Posted on March 3, 2010 by David Oxenford

FCC Clarifies Application of the Multiple Ownership Rules After the Digital Transition Makes the Grade A Contour Disappear

The FCC's rules limiting the common ownership of radio and television stations, and of television stations and daily newspapers, are triggered by the Grade A contours of the television station encompassing the city of license of the radio station, or the city in which the newspaper is published.  Since June, there has been one problem with the application of that rule (Section 73.3555) - television stations in the digital world no longer have Grade A contours.  When adopting service contours for digital television, the FCC specified a Noise Limited Service Contour ("NLSC") as essentially the equivalent of the Grade B contour of an analog television signal - the contour at which the majority of people can receive the signal a majority of the time.  The FCC also specified a principal city contour - the signal level that needed to be placed over a station's city of license.  But the FCC never bothered to specify the Grade A contour, despite the fact that the cross-ownership rules were premised on that contour.  In a case decided last week involving the financial restructuring of a radio company, the FCC's Media Bureau staff decided that they would use the NLSC as a proxy for the Grade A contour until such time as the full Commission otherwise directed.

This decision actually makes common ownership of television stations and either newspapers or radio stations somewhat more difficult, as the noise limited contour, approximating the old analog Grade B contour, actually extends further than where the Grade A contour would have reached (when a digital station replicated its analog service area).  Thus, using this standard, the owners of a television station could be precluded from having attributable interests in radio stations or daily papers in more communities than would have been the case in the analog world.  As the FCC is now embarking on its review of the multiple ownership rules (as we have written before), the FCC may well revisit this issue in the course of that review.

The context of this decision is interesting, in that the issue arose in the restructuring of Nassau Broadcasting, where its creditors were to take a controlling position in the company in exchange for a release of some of the company's debt.  However, the new ownership position of its creditors, where their interests became attributable for the first time, required multiple ownership reviews in several markets, as these same investors were owners, or holders of significant debt (triggering an EDP issue) in other companies holding radio or TV licenses in nearby markets.  As more and more broadcast licensees are forced to restructure their companies, in swaps that reduce debt by giving former creditors equity positions in broadcast licensees, these kinds of ownership issues may well arise.  In a Wall Street Journal article published several months ago (subscription required), I discussed with the reporter the possibility of these situations, as many of these deals were structured in more robust economic times when few expected the number of broadcast restructurings that we have had.  This case illustrates that the limits on creditors when they exercise their rights in situations where that exercise can trigger FCC multiple ownership concerns.  It is an issue that will no doubt be of concern in other deals as well, until there is an economic rebound that makes these concerns disappear.
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Posted on October 22, 2009 by David Oxenford

FCC Releases Agenda for First Workshop on Revisions to its Multiple Ownership Rules - Localism and Economic Competition Issues Included

The FCC has released the agenda for its Workshop on the multiple ownership rules (about which we wrote here).  The workshop will span three mornings (November 2-4), and will include live testimony from a different panel each morning.  The first panel will include the academic perspective on ownership rules, the second the view from "public interest organizations", and the third from industry representatives, though the participants on that panel are, at this point, the most unsettled.  The Commission also requests written comments from the public, which can be filed through November 20.  As we wrote when this topic first came up last month, these workshops are the first step in the FCC's consideration of the multiple ownership rules - a review that it is required to conduct once every 4 years - with 2010 being the year in which such review is required. 

The Commission sets out a series of questions that it would like to have addressed.  These questions include:

  • The FCC is required by statute to consider the rules governing local radio ownership, local television ownership, radio-TV cross-ownership, broadcast-newspaper cross-ownership and the dual network rule.  The Commission asks if it should consider other rules in the context of this proceeding.
  • In assessing ownership rules, should the Commission treat each rule in isolation, or should it look at all media together and attempt to craft more general rules addressing media consolidation as a whole in relevant markets?
  • Should rules that are adopted be "bright line" rules, that limit entities to specific numbers of stations, or should the Commission make a case by case determination of whether a combination is in the public interest, subject to some general principles?
  • Should the Commission address the traditional concepts of competition, diversity and localism to this proceeding, or come up with new ways of looking at these concepts, or different concepts to assess ownership goals?
  •  How should the FCC analyze competition, localism and diversity in today's marketplace?  What are the relevant markets for analysis?  What metrics should be used?
  • What studies or analysis should the FCC use to inform its decisions on these topics.

