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FCC Takes Aim at TV Joint Sales Deals

Agency will also initiate review of media ownership rules

Tom Wheeler | Photo: Getty Images

Does the Federal Communications Commission have it in for local broadcasters? Some insist that's the case. 

As expected, the FCC will vote on new rules next month that will make it a lot harder for TV stations to operate joint sales agreements, particularly in smaller and medium sized markets.

Plus the FCC's pending auction of spectrum is dependent on broadcasters giving up lots of that spectrum—another piece of evidence to those sensing hostility.

Positioning the new rules as closing "loopholes" in the media ownership rules, the FCC will vote at the March 31 meeting to make joint sales agreements between TV stations count as owned under the current ownership rules. The commission will also vote on a rule to modify retransmission consent that prohibits two or more of the top four TV stations in a market from jointly negotiating agreements with pay TV providers.

"Motivated by evidence that our rules protecting competition, diversity and localism have been circumvented, we will consider some changes to other commission rules to enforce existing rules," FCC chairman Tom Wheeler wrote in a blog post

JSAs have long been a sore spot with a number of public interest groups that see such arrangements as an "end run" around the limits on owning no more than two TV stations in a market. In the past the FCC has allowed JSAs and other shared service agreements, but has had an open proceeding on changing the status of the agreements since 2004.

Citing the Department of Justice's endorsement of the change, the FCC is now moving ahead with a rule that if the owner of one station in a market sells 15 percent or more of the advertising time for another, then it will be deemed to have ownership interest in the station.

"JSAs in concert with other arrangements assert nearly total influence; the smaller stations are not independent," an FCC official said during a press call.

Broadcasters will vigorously oppose the change, arguing that the arrangements bring more local news and other local programming to financially-strapped stations in smaller markets. They are likely to appeal the rule, if the FCC chairman Tom Wheeler can get his two fellow Democrats to vote with him.

"The real loser will be local TV viewers, because this proposal will kill jobs, chill investment in broadcasting and reduce meaningful minority programming and ownership opportunities. Coincidentally, two industries woud benefit from today's proposal: big cable companies who want less competition for advertising in local markets, and wireless companies who support punitive FCC actions that drive more TV stations into spectrum auctions," said Gordon Smith, president and CEO of the National Association of Broadcasters. 

Groups like Sinclair Broadcast Group, Lin Media, and Nexstar Broadcasting Group that have stations in JSAs will have two years to unwind JSA deals. Stations can also apply for a waiver from the rule. The FCC will also propose to put in place an expedited waiver process to examine JSAs on a case-by-case basis to determine if some cases serve the public interest.

Citing the rising cost of retransmission fees, the FCC will also prohibit TV stations in a single market from jointly negotiating carriage deals with pay TV systems. The separate rulemaking was a change heavily lobbied by the American Cable Association, representing smaller cable systems.

“FCC Chairman Wheeler deserves high praise for addressing the broken retransmission consent market and moving to correct one of its most serious flaws, the collusion practiced by dozens of TV stations owners, who are supposed to be competing with one another,” ACA President and CEO Matthew M. Polka said in a statement.

Finally, the FCC will initiate its 2014 review of media ownership rules, rolling it up with the never-completed 2010 review. As part of the review, the commission will propose to keep the ban on owning more than two TV stations, but ask about whether the cross-ownership ban between TV and radio and broadcast and newspapers should be lifted.
 

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