Gannett's $2.2 billion deal to buy Belo to become a 43 TV station super group is opening up some old-media consolidation wounds in Washington.
Several public interest groups representing newspaper and cable TV concerns filed petitions with the Federal Communications Commission to either deny the deal or impose conditions on the proposed merger. They include Free Press, Common Cause, The Newspaper Guild-CWA and the American Cable Association, which is filing its petition along with DirecTV and Time Warner Cable.
The primary objections to the merger center on five markets where the combined station group would own more TV stations and newspapers than the FCC allows under its media ownership rules: Phoenix; St. Louis; Portland, Ore.; Louisville, Ky.; and Tucson, Ariz.
To get around the rules in those markets, Gannett intends to maintain control of all the local media properties by transferring the licenses for certain TV stations to third-party shell firms, Sander Operating Co. (operated by former Belo TV exec Jack Sander) and Tucker Operating Co. (run by former head of Fisher Communications TV Ben Tucker), which would then operate those stations for Gannett through a series of business agreements, commonly called shared-service agreements.
For example, in Phoenix, Gannett owns the Arizona Republic and has an FCC waiver to own NBC affiliate KPNX. It would sell Belo's two Phoenix stations, KASW and KTVK, to Sander's company. Through a shared-services agreement, Gannett would provide administration and website operations for the Sander stations and serve as the main studio for all three stations.
In Louisville, Gannett would own the sole daily newspaper in the market, the Courier-Journal, and sell WHAS-TV, the ABC affiliate, to Sander Operating Co. Gannett would handle all ad sales and provide local news for the station.
"The FCC shouldn't let Gannett break the rules. Media consolidation results in fewer journalists in the newsroom and fewer opinions on the airwaves. Concentrating media outlets in the hands of just a few companies benefits only the companies themselves," said Craig Aaron, president and CEO of Free Press.
While public interest groups argue such deals would run afoul of what's best for the general public, reduce the number of voices in the market and harm competition, cable companies are concerned that the arrangements would give Gannett a negotiating edge in retransmission negotiations.
"The transaction … threatens to drive up retransmission consent fees [and in turn, consumer prices] and to increase the risk and incidence of broadcast programming blackouts," the cable companies wrote. "Such collusive behavior results in significant consumer harms and is starkly anticompetitive."
Shared-service agreements, created by TV groups as a way to get around the FCC's ownership rules, have mostly been overlooked by the agency. But cable operators that have to negotiate carriage agreements with TV stations, and public interest groups, have increasingly attacked the rules.
Gannett defended its moves as perfectly legitimate. "This transaction is entirely consistent with all FCC rules, policies and precedent, and will bring substantial benefits to the public," read a company statement.
Before he exited the agency, former FCC chairman Julius Genachowski included a provision in his proposed draft of media ownership changes that would count SSAs toward ownership. So far, the commission has yet to act on SSAs or the media ownership rules.