Multiple Ownership Rules

With the FCC closed because of the Federal government shutdown so no new decisions will be coming out for the time being, we get to look at some of the issues and decisions that we didn’t get a chance to write about when they first came out.  One of the cases we overlooked raised the question of whether the FCC cares about a broadcaster’s market share when it goes to buy a new radio station, or will it simply apply the numerical station ownership limits set out in the rules? Based on a decision released last month (note that the link to the decision may not work during the shutdown), the rules which set numerical limits on how many radio stations one party can own in a market are pretty much decisive in the FCC’s determination of whether or not a party can buy a station in a market. Even if the advertising or audience market share of the buyer is very high, the fact that there are other stations in a market providing competitive opportunities makes questions of audience share essentially irrelevant. The case also addresses two other interesting aspects of the FCC’s analysis of radio holdings in a market – which stations are included in the station count for a market, and when a station being silent means that it will no longer be counted as a competitive voice in the market.

The case involved the purchase of a radio station in the Roanoke-Lynchburg, Virginia market. The Buyer already owned four FM stations in the market, and was buying a fifth. Another owner contended that the ownership of those stations would give the Buyer a share of the advertising market of more than 50%, which the petitioner claimed would impede competition and make it difficult for minorities and other new entrants to buy stations in the market. The Media Bureau rejected the arguments, finding that, as there are at least 45 stations in the market, ownership of 5 FM stations in the market is permissible under the rules established back in 1996, and revised in 2003. The numerical limits were found by the Media Bureau to represent the FCC’s judgment of what represented a sufficient limit on one party’s ownership of stations in a market. While a company that owns the maximum number of stations in a market may have a very large share of the advertising market, the decision concluded that the Commission, when adopting the numerical caps, made the determination that the numerical caps were more reliable than a market share analysis.  Even when an owner owns the maximum number of stations allowed under the rules, there are numerous other competitive outlets in the market.  As market shares can change over time, the numerical limits were found to be determinative. So the Media Bureau would not upset that policy decision in a case like this.


Continue Reading Challenge to Radio Station Purchase Helps Define FCC Radio Ownership Limits in Arbitron Markets

The FCC yesterday proposed abolishing the UHF discount – which counts the audience reached by a UHF station as only one-half when computing whether the owner is approaching the 39% cap on nationwide audience that can be reached by one owner. While many FCC rulemaking proposals are very subtle, with many nuances that are important in the debate about the final rules to be adopted, this proposal is actually straightforward – should the discount be abolished or not.  Following the digital transition, which saw many migrate from VHF to UHF, most television stations are now UHF (meaning that they operate on TV channels 14-51). While many stations may continue to identify themselves by their old VHF channel numbers, the vast majority now really operate on UHF channels because of UHF’s technical superiority in a digital world.  Digital allows these stations to identify themselves with a “virtual” number – looking to consumers like they are still on channels 2, 4, 7, 9, etc. – when they are really operating on a UHF channel.  But the actual channel of operation is used for claiming the UHF discount and assessing compliance with the 39% audience cap. In yesterday’s Notice of Proposed Rulemaking, the Commission proposed doing away with that discount, as the impediment that stations used to suffer from being on a UHF channel (worse indoor reception, a more limited coverage area and significantly higher electricity costs) are no longer as severe, and being on UHF actually has become an advantage (as UHF, in a digital world, is less susceptible to interference and needs a smaller antenna, thus being better for mobile operations). While the Commission’s proposal is straightforward, and the logic seems simple, the proposal is not without issues.

These issues were identified by Commissioner Pai who yesterday dissented from the proposal for the abolition of the rule. The Commissioner noted that several television groups are already above the cap if the discount is abolished (including Univision), and several others are nearing the 39% cap. He suggested that, if the discount is to be abolished, the Commission should consider lifting the cap above 39% to reflect today’s competitive television marketplace realities, and to not effectively raise the cap on how many stations can be owned. He also suggested that diversity should be part of the consideration, given the impact on Univision. Perhaps the biggest area of debate that he raised is the question of when any rule change would take effect.


Continue Reading FCC Starts Proceeding to Consider Abolishing the UHF Discount – Effectively Lowering TV Ownership Limits?

