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FCC Eyes Raising TV Station Ownership Cap Amid Sinclair-Tribune Merger Review

The FCC has formally initiated a review of its rule that limits the number of TV stations that a single entity can own — an effort that will surely draw protest as it comes amid the commission’s evaluation of the mega-merger between Sinclair Broadcast Group and Tribune Media.

The FCC on Tuesday issued a notice of proposed rulemaking regarding the national ownership cap, which is now set at 39% of U.S. TV households. The Sinclair-Tribune merger as it stands would require divestitures for the enlarged company to remain under the 39% threshold. If the cap is raised significantly, Sinclair would not have to sell off as many stations.

The review of the ownership cap is tied to another decision made by FCC chairman Ajit Pai early on in his tenure that has also been criticized as a major benefit to Sinclair. The FCC’s so-called UHF discount — a formula for calculating a company’s TV station holdings against the 39% limit — was reinstated by Pai in April after it was eliminated by the previous FCC regime.

“Earlier this year, the Commission reinstated the UHF discount, finding that the prior FCC’s decision last year to eliminate it absent a simultaneous review of the 39 percent national cap effectively tightened the cap without determining whether that was in the public interest. Because the national cap and the UHF discount are inextricably linked, any review of one component of the rule must include a review of the other,” Pai said in a statement.

“Under the proposal that I shared with my colleagues today, we would go about determining the future of the national cap, including the UHF discount, the right way. Specifically, we would seek public input on whether to modify, retain, or eliminate the 39 percent national cap as well as the UHF discount.  With respect to legal authority, in 2016 the Commission ‘conclude[d] that [it] has the authority to modify the national audience reach cap, including the authority to revise or eliminate the UHF discount’; we will take a fresh look at this issue as well,” Pai said.

The notice of rulemaking means that the FCC’s review of the ownership cap will be opened up to public comments and replies in the coming months. That is sure to be a free for all among advocacy groups who are already on the offensive against the $3.9 billion union of Sinclair and Tribune. Even if the Sinclair-Tribune deal is approved by the FCC before a formal vote on raising the cap, Sinclair could cite the pending review as a reason to hold off on divestitures.

The national ownership cap was last raised in 2004. It was initially lifted in 2003 from 35% to 45%, but an outcry from independent TV station owners (who worried that the major networks would elbow them out of large markets) as well as media watchdog groups, Congress came up with a compromise solution of 39%.

The UHF discount allows owners of stations on the UHF band (14-64) to count those stations at only half of the actual coverage area of the markets they serve. The UHF discount had been in place for years but was rescinded in 2016 because the question of signal strength had become mostly moot in the era of digital broadcasting, and because the vast majority of TV homes receive signals through an MVPD. The restoration of the UHF discount made Sinclair’s acquisition of Tribune possible because most of Sinclair’s 170-plus TV stations are UHF outlets.

The fact that it was Congress that imposed the 39% solution on the station cap in 2004 has led to some debate about whether the FCC has the authority to make any changes. Pai has asserted the commission does have the right to review it as part of its mandate to enforce media ownership rules.

“A comprehensive review of the rule is warranted in light of considerable marketplace changes, such as technological developments and increased video programming options for consumers, since the cap was last modified in 2004,” Pai said.

The National Association of Broadcasters, which reps most of the nation’s TV station owners, declined comment on the news, reflecting the divide among its members on the how-big-is-too-big question. Karl Frisch, executive director of the consumer watchdog org Allied Progress, was among the media activists who were quick to blast the FCC’s move.

“The lengths to which Chairman Pai will go in order to help Sinclair monopolize the local television news industry is astonishing,” he said. “His move is not only the latest in a series of rule changes tailor-made for Sinclair’s benefit, it is an egregious, and likely illegal, example of overreach by the FCC.”

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