Wheeler Quibbles With Stations’ Share Tactics

FCC chairman appears determined to disallow deals that look like ownership rules work-arounds
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FCC chairman Tom Wheeler is on a mission to crack down on TV station sharing arrangements, particularly ones that look like efforts to skirt the rules.

With local caps on ownership and no rules explicitly against them, broadcasters have used joint sales agreements (JSAs) and shared news and other services agreements to extend their reach, and profits, without violating FCC rules.

But Wheeler has made it clear to broadcasters, in private meetings and public notices, that such arrangements will soon have a higher hurdle to overcome.

Wheeler’s sword and shield is the public interest standard, which permits the commission to disallow deals even when they do not violate antitrust laws— or even FCC rules, apparently.

Two weeks ago, acting FCC general counsel John Sallet explained to a National Press Club audience that while the Justice Department, which also vets media mergers, looks at whether a station deal is anticompetitive under antitrust law, the FCC can judge whether a deal furthers competition, not just whether it doesn’t diminish it.

That speech came the same day the FCC’s Media Bureau fired a warning shot across the bow of deals that involve sharing arrangements with associated financial ties like shared lenders or options to buy a station.

Wheeler is planning an FCC vote March 31 to make television JSAs of more than 15% of a station’s ad sales attributable as ownership interests, as is already the case in radio. It will also mean unwinding current JSAs that would run afoul of national or local ownership limits.

Broadcasters, meanwhile, are pushing back hard. But according to sources, Wheeler appears to be set on his path and is said to be disarming lobbyists in meetings by pointing out that he is a former lobbyist and knows where they are coming from.

“It is apparent he thinks he [has arrived] at the right answer and has not indicated in any way that he is interested in a compromise,” said someone familiar with Wheeler’s stakeholder-side manner in meetings, an observation seconded by several others in a position to gauge.

NAB president Gordon Smith last week was pitching a compromise, including to one of the three FCC Democratic votes that will be needed to approve the JSA deal. In a letter to Democratic FCC commissioner Mignon Clyburn, Smith, who has said the FCC would actually be hurting diversity, offered a proposal to make JSAs above 30% attributable, with diversity and control benchmarks to address concerns about de facto control.

Clyburn could steer the item in a more favorable direction for broadcasters, though she is unlikely to outright oppose it.

Turning the Tables

Also last week, the NAB went on the offensive, pointing to what it said was cable operators’ collusive ad sales. The broadcasters’ group asked the FCC to investigate NCC Media, an ad sales organization owned by Comcast, Cox and Time Warner Cable that offers ad time on cable operators, satellite and telco video services U-Verse and Fios as a single, local-market buy.

That, said Smith, smacks of big pay-TV companies gaming the ad sales market. He left no doubt what had prompted the volley.

While broadcast JSAs are under the gun, “the heavily consolidated pay-TV industry, unshackled by any ownership rules, is free to engage in this most collusive of advertising sales practices on a massive scale in multiple markets,” Smith said. Michael Powell, National Cable & Telecommunications Association president, called Smith’s comments “a transparent stunt to muddy the waters and confuse the issue.”

FCC WON’T UNDERCUT AD REPS

The FCC’s crackdown on joint sales agreements (JSAs) won’t wreak havoc with national spot advertising after all. That would make one small victory for Sinclair in an FCC item that otherwise takes aim at the kind of shared sales and services agreements and financial arrangements—joint lenders and options to buy—that Sinclair has used to help build and strengthen its broadcast profile while staying within FCC ownership limits.

Sinclair has been arguing against the FCC’s plan to make all JSAs above 15% of a station’s ad sales attributable as ownership interests, as they are in radio.

In a 2004 filing, Sinclair pointed out that rep firms Katz and Telerep are owned by TV station owners Clear Channel and Cox, respectively. (Clear Channel has since sold its stations).

Katz sells national spot advertising on Sinclair's stations, which amounts to more than 15% of the ad time total. In San Antonio, for example, Katz brokers approximately 44% of the ad time on Sinclair's KABB and KRRT, but parent Clear Channel owned radio station WOAI. "The proposed JSA rule would appear to attribute the Sinclair stations to Clear Channel," said Sinclair in a statement, adding that this would be "absurd."

“A straightforward application of the commission’s proposed rule suggests that Katz would irrationally obtain multiple attributable interests in virtually every market nationwide,” Sinclair told the FCC. The FCC apparently agrees, according to a source familiar with chairman Tom Wheeler’s proposed JSA item, which was circulated March 10 and is set for a vote March 31.

“Sinclair sought clarification that the commission would not attribute TV and radio stations that are represented by national advertising representative firms where a rep firm is co-owned with a broadcaster and the parent [owning] a same-market station,” the order stated, according to that source. “We find that the record does not support the attribution of a rep firm’s client stations to a rep firm.”

(Photo Credit: Gary Cameron/Reuters/Newscom)

FCC chairman Tom Wheeler is on a mission to crack down on TV station sharing arrangements, particularly ones that look like efforts to skirt the rules.

With local caps on ownership and no rules explicitly against them, broadcasters have used joint sales agreements (JSAs) and shared news and other services agreements to extend their reach, and profits, without violating FCC rules.

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