FCC Paints TV Focus For Pai’s Proposed Ownership Rule Order

Radio & Television Business Report

By Adam Jacobson -   October 26, 2017

Two senior FCC officials have disclosed the key points of Chairman Ajit Pai‘s proposed Report and Order on ownership modernization, which all broadcast media owners have been eagerly anticipating.

The language of Pai’s Order is set for release today, along with a Nov. 16 Open Meeting agenda that will also see a vote to approve the ATSC 3.0 next-gen television transmission standard, which the officials declined to comment on.

There’s much more clarity on what is set to transpire, and there’s not much change on the way for radio industry ownership rules. But, they can now own TV stations in the same market as radio stations — and that could spur a whole new array of deals.

Speaking to members of the press, the FCC senior officials spoke in lock-step of Pai’s plan, noting that it will “clear a path for more competition, innovation, and investment in the media sector.”
Democratic Commissioners Mignon Clyburn and Jessica Rosenworcel may not agree.
As expected, the Order would eliminate the FCC’s newspaper/broadcast cross-ownership rule, in force since 1975. One senior FCC official reiterated comments made by Pai and Republican Commissioner Michael O’Rielly in noting that the 42-year-old rule “does not reflect the current media marketplace.”

There are two big reasons for the push to rid the media industry of this restriction, in the eyes of Pai. First, “the rise of the internet and all of the new diverse voices that come with it” have vastly changed the media landscape in the U.S.

Then, there are the present-day struggles of the newspaper industry. “In the world of 2017 do we need to have this rule to foster diversity, or is it inhibiting the news-gathering abilities of media?,” one of the senior FCC officials asked. “It is an outdated relic from a past time and there is no reason to prevent broadcasters from investing in and owning newspapers. In this day an age, if you want to own a newspaper, you should be thanked.”

MOSTLY STATUS QUO FOR RADIO
What will the immediate future look like for radio broadcasting companies?
If they wish to merge with a TV broadcasting company, they have a clear path to doing so without fear of violating the Commission’s radio/TV cross-ownership rules, should Pai’s plan see its expected approval.

The local ownership rules for radio remain intact: One company will continue to be limited to ownership of eight radio stations in a market with at least 45 AM and FM stations.
For TV, if adopted on Nov. 16, one company may own a maximum of two TV stations per market.
Asked by RBR+TVBR to clarify what this means for cross-ownership, one senior FCC official hinted but did not confirm that ownership of two TV stations and eight radio stations in a top market will now be allowed.

Answering another reporter’s question, the official clarified that the FCC will look at local radio AM and FM “sub-caps” upon its next quadrennial review of its ownership rules, per the Telecommunications Act of 1996. This is expected in early 2018.

‘EIGHT VOICES’ SILENCED
The TV ownership rules presently allow one company to own up to 2 TV stations in the same market, but only if at least one is not ranked among the top 4 stations and at least 8 independently owned stations remain in the market following the purchase.

That formula is set for erasure, thus eliminating the “eight voices test.”
A senior FCC official commented that, in Pai’s view and that of the Republican majority, there is “no economic basis and no evidence whatsoever that supports this rule.” The official added that there is “no other market that we are aware of where any government agency has said you need eight competitors in the market for it to remain competitive.”

Another reporter asked about waivers, and the end to the Top 4 prohibition. What’s Pai’s plan? To “chart a middle course.”

One senior FCC official said, “Some wanted to keep it as it is, and there are others who said get rid of it in its entirety.”

What the chairman has chosen? “A hybrid approach where there will be a case-by-case review,” the official confirmed.

That could clog the Commission with review after review, in DMA after DMA, should media brokers be circling the wagons now ahead of an all-out blizzard of asset purchase agreements hits the FCC’s CDBS database via Form 314 filings come late December or early January 2018.

Also in the Pai proposal is language that would strike a “party-line decision” made in 2014 by a Commission led by Democrat Tom Wheeler on Joint Sales Agreement (JSA) attribution. The FCC officials say this would return the FCC’s to the way they were until three years ago, and echoed GOP views that a JSA is not the same as outright ownership of a station. They considered the rule change “a tremendous mistake,” and noted that a JSA in Joplin, Mo., allowed for the purchase of a Doppler Radar system ahead of devastating tornadoes that ravaged the community. Additionally, a JSA in Wichita allowed for the debut of a local Hispanic TV station, the senior officials noted.

There will be no changes to the placement of shared service agreements in a station’s online public file.

Lastly, as reported on Wednesday, Pai’s order notes that there will be the creation of an incubator program tied to an effort “to create new voices and create diversity” in media ownership.
What about the national TV ownership rule, and the controversy surrounding the return of the “UHF discount,” which has allowed Sinclair Broadcast Group to seek a merger with Tribune Media?
The rule is not part of the FCC’s quadrennial review of its ownership rules. The senior FCC officials note that this is part of a “holistic review” and hopes to have a NPRM in place by the end of the year.

WHEN WILL THE OWNERSHIP RULE CHANGES BEGIN?
Meanwhile, Pai’s Order will likely pass by at least a 3-2 vote, with Commissioner Rosenworcel perhaps a fourth vote — although that seems unlikely.

Then, the Federal Register would need to publish the order following the Nov. 16 vote. Once this is published, the rule changes would go into effect 30 days later.

That’s, of course, assuming that a Federal court does not step in to block the new rules. This is very possible, as groups opposed to the changes may very well sue the FCC to prevent them from occurring.

On Nov. 16, the FCC will technically be voting on an action based on a Petition for Reconsideration the NAB filed after the Commission under former Chairman Tom Wheeler reviewed the ownership rules in 2016 — and let them stay as is.

Upon a likely 3-2 affirmative vote, groups such as Free Press could then move to seek an immediate stay of the deregulation and seek review of the FCC action by the U.S. Third Circuit Court of Appeals in Philadelphia.

“That’s a court that has been hostile to broadcast ownership relief since 2002, when it threw out then-FCC Chair Michael Powell’s attempt to reform broadcast ownership rules,” a source close to the matter tells RBR+TVBR. “This book has a few chapters left to be written. Who knows if the Third Circuit will reject the Pai Commission’s attempt at getting rational ownership relief for broadcasters?”

As of now, there are no groups actively seeking to stop what many have long sought — an end to rules put in place when “Jive Talkin'” by the Bee Gees was No. 1.