DC Circuit Upholding UHF Discount Paves Way for Deals, Takes Pressure Off Cap

Though the court appeared in oral argument to be hostile to the FCC’s petition (see 1804200059), Wednesday’s judgment (in Pacer) dismissed the case brought by groups including the National Hispanic Media Coalition, Free Press and the United Church of Christ, Office of Communication for failing to show members would be harmed. The groups filed supplemental standing evidence after oral argument (see 1805160066), which the court declined to consider because petitioners “failed to show, per this court’s order, that they reasonably, though mistakenly, believed that their initial filings were enough to evince associational standing.” With the case dismissed for standing, the panel of Judge Patricia Millett,Judge Gregory Katsas and Judge Cornelia Pillard didn’t rule on the merits.

The court’s rules for standing “are pretty damn clear,” said Fletcher Heald appellate attorney Harry Cole Lawyers characterized the petitioners' lack of sufficient filings showing standing as a surprising error. The same court on Tuesday dismissed a petition by Video Relay Services Consumer Association over standing (see 1807240016), and appellate attorneys said the D.C. Circuit has long scrutinized the standing of petitioners. The groups didn’t provide evidence at the case’s outset that their members included affected viewers, the court said. “They were not satisfied,” with the groups’ arguments for associational standing, said the petitioners’ attorney Andrew Schwartzman, senior counselor at Georgetown Law’s Institute for Public Representation.

Petitioners could appeal to the U.S. Supreme Court, or seek a rehearing or en banc appeal, but Schwartzman said it’s too early to decide. Those possibilities aren’t considered likely to succeed, and would concern the matter of standing rather than the merits of the UHF discount, appellate attorneys said. Since too much time has passed since the discount was restored, the groups can’t file another appeal of the rule change, they said.

“I’m pleased with the court’s decision to reject this challenge to the reinstatement of the UHF discount pending the completion of our comprehensive review of the national ownership cap,” said Chairman Ajit Pai. Former Commissioner Mike Copps disagreed. “Court’s no substance ‘decision’ on UHF discount, if allowed to stand, is another green light for industry to consolidate into more monopoly markets,” Copps tweeted. “So many green lights, so little public interest.” “The Wheeler FCC’s decision eliminating the UHF discount without consideration of the national TV ownership cap was inappropriate and ignored the market power of massively deregulated pay TV providers,” said a “pleased” NAB.

The discount remaining in place removes any perceived time pressure on the FCC to quickly act to raise the national ownership cap, industry officials said. The FCC previously was seen as possibly looking to act on the cap with speed because of the impending court decision and the now-foundering Sinclair/Tribune deal (see 1806110058. Before the court’s negative reaction to the UHF discount in oral argument, industry officials believed the FCC was unlikely to act anytime soon on the national cap (see 1711210044), but they said Wednesday some action is now considered likely despite the court win. A new cap would make it harder for a future administration to re-eliminate the discount or otherwise constrict ownership rules, a broadcast official said.

The UHF discount’s continued viability is considered a boon to TV dealmaking. “THIS IS A HUGE POSITIVE SURPRISE,” Wells Fargo analyst Marci Ryvicker emailed investors. “This again proves that oral arguments are difficult, if not impossible, to read.” The discount remaining opens up possibilities for Cox’s possible sale of TV stations (see 1807240043), Ryvicker said. “This is a nice and unexpected positive for the broadcast space.” Industry officials said it improves Tribune’s eventual prospects.

The ruling doesn’t make Sinclair/Tribune more likely to happen, said Ryvicker and every broadcast industry official interviewed. Though it’s seen possible that Sinclair might use the ruling to try to seek some sort of accord or consent decree with the FCC, that’s considered unlikely to work out. If Pai were open to future negotiation with Sinclair, the deal would never have gone to hearing, Cole said. FCC issues with Sinclair “don’t have anything to do with the UHF discount,” said Newsmax CEO and Sinclair/Tribune opponent Chris Ruddy. “This will have no impact on Sinclair’s case.”