criteria for obtaining waivers of the local ownership rule. Without such criteria, every attempt to acquire a waiver is subject to being bogged down in interminable debate over whether it would serve the public interest.

Pai, who has seen the new waiver standard, called it “a fig leaf” meant to hide the harshness of the ruling. “[W]hile I very much hope I am wrong, I fear that the substantial majority of requests will not meet with a favorable response.” At least not while Wheeler or a like-minded Democrat is in charge, I would add.

At Monday’s meeting, Wheeler made it sound as if broadcasters have been running amok without FCC oversight. “Today, what we’re doing is closing off what has been a growing end run around those rules,” he said.

“We have heard a lot about the alleged impact on small broadcasters and entrepreneurs by the elimination of these rules, but it is the opposite which is the reality. JSAs have been used skirting the existing rules to create market power that stacks the deck against small companies seeking to enter the broadcast business.”

If broadcasters were “skirting the FCC rules,” they were doing so with the full knowledge and consent of the FCC before Wheeler took the oath last November. By one count, 85 JSAs have received the FCC blessing since 1988.

Poor Bill Lake. As chief of the Media Bureau, he has been tacitly approving JSAs for the past four and a half years. Yet, on Monday, he was forced to disavow them in a scripted exchange with Wheeler just before the final vote.

“As to JSAs, we see that they are being used more and more, and increasingly in transactions that contain JSAs; we see that they lead to all of one station’s advertising being controlled by another station,” Lake dutifully reported. “That control of advertising is effective control of programming.”

I agree with Commissioner Pai that in reneging on all its JSA approvals to date, the FCC is discouraging investment in broadcasting and, perhaps more important to Wheeler, undermining his planned incentive auction, through which he hopes to reallocate spectrum from TV to wireless broadband.

“For broadcasters to participate in the incentive auction, they must have confidence that we will follow through on our commitments,” Pai said. “But after today’s item, our promises regarding the incentive auction may prove as illusory as our prior approvals of JSAs.”

The local ownership rule was adopted in 1974. In 1998, the FCC of Chairman Bill Kennard, a Democrat appointed by Bill Clinton, relaxed the rule to allow two commonly owned stations — duopolies — is some markets. Since then, the rule has been further broadened through the liberal acceptance of JSAs and SSAs by the FCC staff and tacitly by the commissioners.

The trend line was clear and uninterrupted.

What Wheeler should have done on Monday is continue the trend. He should have recognized that the mediascape has changed radically since 1974 (and even since 1998) and then either eliminated the entire local ownership rule or codified the use of JSAs as established in commission precedent.

Instead, he chose to slam deregulation into reverse.

Unless overturned by the courts, the crackdown on JSAs is going to disrupt a lot of businesses. It’s already caused a lot of financial damage. To what good end, I don’t know. Wheeler says it’s going to create more opportunities in broadcasting for small businesses, especially those owned by minorities and women, but he makes no good case for it. He offers no evidence that it will.

Deregulation is a powerful trend that no single chairman stopping by the FCC for two or three years is going to permanently arrest. But let’s just hope this particular chairman doesn’t do too much damage during his visit.

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