Stakeholders Square Off Over Media Reg Review

FCC referees tag-team effort to reshape ownership rules
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Why This Matters: Stakeholders are lining up to weigh in on the FCC’s latest moves to deregulate media ownership.

The FCC is getting a lot of help in deciding whether — though more likely how — it will further deregulate broadcast ownership, including from those who say that TV-station groups tell Wall Street one thing and the regulator something else.

The commission is currently in the midst of its review of all of its media-ownership rules. It has embarked on what’s supposed to be a quadrennial review at the direction of Congress, and is under order from the 3rd U.S. Circuit Court of Appeals to consider how whatever it decides to do will impact ownership diversity.

FCC chairman Ajit Pai

FCC chairman Ajit Pai

Ajit Pai, the FCC’s deregulatory Republican chairman, has long argued that broadcasters are held to the last generation’s rules while their competitors are moving to next-generation technology to ramp up video competition.

Early on, Pai reversed the FCC’s advisory that it would consider sidecar agreements like shared services and sales agreements as tantamount to ownership; lifted the ban on newspaper-broadcast crossowership; allowed for ownership of two of the four top-rated stations in a market under some conditions; and restored the UHF discount that allows those stations to count only half of their viewers toward the 39% cap on national audience reach.

The results of a current Justice Department review of the broadcast advertising marketplace could give Pai cover for serious deregulation, such as lifting that 39% national ownership cap, expanding duopoly rules to smaller markets, making it even easier to own more than one top station per market or allowing ownership of more than one network — all things broadcasters have said they need.

In the meantime, though, stakeholders are making their own arguments for and against what broadcasters say is a more level playing field, and what critics call an unwarranted scale and scope that could reduce broadcaster obligations to serve their communities with truly local programming and unfairly boost their ability to command larger carriage fees.

Here is a brief tour of what the FCC is eyeing in the busy quadrennial review docket — actually the busiest of all the agency’s dockets at press time:

Keep a Lid on the Top Four. Invoking the impact on retransmission-consent negotiations, cable operators represented by NCTA–The Internet & Television Association want the FCC to say “no way” to loosening the now-qualified prohibition on owning two of the top four-rated stations in a market. But NCTA wants to go further, applying the prohibition to low-power TVs and multicast channels. Broadcasters can program both with network affiliate programming without running afoul of the top-four prohibition.

As for the FCC’s case-by-case review of waivers of the top prohibition, NCTA has said those should only come in the most extraordinary cases.

No Gray Areas for Gray.  Gray Television says dual ownership should be allowed in markets of any size, no matter how few stations would remain — even in markets with just two broadcast-TV stations. “The combined operation will be able to spread its costs across two television stations and likely will be able to justify expanding local news operations,” Gray told the FCC. (Editor's note: Originally this item said there was still an eight-voices local market ownership test.  That was actually eliminated in the FCC's most recent periodic regulatory review.

Indies Weigh In. Broadcasters’ argument that they need scale to compete is belied by large broadcasters making lots of money, in the view of Ride TV, MAV TV, Cinemoi and beIN SPORTS, independent programmers that teamed up to make their voices heard in the proceeding.

For example, they point to Nexstar Media Group’s record net revenue in the fourth quarter 2018 of $798 million, a 22.1% increase over fourth-quarter 2017 ($654 million), though almost all of that is attributable to political spending for the midterm election of $140 million versus $12.5 million in Q4 2017.

They also talked about Gray’s “all-time best” quarterly revenue and cash flow in the fourth quarter of 2018.

Independent networks concede the strong impact of political ads, but suggest the 2020 race could be an even bigger windfall for stations arguing they need help.

Aren’t They Special. TV writers have suggested the FCC would be going off-script to loosen broadcast regulations further, specifically with respect to the dual-network rule, which they said would lead to further consolidation of TV stations and their must-have programming.

The Writers Guild of America tells the FCC that online video is not a substitutable option for local TV (which is what the Justice’s antitrust division is trying to determine) because the latter is delivered free “over the public airwaves.” There is no “stay tuned for your local news” component to Netflix or Hulu, for example, and broadcasters have locked up rights to lots of key sports properties.

The WGA has argued that the quid pro quo for free spectrum and “unique legal protections” such as retransmission consent and must-carry are special restrictions, like the dual network prohibition rule.

DOA. Free Press has said the FCC can’t deregulate local or national ownership limits period, so the discussion of how is moot.

“The commission cannot move forward with any relaxation of the three ownership rules [local market TV and radio rules and the dual network prohibition] because it has once again failed to meet the Third Circuit mandate to study the impacts of agency decisions on ownership by women and people of color,” Free Press said. “Without such analysis, any further rule modification would be premature and a reversible error too, and it would risk causing further irreparable harm to women owners and owners of color.”

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