The FCC yesterday released the agenda for its April 20th meeting – and it includes three broadcast items. Two deal with noncommercial broadcasters (undoing the requirement for noncommercial broadcasters to get Social Security Numbers from its board members so that they can acquire an FCC Registration Number for them – see our articles here and here on this issue – and one allowing noncommercial broadcasters to interrupt programming to raise funds for unrelated non-profit organizations- see our article below). But in a decision which, if adopted, will likely have an immediate impact on the market for the purchase and sale of television stations, the FCC released a draft order, to be voted on at the April 20 meeting, proposing to reinstate the UHF discount.
That discount, in assessing the broadcaster’s compliance with the 39% cap on the nationwide audience that any broadcaster can reach with TV stations in which it has an attributable interest, accords half the weight to the population of television markets in which a broadcaster holds a UHF station. The discount was adopted back in the days of analog television, when UHF stations had signals that were harder for most viewers to receive, and the stations were more expensive to operate than VHF stations. In the digital world, that deficit has disappeared, underlying the September decision of the Commission (which we summarized here) to abolish the discount. The September decision did away with the discount, and the Commission had effectively put on hold television transactions that would exceed the cap for several years while considering the September order. This effectively froze the acquisition of new stations by the major television groups – a freeze that may quickly thaw if the Commission follows through and adopts its draft order on April 20.
In the draft order released yesterday (as well as in Chairman Pai’s dissent in September), the fact that the discount was in place when the 39% cap was initially adopted was central. The decision looks at the history of the national audience cap, and concludes that every time the cap was considered, the fact that there was a UHF discount was also recognized. Thus, the decision reasons that the discount can only be changed in the context of an overall review of the 39% cap, a review not done in reaching the September decision.
So the Commission apparently plans to reinstate the discount, and to undertake the review of the national audience cap at some point later this year. Theoretically, after this review of the national cap, the FCC could come back and reexamine the UHF discount – though in the interim, broadcasters would apparently be free to rely on the discount, potentially allowing some groups to greatly expand their holdings of TV stations.
Appeals of the September decision abolishing the UHF discount were filed by broadcasters. If the Commission acts as proposed, there may well be appeals of that decision filed by public interest groups arguing that the September decision was correct as it recognized the reality of the technical properties of UHF and VHF stations. Obviously, that position would be opposed by broadcasters who favor the discount and believe that it is necessary to let them compete in today’s video marketplace. There is much appetite for broadcast groups to grow larger to compete with other video providers that have nationwide reach, so if the FCC acts as expected at its April 20 meeting, don’t be surprised to see deals being announced soon thereafter.