Multiple Ownership Rules

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The FCC’s Order released at the end of August deciding the issues in its Quadrennial Review of its ownership rules is over 100 pages long. The full document, with the dissents from the Republican Commissioners, required regulatory impact statements and similar routine attachments totals 199 pages. The Order addresses many issues. For TV, it declines to change the local ownership rules, readopts the decision to make Joint Sales Agreements into attributable interests (thus effectively banning them in many markets, though making some tweaks to the grandfathering of existing JSAs), and adopts new rules for reporting shared services agreements. The Order retains the newspaper-broadcast and radio-television cross-ownership rules. It takes limited new steps to encourage minority ownership (principally re-adopting the rule that allowed small businesses to acquire and extend expiring construction permits for new stations and to buy certain distressed properties, see our article about that old rule here), but does not adopt any racial or gender preferences for broadcast ownership. It also ends consideration of using TV channels 5 and 6 for the migration of AM radio and other new audio services including those targeted to new entrants into broadcast ownership (see one of our articles about that proposal here). And it rejects most proposals to change the radio ownership rules. Today, with the NAB Radio Show just two days away, we will look closer at the radio rules, and will cover many of these other aspects of the decision in coming days.

Perhaps the biggest “ask” for changes in the rules came from numerous radio groups that requested changes in the “subcaps” that apply to radio ownership. For instance, in the largest radio markets, one owner can hold up to 8 stations, but only 5 can be in any one service (AM or FM). Some parties had hoped to be able to own more FM stations in a market, particularly given the growing levels of competition in the audio marketplace from satellite and online radio. Some AM owners looked to hold more than the current maximum number of AMs in a market as a way to provide economies of scale that might help to preserve and strengthen the struggling AM radio industry. The Commission rejected such changes.
Continue Reading FCC’s Decision on the Quadrennial Review of the Multiple Ownership Rules – Part 1 – Radio Issues

Last week, the FCC released its order eliminating the UHF discount. Under this discount, a TV broadcaster, in determining its compliance with the national ownership limit prohibiting any owner from having attributable interests in stations serving more than 39% of the nationwide television audience, would include in its count only one-half of the audience of any market served by a UHF station. This discount originated in the analog world, when UHF stations tended to have smaller audiences as their signals were harder to receive, and yet their operational costs were higher. Three years ago, the FCC proposed to eliminate the discount, as the technical inferiority of UHF stations no longer exists in the digital world (see our post here describing the FCC’s proposed action). This decision, reached in a 3 to 2 vote of the Commissioners, will put several broadcast groups over the national cap, while others will come close to it, limiting their ability to expand into new markets. Did the video distribution marketplace demand this action?

In fact, the Commission’s majority decision really did not examine in any detail the public interest factors justifying this action. Instead, the FCC focused almost totally on the fact that, in the digital world, UHF stations were no longer technically inferior. That was essentially stipulated by all parties, and the Commission viewed the decision as simply being one that was necessary to keep up with technology – as UHF stations were no longer inferior to VHF stations, there was no reason to give owners of these stations a discount in computing compliance with the national ownership limits. The Commission also pointed to the fact that, in the days before the digital transition, it had warned TV broadcasters that an end to the UHF discount was coming. But changes in the media marketplace in the 15 years since many of these statements were made, with the rise of multichannel video program providers and over-the-top television services like Netflix that were not even imagined 15 years ago, are given only a passing reference, as pointed out by the dissenting Republican commissioners.
Continue Reading Eliminating the UHF Discount and Limiting the National Ownership Reach of Television Groups Without Reviewing the Media Marketplace

September 29 will be a big day for broadcasters and other media companies when the FCC holds its next open meeting. In the tentative agenda for that meeting released on Thursday, the FCC identified several issues that deal with the media including two big items on video issues – the decision as to what to do about the Commission’s proposals to open the cable set top box to competing systems, and a new proposal designed to promote sources of independent programming for video distributors. In addition to these two items, the FCC also says that it will resolve the proposals to make the FCC’s foreign ownership rules for broadcasting more like those applicable to non-broadcast companies, easing some of the procedural restrictions that made it difficult for non-US investors to become owners of US broadcast stations.

