Sometimes the FCC decisions come out in a flurry, often with little nuggets of importance in each one. Rather than trying to write about each one, we’ll from time to time, just try to highlight those nuggets for your consideration. At the end of last week, three decisions came out with just such nuggets – all dealing with different issues. The first case involved the issue of divestiture trusts – trusts set up to hold broadcast assets when a buyer of broadcast properties, usually in connection with the acquisition of a broadcast group, needs to divest some stations so that the buyer remains in compliance with the multiple ownership rules (usually in radio where the attribution of LMAs and JSAs make impossible divestitures like those used in television, to parties with no connection to the buyer but operating with a Shared Services or Joint Sales agreement). In the past, the FCC has not put any limit on how long the stations could remain in a divestiture trust, with some stations spending 5 or 6 years (or longer) in such trusts before they are finally sold. This case involved an acquisition of a large number of radio stations by Townsquare Media from Cumulus. Here, the Commission established a two year limit on period of time that the trust could hold the stations placed in its care. Thus, the trustee needs to divest of those stations within that period. We would not be surprised to see that limit imposed on any trusts created in the future – perhaps even on some longstanding trusts still in place when they are subject to renewal applications, where such trusts have been challenged from time to time.
In TV, often stations that cannot be owned by a broadcaster who is buying another station in the same market consistent with the multiple ownership rules are not sold through a trust, but instead they are sometime bought by an independent party who can support the station through some sort of Joint Sales or Shared Services Agreements with the buyer. In one of those cases, the continuation of an existing Shared Services Agreement was challenged in connection with the sale of the brokering station held by Young Broadcasting to Media General. The FCC again (as they have in many cases before, see for instance our article here), held that the sale was permissible and that the SSA could continue after the sale. The brokering station did supply news to the brokered station, but it was under 15% of the program time, and thus not attributable. The brokered station continued to have a financial incentive to operate the station successfully, keeping 70% of the cash flow of the station. And the mere fact that the owner of the brokering station guaranteed the debt of the brokered station did not make that interest attributable to the broker. Note, however, that the Commission did question the staffing of the brokered station but, as that station was not being transferred as part of the sale before the FCC, the Commission said that they would review that issue in connection with the license renewal of the brokered station. Shared Service Agreements are also under consideration in the current Quadrennial review of the FCC’s multiple ownership rules (see our stories here and here ). So some of these issues may be revisited again in the not too distant future, when the new FCC Chair decides to complete that review.
In the Young case, one of the satellite television companies also objected to the SSA arrangement, and the joint negotiation of retransmission consent agreements by these stations. The FCC rejected that argument, saying that this issue was under consideration by the FCC in the broader context of the Commission’s reexamination of the retransmission consent rules, and the policies would not be changed in an individual case such as this one.
Carriage issues were also at stake in the decision by the Commission on a market modification request by a Providence television station, which requested that a Boston station no longer be considered “significantly viewed” in certain communities (allowing cable systems to carry that Boston station without deleting programming duplicative of that run by the Providence station). The case was essentially a standard case of determining whether the Boston station continued to meet the over-the-air audience thresholds for significant viewing in the communities in question. But there were two interesting nuggets in this case. One was that the FCC allowed the Providence station to use Nielsen audience data for the communities that was over 5 years old, as that was the last survey data that had over-the-air households identified in the communities in question. The siginificant viewing determination is based on the viewing patterns of over-the-air households, which in areas of high MVPD penetration makes finding Neilsen-surveyed over-the-air households difficult, especially in smaller communities. The decision also rejected an attempt by the Providence station to identify as a “community” for cable carriage purposes part of an incorporated town, just because that part of town had its own zip code definition and census identification. Where the identified place was part of a larger community, the stations could not pick and choose which parts of the community to use for determinations as to significant viewership.
Odds and ends for your consideration this week….