FCC’s Move to Relax Ownership Rules Could Lead to Wave of Media Mergers

Ajit Pai Free Speech

The FCC is poised to make the most significant changes to its media ownership rules in a generation on Thursday, a relaxation of limits that broadcasters see as long overdue and opponents view as another step toward consolidation of local media.

The changes — expected to pass by a party line, 3-2 vote — 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 Chairman Ajit 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merger review as well as his proposed changes, pointing out that he has long been a critic of regulations he sees as outdated.

“Few regulations are more disconnected from today’s realities than the F.C.C.’s media ownership rules,” he wrote in a New York Times op-ed last week.

But Michael Copps, a former FCC commissioner who is now senior adviser to Common Cause, told reporters on Wednesday, “We are on the eve of media madness at the FCC and to me tomorrow is really the nadir of the FCC’s credibility.”

If adopted, the changes would allow for:

Common ownership of a newspaper and a broadcast station in the same market. The newspaper industry has long lobbied for the elimination of this rule, on the grounds that the print business is struggling and could benefit from teaming up with local broadcast outlets.

David Chavern, president and CEO of the News Media Alliance, said that for many papers, “you either need investment or you need to sell.”

By getting rid of the rule, “it adds a lot more buyers into the possible mix.” A local station would be a likely interested party should a newspaper go on the block, he said. That’s what happened recently when the Chicago Sun-Times was up for sale, but local TV stations were not able to bid.

Still, public interest advocates worry that combinations of newspapers and TV stations will merely mean the further elimination of jobs in the market — and fewer independent voices.

Common ownership of two 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.

Broadcasters point to the decline in the local ad market as a reason to bulk up, even in the same city. They face stiffer competition from cable, as well as new online rivals from Google and Facebook.

Critics say that this rule will hasten media combinations and limit local coverage and diversity as major station groups seek cost efficiencies.

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.

The changes to the rules follow other actions the FCC has taken earlier this year:

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 that 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 that 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 Sinclair-Tribune combination has been held up by public interest groups as the shape of things to come.

On Wednesday, representatives of Sinclair and Tribune appeared at an event on Capitol Hill in which they debated public interest advocates opposed to the transaction. The event was sponsored by Georgetown Law’s Institute for Technology Law & Policy and the panel was moderated by Gigi Sohn.

Among the speakers was Sen. Richard Blumenthal, who told the gathering, “This merger threatens to create a concentration of unprecedented scope and scale…and unquestionably will affect the public interest.”

But Rebecca Hanson, senior vice president of strategy and policy at Sinclair, said that in the disruptive media environment, stations face greater economic pressures.

“We believe that free, over-the-air broadcasting should be just as compelling and have just as high quality content as that behind the paywall,” she said. “You can only do that if you have scale.”