The set top box debate is perhaps the debate that has garnered the most publicity, with the Commission proposing to allow more companies to offer a means to access cable and satellite TV programming – perhaps enabling the use of new apps to access and inventory that programming. Content owners and program distributors have worried about security issues with opening programming to access on a myriad of devices, and have also been concerned that the loosening of these restrictions could interfere with contractual rights limiting access to certain programs to certain devices and distribution channels. The FCC Chairman yesterday released this fact sheet about the proposal setting out some specifics of the proposal that will seemingly be voted on at the late September meeting, and the Chairman published this op-ed article in the LA Times explaining what he is trying to do. The matter is sure to remain controversial right through the late-September meeting, and perhaps after the decision as well.
Continue Reading September FCC Meeting To Be a Big One for Media Companies – Set Top Boxes, Foreign Ownership of Broadcast Stations and Promotion of Independent Programming

In the last few minutes, the FCC has released its order on the Quadrennial Review of its multiple ownership rules, about which we wrote last week. The decision is available here, and includes dissenting opinions from the two Republican commissioners and a concurring statement from Commissioner Clyburn. In total, the text is 199…

While the trade press has been full of reports that the FCC has voted on an order addressing the issues raised in its Quadrennial Review of its multiple ownership rules, and that the decision largely left those rules unchanged (including the broad ban on the cross-ownership of daily newspapers and broadcast stations), no final decision on the review has yet been released. However, we did see on Friday that, in the FCC’s list of matters pending before the Commission for approval “on circulation” (i.e. to be voted on without being considered at an FCC open meeting) the ownership item was removed from the list of pending items, seemingly confirming that the decision has in fact been voted on and is thus no longer circulating for approval. If the press reports are to be believed, there has been no major change in the rules despite much last minute hope for some relaxation of the newspaper cross-interest rule. The rules are thus likely to be those indicated by the Chairman in his blog post in late June, which we summarized here. Even if the most significant rules (e.g. local ownership rules for radio and TV – the “duopoly” rules, and the newspaper-broadcast cross-ownership rules) remain unchanged, that does not mean that the broadcast community should ignore the upcoming decision, as there are bound to be other issues addressed in the order that may be of significance.

In connection with the newspaper cross-ownership rules, while the press reports indicate that the rules will remain in place, there are reports that there will be some sort of waiver allowed, seemingly where economics justify the combination. If this is akin to the “failing station” waiver used to justify the ownership of 2 TV stations in markets where such ownership would normally not be allowed, some have wondered, given the economic state of the newspaper industry, if such a waiver would ever be used as it will be a rare case where a last-minute broadcast combination will rescue a failing newspaper. But we will need to see what the details are of the waiver standard to be applied.
Continue Reading Preparing for the FCC’s Soon to be Released Decision on Changes to its Multiple Ownership Rules

Recently, we wrote about two cases seeking declaratory rulings from the FCC that non-US ownership of companies owning broadcast stations should be permitted even though that ownership would exceed the 25% standard that had been, until that last few years, the limit on such ownership. Last week, the FCC announced the filing of another such…

Last week, the FCC announced a consent decree with Sinclair Broadcast Group where Sinclair agreed to pay $9.495 million to the FCC to settle claims that it negotiated retransmission consent agreements involving stations that it did not own with MVPDs (cable and satellite companies).  Sinclair did not admit any liability – but stated that it…

There are so many legal issues that facing broadcasters that it is sometimes difficult to keep up with them all. This Blog and many other activities that those at my firm engage in are meant to help our clients and other broadcasters keep up to date on all of the many regulatory challenges with which…

