Quadrennial Review and UHF Discount Elimination Draft Orders Circulate
A draft media ownership quadrennial review order and a draft item that would eliminate the ownership UHF discount were circulated on the eighth floor Monday, FCC officials told us. As expected (see 1606140052), the media ownership draft order would uphold most existing rules, sticking relatively close to an NPRM, and brings back the joint sales agreement attribution rule that was knocked down by the 3rd U.S. Circuit Court of Appeals, according to an FCC fact sheet. The UHF discount draft order also closely resembles its NPRM forebear, including a grandfathering clause that would apply only to arrangements or applications that were in existence when the 2013 notice was approved (see 1309270045), FCC officials told us.
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Proposing to eliminate the UHF discount in the midst of an incentive auction that makes it impossible to know how many UHF stations will be in existence when the rule is implemented is “a strange move,” a broadcast official told us. “Our Analysis indicates that the ownership restrictions remain necessary in the public interest, though the realities of the media marketplace require some targeted modification of a number of the rules,” said the FCC fact sheet.
The draft ownership order would re-establish the JSA rule “consistent with Congress’s guidance on grandfathering,” the fact sheet said, suggesting the new rule won't try to return to the much shorter grandfathering period originally ordered. Some broadcasters had told us they thought there might be a chance the FCC would eliminate the newspaper/broadcast cross-ownership rule after it was singled out by a 3rd U.S. Circuit Court of Appeals ruling, but the rule remains in the draft item. Instead, the draft order proposes to “modestly relax” the rule by providing an exception for failed or failing entities and “states that the Commission will consider waivers,” the fact sheet said. Rules for local TV ownership, local radio ownership, radio/TV cross ownership, and the dual network are retained with small changes, such as modifications to “address the transition to digital broadcasting,” the fact sheet said.
The draft order will require shared service agreements to be uploaded to stations' online public files, the fact sheet said. It defines an SSA as any agreement in which “a station provides another station, not commonly owned, with any station-related services, including administrative, technical, sales, and/or programming support; or stations not commonly owned collaborate to provide station-related services, including administrative, technical, sales, and/or programming support,” the fact sheet said.
The draft order re-adopts the revenue-based standard for eligible entities and says the FCC “does not have a basis for instituting race-based or gender-based preferences that would withstand the Supreme Court’s very high standard for such actions,” the fact sheet said.
The quadrennial review item doesn't include any new studies of ownership diversity, a portion of the 3rd Circuit's directions the FCC has “ignored,” said United Church of Christ Communications Office Counsel Cheryl Leanza in an interview. The lack of such studies is likely to lead to further litigation and another loss for the FCC, she told us. Public interest attorneys also had questioned how the FCC could evaluate the impact of ownership rules in the midst of the incentive auction. “Given that the broadcast TV incentive auction is underway and its results will not be known for some time, the auction’s effect on the marketplace is not yet clear,” said the FCC fact sheet. “The Commission’s future quadrennial ownership review will be able to assess the impact of marketplace changes resulting from the auction.”
The UHF discount draft item is seen as very similar to what was proposed in a 2013 NPRM, eliminating the discount for UHF stations in calculating how close ownership groups are to the 39 percent nationwide audience cap on TV ownership. Because of the ongoing incentive auction, the FCC and the broadcast industry can't determine how many UHF stations there are or how close to the cap ownership groups are, said BIA/Kelsey Chief Economist Mark Fratrik in an interview. The auction means the FCC likely wouldn't be able to implement the rule until after the auction's results are determined, he said. Though the incentive auction was designed to free up UHF spectrum, many stations will remain on the UHF band after the auction, and eliminating the discount will affect many large broadcast groups, Fratrik told us. The September 2013 UHF discount rule was approved under then-Acting Chairwoman Mignon Clyburn and tied a grandfathering clause to combinations already in existence at the time of the vote or that had submitted applications to the FCC by then.
NAB is "disappointed" that FCC Chairman Tom Wheeler "continues to ignore the will of both the courts and Congress by proposing to retain broadcast ownership rules that long ago outlived their usefulness," an NAB spokesman said in a written statement. "It is shocking that regulators who bless mammoth mergers like AT&T/DirecTV and Charter/Time Warner Cable would still bar common ownership of two TV stations or broadcast/newspaper combinations in a local market." NAB "hopes the five-member FCC, Congress or the courts end this indefensible FCC charade," the spokesman said.