Walden Comes Out Swinging Against FCC Rule Change to Cap Size of TV Groups

Politics at play on heels of big station deals

In what is turning out to be a highly contentious rulemaking, the Federal Communications Commission voted 2-1 along party lines to begin the process of changing how TV stations are counted toward the 39 percent national ownership cap.

The proposed rulemaking is already catching flak from Rep. Greg Walden (R-Ore.), the lawmaker whose subcommittee has jurisidiction over the FCC.

"I'm frustrated and disappointed," Walden told Adweek. He has been pushing for FCC process reform in a bill he is working on with his members in the communications and technology subcommittee. "This gives us an additional incentive to act."

It's hard not to see politics at play in the notice for proposed rulemaking, coming off the heels of a spate of big TV station deals, including Gannett-Belo, Tribune-Local TV, Media General-Young Broadcasting, Sinclair-Allbritton and, just announced Wednesday, Sinclair-New Age Media. 

The proposed rule would eliminate the 50 percent UHF discount adopted in 1985 to take into account disparity of signal power between UHF and VHF stations. Since the digital TV transition, that disparity is nullified. If the rule were eliminated, TV groups as of Sept. 26 that exceed the 39 percent cap solely because of the termination of the UHF discount would be grandfathered in.

Though the rule as currently proposed would not affect current pending TV deals, it would stop any further consolidation dead in its tracks. 

For Walden, the FCC's rule is just another example of the agency creating uncertainty in the market.

"If there was an emegency, I get it. But this amounts to regulatory purgatory for broadcasters between now and whenever the FCC produces a rule. It's the equivalent of us holding a hearing and telling an industry 'you're on hold until we legislate,'" said Walden, a former broadcaster. "It's not that they shouldn't review it, but they should also look at the ownership cap."

Commissioner Ajit Pai, the sole Republican on the agency, made similar arguments to Walden in his dissent. 

"It's not the law of the land now, but the grandfathered clause tells the marketplace to behave as if it's already been eliminated, making the rulemaking process a reality before it's voted," Pai said. "It would dampen the market for broadcast stations and depress value."

Whether the FCC has the authority to make the change is also a question that Walden intends to research. "We're looking into it. The FCC has been slapped down before. They don't seem to learn their lesson," he added. 

Broadcasters are likely to urge the commission to run an engineering study first to quantify the coverage disparity between UHF and VHF stations. "If the goal is to make it more real world, then let's make it real world," said Scott Flick, a partner at Pillsbury Winthrop Shaw Pittman. "Setting aside for and against the change, there isn't anyone that isn't going to be affected. It would impact every group's reach calculation."