 

It will be fascinating to watch this procedure unfold.  When one looks at the panels that the FCC has assembled, you will no doubt see positions being staked out that are at opposite ends of the spectrum.  For instance, on the panel of "public interest groups," you will have the former head of the Media Bureau at the time of the FCC's 2003 Multiple Ownership decision which dramatically loosened ownership restrictions, only to have that relaxation overturned by the Courts, on the same panel as several speakers who seem to oppose consolidation reflexively - no matter where it comes up.  How can both poles of the debate be representative of "the public"?  If I had to guess, I would bet that the public really falls somewhere in between - not all that concerned about most consolidation as long as it does not severely affect their media choices.

As we have written before, in today's media world, there has never been so much choice (see, e.g., our articles here and here).  The effect of competition from the Internet and other new media must be taken into account in this analysis as it has so profoundly affected the current media landscape.  While in 2003, the new media was mentioned as partial justification for the relaxation that was fleetingly adopted, who could have imagined only 6 short years ago, the impact that new media could have on "traditional" media, like the newspaper, once the dominant advertising medium in most local markets and now imperiled in many of those same markets.  As we have written before, it is quite possible at this point in time to imagine the rules against media consolidation with newspapers outliving the newspaper itself.  One hopes that this is not true for other forms of traditional media as well, though recent articles about the FCC potentially moving toward limiting or ending over-the-air television so that the spectrum can be freed for other uses suggest that there are other moves afoot that undermine concerns about the power of big media as regulated by the FCC.  This proceeding is one that all broadcasters should watch carefully, and in which they should participate aggressively, to make sure that your voice is heard when the FCC shapes that rules that will affect media ownership in the next five years - years that may well affect the very survival of many traditional media outlets. 
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Posted on May 13, 2007 by David Oxenford

Debate Over Newspaper-Broadcast Cross Ownership Rule Heats Up

While the FCC continues its series of public hearings on possible revisions to its multiple ownership rules, the issue of newspaper-broadcast cross ownership is now squarely before the FCC in a number of proceedings. For instance, in the applications proposing a transfer of control of the Tribune Company, waiver requests have been filed in the markets where the company owns both newspaper and broadcast properties.  These markets include some of the largest television markets in the country including Los Angeles, Chicago and New York.  As the current rules prohibit the ownership of a daily paper and either a radio or television station in the same market, Chicago, where Tribune owns radio, TV and newspaper properties and has done so for many years, asks for waivers for both stations.  The FCC just designated the application for transfer of control of the Tribune Company as a permit but disclose proceeding, meaning that parties can talk to the FCC decision makers about the case, as long as they file a written disclosure statement with the FCC for inclusion in the record of the case.

 Also, press reports note that the petitions to deny have been filed against applications for the renewal of Fox's television stations in New York, arguing that the combination of  Fox's television stations in the market with the ownership of the New York Post is not in the public interest.

Seemingly, the proposed purchase of the Wall Street Journal by News Corporation, the owners of Fox,  if it were to ever come to fruition, would at least be reviewed by the FCC, as the Journal is published in New York, where Fox owns television stations.  However, FCC precedent established when Gannett purchased a Washington, DC TV station, in the same market where USA Today is published, would seem to set a precedent for the treatment of a specialized national newspaper like the Journal. While published in New York, the Journal really is national in scope - and not focused on local news, sports, entertainment or advertisers in the same manner that a local newspaper would be. 

It is interesting that the newspaper-broadcast issue still is being considered by the FCC.  In its 2003 Ownership Order, the FCC allowed newspaper broadcast cross-ownership in all but the smallest TV markets.  The US Court of Appeals for the Third Circuit, when reviewing the Commission's decision, seemed to agree that the broadcast-newspaper cross ownership rules were outdated and should be substantially relaxed, but the Court did not like the methodology used by the FCC to consider in which markets such relaxation should be allowed.  Since the Court's order in 2004, the issue has stalled, pending at the FCC with the remainder of the multiple ownership proceeding.

Look for these combinations to stay in place while the FCC continues its consideration of the multiple ownership rules.  As some relaxation seems to be in store, and as combinations once broken up are difficult to reassemble, the Commission would likely not break up these long-standing combinations while rules which would make them permissible are pending. 

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