Nexstar/Tribune Could Make Action on Cap Complicated
Nexstar’s proposed buy of Tribune could complicate upcoming action on the national TV ownership cap, said broadcasters and their lawyers in interviews. The transaction (see 1812030055) doesn’t exert pressure on the FCC to act on the cap soon because it fits under current rules, but the deal could become the focus of negative attention if the FCC relaxes the ownership cap while it’s still pending. Since the deal’s designed to work under the rules, changes to them -- such as doing away with the UHF discount -- could also negatively affect it, experts said.
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If the FCC raises the 39 percent cap while the deal is pending, opponents could complain the limit change is intended to favor Nexstar’s purchase, as was said of Sinclair's now abandoned plan to acquire Tribune, attorneys said. The existence of the deal would allow critics of raising the ownership cap to point to Nexstar’s increased size as a concrete harm of lowering ownership limits, they said. Commissioner Mike O’Rielly wants to vote on changes to the cap so the courts can rule on FCC jurisdiction over the cap (see 1811010041). Changing the threshold with Nexstar/Tribune extant would make that court case more complicated, said Fletcher Heald's Dan Kirkpatrick. “It brings more people into the proceeding” along with “ancillary issues,” he said. The FCC and Nexstar didn't comment.
Nexstar/Tribune is likely to draw significant opposition, attorneys said. Free Press and the American Cable Association registered objections. With a Democratic-controlled House, the FCC tackling the cap and a controversial transaction likely would lead to oversight hearings, attorneys said. Nexstar/Tribune is “so much cleaner” than the Sinclair deal, the agency likely won’t want to “fool around” with the cap if it doesn't need to, said Holland & Knight' Charles Naftalin. The pending court battle over previous quadrennial reviews (see 1811280050) dubbed Prometheus IV is another reason the agency might be reluctant to take up the cap soon, Naftalin said.
Nexstar CEO Perry Sook repeatedly said the deal is constructed to abide by current FCC rules, so alterations to those rules could change the transaction’s outcome, attorneys said. A group of mid-size broadcasters backed a plan to alter the cap by setting it at 50 percent and dropping the UHF discount entirely. Without the UHF discount, Nexstar and Tribune’s would be in the 70s, said S&P Global analyst Justin Nielson. NAB proposed applying a 50 percent discount to both VHF and UHF stations. Nexstar/Tribune includes VHF stations, Nielson said, so that change would affect the purchase. Though Sook said Nexstar would be ready to accommodate a relaxation in the ownership rules, rule changes that alter the nature of the deal would be more complicated for the FCC to enact, lawyers said.
University of Minnesota School of Journalism assistant professor-media law Christopher Terry disagreed about the level of political heat generated by Nexstar/Tribune. “I don’t think Nexstar comes with the same baggage” as Sinclair, he said. Terry said Nexstar/Tribune is unlikely to have much effect on action on the limit because he doesn’t believe the agency has the authority to alter the cap: That's “going to take an act of Congress.”