The FCC yesterday announced a consent decree with Media General by which Media General agreed to pay a $700,000 “settlement payment” to the US Treasury to settle the investigation of its attempts to enforce the provisions of a Joint Sales Agreement with Schurz Communications.  Media General had tried to enforce the JSA when Schurz tried to terminate that agreement in order to sell its station to Gray Television.  Media General tried to get an injunction from a state court seeking to stop the sale, continue the JSA, and prevent Schurz or Gray from putting the station into the incentive auction.  As we wrote here when the case first arose, the FCC wrote to the court, contending that the injunction would not only violate the conditions placed on the sale by the FCC (that the Schurz station be sold before the Gray deal could close) but, more importantly for the general broadcast community, that the restrictions on the sale of the station, and its participation in the incentive auction, were improper restrictions on the control rights of the licensee.  Essentially, the FCC was saying the licensee’s right to sell the spectrum it had was not one that could be conveyed to a third party.  The FCC even stated its intention to initiate a proceeding to determine whether Media General’s FCC licenses should be revoked.

What we wrote when the case came out, and what we wonder now, is what the FCC considers the degree to which a licensee’s ability to sell its spectrum can be limited by contract or agreement.  Yesterday’s release provides no guidance, as it was simply a settlement agreement.  The consent decree recites what the FCC was initially concerned with, but Media General did not admit any liability, and the consent decree does not reach any conclusion as to the actual basis of the settlement payment.  So it is conceivable that the FCC was actually only worried about the attempts by Media General to require that the station be kept and the JSA stay in place, even though the FCC ordered that it end.  It may not have been a case dealing principally with control at all, but instead one dealing with grandfathered JSAs and whether those JSAs can stay in place after the sale of one of the television stations involved in the arrangement.  Otherwise, if the case was really about putting limits on the degree to which contracts can limit the ability of a licensee to sell its station, that issue could have had much broader implications than the FCC may have intended.
Continue Reading $700,000 to Be Paid By Media General to End Inquiry on its Attempts to Enforce a JSA – What are the Limits on the Enforceability of a Contractual Restriction on an FCC Licensee’s Sale of its Station?

In the last two days, the FCC has asked for public comment on two proposals for foreign ownership of US broadcast stations where that ownership would exceed 25% of the company – a limit that has for decades been seen as the upper end of ownership by foreign nationals.  While the FCC three years ago said that they would consider such ownership on a case by case basis (see our article here), up until this week, the FCC had considered only one case under this new flexible policy – and that was the case of Pandora, where the FCC took over a year to approve their acquisition of a broadcast station – and Pandora didn’t even think that their foreign ownership exceeded the 25% threshold, but they could not prove it because of the difficulty of assessing the citizenship of public companies (see our article here on the filing of the Pandora petition).  Now, the FCC seeks comments on two cases, one where an Australian husband and wife team seek to acquire 100% ownership of companies owning 29 radio and TV stations in Alaska, Arkansas and Texas.  The second involves Univision, which asks for FCC approval for foreign ownership of up to 49% of its stock, as it plans a public offering which would also involve the conversion to stock of warrants held by a Mexican company that already has a stake in the company.

While the FCC last year asked for comments on adopting new processing rules for these kinds of requests – especially those involving public companies – no order has come out of the FCC on that proceeding yet (see our summary here).  Last month, the FCC did adopt some new procedures for the streamlining of the consideration of foreign ownership requests for all services regulated by the FCC, not just broadcasting, but that proceeding did not deal with the substantive issues surrounding foreign ownership, but instead with the process by which the FCC interacts with other government agencies in assessing the national security concerns with foreign ownership of communications properties.  With this background, does the release of these two requests for comment signal any movement from the FCC on foreign ownership issues?
Continue Reading Foreign Ownership of US Broadcast Stations Suddenly the Rage? – FCC Seeks Comments on Two Proposals for Alien Ownership to Exceed 25%, Including One for 100% Australian Ownership