It's war!Affiliates go to FCC with attack on networks 3/11/2001 07:00:00 PM Eastern
The networks are screwing us. And not just with good old-fashioned, time-honored business tactics but with practices that are flat-out illegal. Or ought to be.
So said more than 600 of the nation's local TV stations affiliated with ABC, CBS and NBC in a complaint filed with the FCC that demanded a commission inquiry into the entire network-affiliate relationship. Many of those broadcasters will be in Washington this week to press their case on Capitol Hill.
The networks were taken by surprise and reacted angrily, using words like "baseless" and "irresponsible" to describe the affiliates' salvos. And all of the networks suspected that very recent events were behind the filing, not the alleged long history of abuse cited in the affiliate complaint.
The networks all said privately that, as one executive put it, the affiliates "freaked" when the courts rejected the FCC's cable-concentration rules two weeks ago, fearing that the 35% national-broadcast-ownership cap would be next. Another network official said that the stations would have a hard time gaining sympathy from regulators because their profit margins average 50% to 60%, while network margins are more like 5% (although the network parent companies have profit margins that far exceed that).
Some affiliates admitted that the timing was not coincidental but insisted that the complaint was about much more than just the ownership cap. Most stations want the current limit kept in place, while the networks want it lifted to 50% or higher.
Alan Frank, president of the Post-Newsweek Stations, said work on last week's filing began in 1999, and it's mostly a litany of network practices that have the effect of taking programming control of stations away from local licensees, a violation of the Communications Act and FCC rules.
Frank is chairman of the Network Affiliated Stations Alliance (NASA), the 15-year-old trade group that represents the common interests of Big Three affiliates and that filed last week's petition with the FCC. (The Fox affiliates aren't a part of the group, although last week's complaint was peppered with references to alleged Fox network rule violations.)
The affiliate boards of all three networks unanimously voted in favor of demanding an FCC inquiry, Frank said. And those votes, he added, began three weeks ago, well before the courts tossed out the cable concentration rules.
Andy Fisher, president of Cox Television and one of the NASA coordinators, said the document was assembled over two years. The affiliates made their move en masse, he said, "because individual owners tell us they are fearful of retribution. They felt that as owners they had no easy recourse and that they would be targeted for financial retribution. So many owners are concerned; they called upon NASA because what had at one time been a trickle of events had become a pattern."
By casting the networks' behavior as a series of rule violations, NASA appears to be appealing to FCC Chairman Michael Powell's stated desire to transform the FCC into an enforcement agency likely to step in after harmful actions have been demonstrated, rather than a commission making rules before there's a problem. Frank and other NASA officials briefed Powell and key House Commerce Committee members Rep. Billy Tauzin (R-La.) and Rep. Edward Markey (D-Mass.) last Thursday. They were scheduled to meet with Rep. John Dingell, Senators Conrad Burns (R-Mont.) and Ernest Hollings (D-S.C.) and other FCC commissioners Friday.
Powell's office would not comment on the NASA's petition. Other FCC staffers, however, said its hard to gauge the chairman's likely reaction. "Their request flies in the face of what Powell stands for because they are looking for government intervention into a contractual relationship," said one agency aide. "On the other hand, the stars seem to be aligned if you're talking about network abuses. First, there was the Voter News disaster, then the demise of Geocast," a digital pooling service for broadcasters, and, finally, repeated "pushing of the networks on licensees' spectrum."
Bruce Baker, executive vice president, Cox Broadcasting, and current chairman of the ABC affiliate board, said the board voted last week to support the filing but had been aware that the petition was being prepared and considered for at least nine months. He and the board, he said, feel that the networks are in violation of the rules. "I think we need to have resolution as to what the future of localism is going to be in terms of a priority with the FCC."
Last week's petition came after years of bitter wrangling between networks and affiliates over such issues as network program exclusivity, reduced compensation, how to use the digital spectrum and even network demands that stations start paying them to help defray the costs of programming.
The sword-rattling rose to a fevered pitch a few years ago, when both Disney's Michael Eisner and NBC's Bob Wright publicly stated that putting their respective over-the-air networks on cable and off broadcast affiliates was a real option.
Much of that was rehashed in the filing, along with references to network repurposing and even of NBC's preempting a presidential debate last fall in order to air a Major League Baseball playoff game.
The petition seems to hang its case on what affiliates believe are three central and widespread abuses, including forcing stations to clear virtually all network programs. As a result, the filing stated, stations abdicate their legal responsibility to program in the best interests of the local community.
The affiliates also charged ABC, Fox and NBC with abuse of station transfer clauses that force stations to agree to almost any network terms to buy or sell an affiliate station. Under those clauses, the networks reserve the right to approve the sale of their affiliates. And the clauses let networks manipulate prices and deal themselves into the action unfairly, the petition stated. The most notable example of that was NBC's attempt to scare buyers away from KRON-TV San Francisco. The filing contained a letter from NBC's Wright that purported to do just that.
The third point is what the filing described as Fox's illegal demand to control its affiliates' digital spectrum, in violation of the Communications Act and FCC rules. Fox said it was studying the petition and would not comment further until completing its review.
"These are very clear rules that are being broken," said Frank, of the network's practices. And they go "to the whole idea of what our broadcast system is about. The local broadcaster is responsible for what is on their air. That's the whole basis of our system of localism and diversity of viewpoints," he said, adding that the rules being violated are "critical to our preservation."
Additional reporting by Bill McConnell and Dan Trigoboff