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FCC Relaxes Media Ownership Rules in Contentious Vote

WASHINGTON — Broadcasters will be allowed to combine with a newspaper in the same market, and could be allowed to own two of the top four stations in a city, as the FCC on Thursday relaxed a series of long-standing media ownership regulations.

The new rules, passed in a 3-2 vote, may be challenged in court, but if they survive, they will mark the most significant changes to media ownership regulations in a generation. They could lead to further consolidation and mergers among broadcasters, who have long argued that they need greater scale to compete with cable and internet companies for local ad dollars.

“The media ownership regulations of 2017 should match the media marketplace of 2017,” FCC Chairman Ajit Pai said. He said the agency was “dragging the broadcast rules into the digital age.” Pai added that the changes are needed, given current consumer habits, as people get their news not just from local stations, but from websites, podcasts, and social media.

The changes are taking place just as the FCC is considering whether to allow Sinclair Broadcast Group to merge with Tribune Media, creating a station group powerhouse with control over 233 stations and a reach of 72% of the country.

Democrats are tying the FCC’s moves to relax ownership rules to Sinclair, arguing that Pai is giving preferential treatment to one company that has been favorable to the Trump administration. Pai, though, has defended the merger review as well as his proposed changes, pointing out that he has long been a critic of regulations he sees as outdated.

In the wake of the changes, Moody’s Investor Services released a report in which it said station groups “will benefit with the ability to consolidate local market ownership through acquisition and or station swaps.”

The two Democrats on the commission delivered vehement dissents.

“Instead of engaging in thoughtful reform, which we should do, the agency sets its most basic values on fire. They are gone,” said Commissioner Jessica Rosenworcel. “As a result of this decision, wherever you live, the FCC is giving the green light for a single company to own the newspaper and multiple television and radio stations in your community.”

Later, she tied the FCC’s actions to the ambitions of Sinclair, telling reporters that the changes to the rules appeared to be a way to “grease the skids” for the broadcasting station group.

Commissioner Mignon Clyburn said, “This is really about helping large media companies grow even larger.” She predicted “floodgates to more consolidation.” She said the FCC’s moves will shut out new entrants in the business, including minorities and women. She said the changes were “deeply flawed” and lacked data to support them, and suggested that the changes could not survive in court.

Commissioner Michael O’Rielly, a Republican appointee, said he had “no doubt” that the changes would end up back before the court, as previous efforts over the past 15 years have.

The changes will allow for:

Common ownership of a newspaper and a broadcast station in the same market. Some public interest groups warn against this change, but on Capitol Hill, legislation to remove the restriction has garnered some bipartisan support.

Common ownership of two of the top four TV stations in the same market, subject to a “case-by-case” review by the FCC. Stations would no longer need to show that after a combination, at least eight other independently owned outlets remain in the coverage area. The FCC also eliminated a rule that explicitly prohibited one entity from owning more than two TV stations and one radio station in the same market, although companies would still have to comply with other restrictions.

Greater leeway for joint sales agreements. This applies to stations that have agreements to sell more than 15% of the advertising time of another outlet in the same market. They no longer will have to count those pacts in calculating whether they are within national TV ownership limits.

Stations say that the agreements have helped outlets in smaller markets survive, but critics say that the JSAs have been abused as a way for media companies to skirt the 39% nationwide ownership cap. With other changes in the ownership rules, public interest groups say major media companies could own two of the top four stations in a market and have effective control over others.

Earlier this year, the FCC took a number of other changes that will have an impact on the broadcast landscape:

Restored the “UHF discount.” Station groups can count their UHF holdings as just half the outlet’s reach. That gives media companies greater leeway to purchase stations and still fall within a national ownership cap.

Station groups were relieved, and it is hard to see how Sinclair’s merger with Tribune could have proceeded without the change. But critics say the discount doesn’t make sense anymore, as the original rationale behind the UHF discount was that those stations used to have a weaker signal and reach. After the transition to digital television in 2009, that is no longer the case.

Eliminated rule requiring that broadcast stations have a main studio in their local coverage area. They would still be required to maintain a local or toll-free phone number.

Advocates of the change say smaller stations were forced to maintain a physical presence even though members of the public rarely visited, and that it will free up money that can be spent on programming. Opponents see it as another way to make it easier for broadcasters to consolidate.

The FCC also adopted an incubator program to try to increase diversity in the broadcast business. The commission will now take public comment on how it should be designed.

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