NAB on FCC JSA Vote: Arbitrary and Capricious

That designation suggests court could overturn; consolidation critics heap on praise
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With the outcome a pretty much a foregone conclusion, reaction was swift to the FCC's vote (3-2 along party lines) to make joint sales agreements (JSAs) above 15% of ad sales attributable under FCC ownership rules, as they have been in radio since the 1990s.

Broadcasters were smarting, but most of the comment came from public advocacy groups celebrating the new regs and hoping for more.

National Association of Broadcasters president Gordon Smith has already suggested NAB might take the FCC to court over that call, and the statement by spokesman Dennis Wharton after the vote did not take anything from that potential hardball.

"It's disappointing the FCC would take this action without first completing its 2010 statutorily mandated media ownership review. As the record before the Commission clearly shows, the public interest will not be served by this arbitrary and capricious decision."

"For a decade, Republican and Democratically-controlled FCCs have approved JSAs, which allow free and local TV stations to survive in a hyper-competitive world dominated by pay TV giants," Wharton said. "That model is now declared illegal, based on the arguments of pay TV companies whose collaborative interconnect advertising sales practices make JSAs seem pale by comparison."

Both commissioner Republicans were on the same page as NAB, as was House Communications Subcommittee Chair Greg Walden (R-Ore.), according toa committee source. Commissioner Pai particularly suggested the decision was not based on the record and suggested the court should step in.

Federal agency decisions that are arbitrary and capricious are illegal under the Administrative Procedures Act. Following the vote at the FCC March 31 meeting, Media Bureau Chief Bill Lake said the item had been written to pass muster with the courts.

Pai spent much of his public statement on the item on anecdotal evidence that JSAs were in the public interest, while FCC chairman Tom Wheeler suggested that there would be an expeditious waiver process for those who want to establish that their above-15% JSA furthers competition, localism and diversity rather than skirting ownership rules in a way that actually harms those goals.

Walden had no comment on the JSA item, but according to a source familiar with his thinking on the  item, he has made clear repeatedly that he thinks the commission should finish the 2010 quadrennial before making any JSA changes, or any media ownership changes for that matter. (That dislike of cherrypicking the JSA issue for action was echoed Monday by Republican FCC commissioners Ajit Pai and Michael O'Rielly, who voted against the item.)

In fact, the current Republican-led draft of Satelite Television Extension and Localism Act, which Walden oversaw, includes a provision that would essentially roll back any FCC JSA decision that came before the 2010 was dealt with.

Walden is said to consider the FCC's move another example of commission policy without proper proces,s and will try to get the FCC back on track in employing sound processes.

"The Federal Communications Commission has taken a welcome step to strengthen independent, locally-owned media, issuing new rules that begin closing loopholes broadcasters have used to cut costs and pad their profits by combining newsrooms and other operations," Common Cause said in a statement Monday.

"We’re hopeful that today's announcement marks the long overdue start of a new era of public interest leadership,” said Michael Copps, special adviser to Common Cause’s Media and Democracy Reform Initiative and former acting FCC chair.

"The loopholes the commission attacked, allow one entity to exert operational and even editorial control over multiple stations in the same market,” he said.

Media consolidation critic Public Knowledge, whose former chief is now a top Wheeler staffer, agreed: "The Commission's JSA order will make it harder for broadcast stations to circumvent media ownership rules in small and medium-sized markets. The FCC's actions are also a meaningful attempt to rein in programming costs. Instead of banding together with competitors to demand increased rates for their programming, local broadcasters should negotiate for carriage on pay TV systems on their own behalf. We applaud the FCC for closing this loophole in the media ownership rules."

Commissioner Jessica Rosenworcel, one of the deciding votes, said she was not under the illusion that retrans costs were the biggest driver of programming costs, but said it was at least a piece of it.

"For years, a small handful of powerful conglomerates has used outsourcing agreements to dodge the FCC's ownership rules and grow their empires at the public's expense," said Free Press president Craig Aaron. "And for too long the agency has looked the other way as these companies have dominated the airwaves. While today's vote focuses only on Joint Sales Agreements, it signals that FCC Chairman Tom Wheeler is willing to break with the past and stop broadcasters from using shell companies to skirt the agency's ownership limits."

The FCC also voted to open an inquiry into the effect of other news and back-office sharing agreements on competition, localism and diversity.

“I thank the FCC for answering my call to rein in the misuse of broadcast television sharing agreements, which has threatened the integrity of the FCC’s media ownership rules,” said Sen. Jay Rockefeller (D- W.Va.), chairman of the Senate Commerce Committee. “Today's action on joint sales agreements is a positive step forward, and I am pleased by the agency's further inquiry into how it can monitor the possible impact other sharing agreements could have on consumers.”

One of the deciding votes came from former Rockefeller top telecom aide, Jessica Rosenworcel.

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