Media Ownership Rules Likely to Draw at Least One Dissent if Vote Held Now

The draft would allow common ownership of a radio station and daily newspaper in a market, waivers so a non-top four-rated TV station could be owned in common with a daily in a top-20 market, and effectively ban TV joint sales agreements in smaller markets when the JSAs let another broadcaster broker more than 15 percent of a station’s ads. Commissioner Robert McDowell said Wednesday that attributing ownership of JSAs to the station brokering the ads would be “counterproductive” (CD Jan 17 p3). Agency and industry officials say Commissioner Ajit Pai shares such concerns. A commission spokesman declined to comment.

Commissioner Mignon Clyburn has privately opposed ownership deregulation before the FCC performs court-ordered studies on barriers to owning stations faced by women and minorities (CD Nov 29 p5). Commissioner Jessica Rosenworcel is concerned about allowing consolidation before doing such research, said agency and industry officials. Genachowski’s plan had been to wait until 2014, when the next quadrennial review order is due under the Telecom Act, to do that research (CD Nov 19 p1). It’s now becoming apparent that neither Clyburn nor Rosenworcel would prefer waiting to do the research and approving rules now, so Genachowski risks losing one or both of their votes if he proceeds, agency and industry officials said.

The recent expression during private conversations at the FCC of commissioners’ concerns, which reflected earlier expectations that Republicans wanted more deregulation and Democrats less than the draft would allow, now gives Genachowski a few options. That’s according to agency officials, broadcast lawyers seeking rules allowing more consolidation, a lawyer for nonprofits who opposes some mergers and acquisitions, and an analyst. They agreed Genachowski is unlikely to get a 5-0 vote on the current draft, as he'd prefer, if he presses ahead for approval. “A 5-0 vote might still be possible, but it could require a delay so the commission can do more on the entry barriers issue, which is clearly important to the Democratic offices,” said Guggenheim Partners analyst Paul Gallant. “Media ownership remains polarized, and virtually any move in this space will be controversial."

The situation faced now by Genachowski, which Republican predecessors Kevin Martin in 2007 and Michael Powell in 2003 also faced in having ownership orders approved over Democrats’ dissent, points up the politics of media ownership, agency and industry officials said. They said that, among issues the commission deals with, ownership is one of the more politically charged, making it that much harder for Genachowski to get the unanimous votes he seeks on all items. Genachowski is “potentially boxed in,” he wants unanimous approval, though “he would do 4-1,” said public-interest communications lawyer Andrew Schwartzman, representing M&A foe Free Press in the proceeding. “Broadcast ownership has always been one of the most capital ‘P’ political matters that the commission has dealt with,” which is why a 5-0 vote is hard to obtain, he said. Media ownership rules represent “a thicket,” said broadcast lawyer Erwin Krasnow of Garvey Schubert, representing broadcasters that want the FCC to allow common ownership of multiple TV stations within smaller markets. He said ownership has “contentious parties, the use of Capitol Hill to place pressure on the FCC and inevitable appeal by the losing party to the courts, even up to the Supreme Court.” Leaders of the congressional black and Hispanic caucuses have asked Genachowski not to proceed with the deregulation (CD Dec 12 p16).

Genachowski could continue pushing for a vote without substantively revising the order, and possibly get the Republicans to approve, with some corresponding risk of a Clyburn or Rosenworcel dissent, FCC and industry officials said. They said that approach would risk having at least one commissioner of Genachowski’s party vote against the order. He could also decide to take more time to seek a possible compromise among FCC members of both parties, in a move that likely would require changing the draft and still wouldn’t resolve all concerns, agency and industry officials said. Some had expected (CD Dec 5 p3) such revisions to occur because the bureau sought comment in docket 09-182 (http://xrl.us/boa9eb) on what types of demographic groups own various types of radio and TV stations, which because the Form 323 ownership data replies were due Jan. 4 delayed the proceeding into this year.

In recent weeks, Genachowski appeared to have abandoned that approach to have substantively revised the order after the Form 323 replies were received, by seeking to bring the matter to a vote, agency and industry officials. Neither Genachowski nor any other member of the regulator had voted “yes” or “no” on the order by midday Thursday, agency officials said. When the bureau circulated a revised order Thursday, that item contained references to filings on the Form 323 data but lacked any changes that appeared substantive in nature, agency officials said. They said the question is whether Genachowski is willing to circulate a third draft of the order with policy changes.

There’s still a chance Genachowski could reverse what now seems to be his course, go back to holding off pressing his colleagues to vote on the rules, and take the additional time to see if a compromise of sorts could be hammered out on the eighth floor, agency and industry officials said. They said that to partly address McDowell and Pai’s concerns, the order could be changed to exempt at least some JSAs from ownership attribution, which might also please Clyburn since she’s apparently come to see some types of the deals as in the public interest. Yet Rosenworcel and Clyburn would still face the dilemma that without finishing the studies to see if rules are needed to target women and/or minorities, the ruling sending back to the agency its last quadrennial review order by the 3rd U.S. Circuit Court of Appeals wouldn’t be met because the 3rd Circuit sought such research, agency officials said. Genachowski’s desire to release an order “is self-imposed,” Schwartzman said. “It is a time honored practice of FCC chairs, and Julius has been particularly adept at this, of doing nothing and stalling” on various items, Schwartzman said. “So he may just decide to leave this box unchecked, and let the next chairman deal with it.” Genachowski is expected to leave the FCC this year.

To avoid a dissent by Clyburn and/or Rosenworcel, the order would need to change tack on cross-ownership of broadcast properties and dailies, agency and industry officials said. They said those two commissioners worry that allowing radio/paper and TV/paper common ownership within a market would lead to further consolidation before the barriers to entry studies are completed, so that if barriers are found later M&A would be impossible to undo. If the order were less deregulatory, McDowell and/or Pai might dissent because they'd prefer to see more rule relaxation than the current draft allows, agency and industry officials said.

Owners of TV stations in JSAs meanwhile continued lobbying against attribution of the pacts, said ex parte filings from Bahakel Communications, LIN Television, Mission Broadcasting and Nexstar. Some industry officials said the lobbying may have led Clyburn to become more open to allowing at least some types of JSAs, based on what appears to be her belief that some lead to more local programming than would be done without the pacts. “Changing the JSA attribution rule would be detrimental to the public interest, particularly in small and medium-sized markets,” said Mission Chairman Nancie Smith, Nexstar Chairman Perry Sook and others in meetings with bureau Chief Bill Lake, Clyburn, McDowell, Rosenworcel and aides to the other FCC members (http://xrl.us/boa9gw). “If the Commission decides not to open a separate proceeding and proceeds to make JSAs attributable without loosening the duopoly restrictions in small and medium-sized markets, Bahakel urged the FCC to adopt an exemption from attribution for JSA brokers that provide significant local news and locally originated programming on brokered stations,” Chief Operating Officer James Babb told an aide to McDowell (http://xrl.us/boa9hi). The agency “would be required to update the record before considering attribution of JSAs,” LIN executives said in meetings with Lake, Rosenworcel and aides to the other FCC members.