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Station Groups Say Rule Change Would Slow Station Sales

The FCC has initiated the process for revising how it calculates whether a media company exceeds a cap on station ownership, a move that some congloms say will slow what has been a marketplace buying spree.

The agency on Thursday voted 2-1 to initiate a public comment process for the proposal, which would count the true reach of UHF channels against a cap on station ownership of 39% of the nation’s households. Previously, UHF stations were counted for only half of their reach, a remnant of the analog days when channels between 14 and 64 were beset with poor reception. That so-called ‘UHF discount” meant that a UHF station in a TV market that accounts for 2% of TV households would be counted as only reaching 1% for the purposes of the FCC calculating whether the station owner is in compliance with the 39% cap.

The change has a potential impact on such station groups as Sinclair Broadcast Group, ION Media and Fox Television Stations, with extensive VHF and UHF stations that are near or exceed the ownership cap, but the FCC said that their existing holdings will be grandfathered in. Recent deals, like Sinclair’s proposed purchase of seven Allbritton Communications stations, also will be subject to the old rules because they have change-in-ownership applications pending before the agency.

Nevertheless, the FCC said that the “grandfathering” cutoff date would be when it puts the proposal up for public comment, which was Thursday. Some station groups have privately complained that setting an immediate grandfathering date is premature, and even a violation of due process, that could scuttle deals in the works. But the rationale behind setting the cutoff date now is to prevent a bonanza of station deals as the proposal is considered.

Commissioner Ajit Pai said he dissented in part because the “grandfathering” date was put in place immediately.  He said that the FCC’s action “effectively tells the private marketplace to act as if the rule has been eliminated,” and that it would depress station values and dampen the marketplace for channel sales. Also, when a UHF station is sold, the grandfathering provision will not apply.

He also said that the proposal also should examine whether the 39% cap on ownership should be raised, given changes in the marketplace.

But Acting FCC chairwoman Mignon Clyburn said that the proposal “reflects the current realities of television broadcasting.” Commissioner Jessica Rosenworcel said the rule was a remnant of the days when “Dallas,” “Dynasty” and “Miami Vice” were the most popular shows. “By any measure, it was a long time ago,” she said.

Update: Fred Upton (R-Mich.), chairman of the House Energy and Commerce Committee, and Greg Walden (R-Ore.), chairman of the Communications and Technology subcommittee, blasted the FCC action, saying it “reveals a startling failure to recognize the chilling effect of regulatory uncertainty and a disregard for the potential economic consequences of commission action.

“Rather than following the good process of adopting new rules and then applying them prospectively, as we suggested in a letter to the Acting Chairwoman, the FCC instead will apply as yet undefined rules to applications filed anytime after today,” they said in a statement.

Matt Wood, policy director for digital rights org Free Press, said they were pleased with the decision, albeit they argued that the companies with broadcast holdings “had no right to expect the continuation of this outdated loophole. By eliminating it altogether, we can better promote ownership diversity and more efficient use of the public airwaves.”

 

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