TV Shared Services Agreements have been one of the targets of public interest groups since the start of the current Quadrennial Review of the FCC’s multiple ownership rules (see our articles here, here, here and here).  Public interest groups, in their zeal to stop any media consolidation (including newspaper/broadcast cross-ownership – even if that prohibition ends up outliving the newspaper itself, see our article here), have seen Shared Services Agreements as end-arounds on the FCC’s in-market television ownership caps, even though such deals may be necessary to preserve competitive, quality TV stations in smaller television markets.  Certain cable operators have also opposed these combinations (sometimes called “sidecar” arrangements), fearing that they will give TV station operators more power in retransmission consent negotiations.  There has recently been a flurry of activity, leaving the status of these deals somewhat confused under the review of the new FCC Chairman.

Before Christmas, two transactions involving shared services agreements were approved over objections.  While these transactions were approved, there was a lengthy analysis of the SSAs involved  in the decision approving Gannett’s acquisition of Belo.  In that discussion, the Commission’s staff carefully reviewed the attributes of the SSAs proposed as part of the transaction, and found them within the precedent established in prior transactions.  This included making sure that the licensee of the station receiving the services retained at least 70% of the proceeds from the sales of advertising time on the station, and that the party providing services programmed no more than 15% of the time on the other station.  But, in a paragraph that many thought was just a statement that Commission always retains the right to review transactions that are consistent with precedent, the Commission stated:

That is why applicants and interested parties should not forget that our public interest mandate encompasses giving careful attention to the economic effects of, and incentives created by, a proposed transaction taken as a whole and its consistency with the Commission’s policies under the Act, including our policies in favor of competition, diversity, and localism

But was this simply a statement of the obvious, or did it mean more?

Since the holidays, there have been indications that there is in fact more.  FCC Chair Tom Wheeler, at a town hall meeting on the West Coast sponsored by an anti-consolidation public interest group, reportedly stated the following:

In an arcane way that only the lawyers would understand, but stay tuned, there were a couple of references in a couple of recent decisions in which we said we’re going to do things differently going forward on these, what were called shell corporations up here in one of the presentations. We’re going to look at that differently

If the Chairman says that the Commission may look at SSAs in some different way, what way is that?   While much was made of a letter to Sinclair earlier in December, that letter primarily focused on grandfathered LMAs (an LMA involves a programming relationship for more than 15% of the programming and, under current rules, can only be entered into by a station that can own the other local station that it is programming – but certain arrangements entered into prior to 1996 are grandfathered ).  The FCC letter to Sinclair did ask about several JSAs, but only seemed to be seeking information to show that these deals were within the limits for SSAs – limits similar to those approved in the Gannett acquisition.  So this letter does not seem terrifically instructive.

This last week, TV NewsCheck reported that any transaction that involved an SSA was being held up by the FCC, and not processed.  But that was not based on any specific FCC statement, but instead from statements of counsel involved in these deals.  If true, and we’ll have to wait to see if it is, it seems that this would confirm that the FCC is reexamining the arrangements, but probably has not yet decided what to do.    We would expect more analysis and controversy about this issue in coming weeks – so stay tuned to see what the next step in the FCC’s wrestling with this issue will be.