On September 26, the FCC will hold its next open meeting and, according to a Public Notice released Friday, will consider several issues important to different parts of the broadcast industry. For television broadcasters, there will be concerns about the proposal to do away with the “UHF discount,” which gives UHF stations a 50% discount in determining the number of households they reach when determining an owner’s compliance with the limitation that prevents any one company from owning television stations that reach more than 39% of the US television households. For radio, the FCC will be getting a report on the preparations for the upcoming LPFM window, allowing applications nationwide for new LPFM stations. That window, as we have written before, is to open from October 15-29. Finally, the FCC will be looking at modifications to its Antenna Structure Registration process – which could be important to all tower owners.

As the UHF discount issue is to be considered by the adoption of a Notice of Proposed Rulemaking, it is no doubt the more controversial of the broadcast issues to be discussed at the meeting. The discount was adopted by the FCC in analog days, when UHF broadcasters faced significant disadvantages. Analog UHF signals (TV channels 14 and above) simply did not travel as far as VHF signals, were less likely to penetrate buildings (especially as many over-the-air antennas were designed for VHF reception), and were far more costly than VHF operations (as VHF transmitters operated at far lower power levels than do transmitters for UHF operations). But, in the digital world, broadcasters found that the world had been turned on its end – with UHF signals being far preferable, as the VHF digital signal was found to be far more susceptible to interference, especially in urban areas. In the less forgiving digital environment (where a signal is either there or not, instead of the degraded "snowy" picture that you could get in the analog world), the UHF signal is generally preferred – despite the higher power costs and the fact that the signals still don’t travel as far.


Continue Reading FCC Meeting to Consider UHF Discount on National TV Multiple Ownership Rules, LPFM Window, and Tower Registration Issues

Another month is upon us, along with all of the FCC regulatory obligations that accompany it. August brings a host of license renewal obligations, along with EEO public file obligations in a number of states, as well as noncommercial Biennial Ownership Report filings in several states. We also expect that the FCC will notify stations of the date for the payment of their regulatory fees (which will either be due late this month or early next). As we reported yesterday, the filing of long-form translator applications for over 1000 applicants from the 2003 FM translator window also comes at the end of the month. There are comments due in a number of FCC proceedings. We’ll talk about some of those issues below. For TV broadcasters, we also suggest that you review our article that recently ran in TV NewsCheck, updating TV broadcasters on issues of relevance to them not only this month, but providing a description of the full gamut of issues facing TV broadcasters. We prepare this update for TV NewsCheck quarterly.

Today brings the deadline for the filing of license renewal applications for radio stations in California and for TV stations in Illinois and WisconsinStations in these states, and in North and South Carolina also have EEO public inspection file reports that should be placed in their public inspection files no later than today. Noncommercial TV stations in Illinois and Wisconsin also need to file Biennial Ownership Reports today, and noncommercial radio stations in California, North Carolina, and South Carolina should also file their Biennial Ownership Reports by today.


Continue Reading August FCC Regulatory Deadlines for Broadcasters – Including Renewals; EEO; Comments on Indecency, the Online Public File and Cross-Ownership

July has many FCC obligations for broadcasters, both regularly scheduled and unique to 2013. There are the normal obligations, like the Quarterly Issues Programs lists, that need to be in the public file of all broadcast stations, radio and TV, commercial and noncommercial, by July 10. Quarterly Children’s television reports are also due to

It looks like the FCC’s long-delayed multiple ownership proceeding won’t be decided this summer. The FCC has asked for public comment on the report submitted by the Minority Media and Telecommunications Council ("MMTC") addressing the likely impact on minority ownership of broadcast stations of allowing more media cross-ownership. Moths ago, the FCC delayed the resolution of the proceeding to allow for the submission of this report (see our article here). The issue of minority ownership, and the impact of any ownership deregulation has been one of the big obstacles to any decision in this proceeding. Relaxation of the newspaper/broadcast cross-ownership prohibitions have been proposed, and one might think that the preservation of newspapers might be of paramount importance to the FCC.  In fact, the Commission has been concerned about complaints from certain “public interest” groups who fear the impact that such combinations would have on the potential for more minority ownership. So this report was commissioned by MMTC, an organization dedicated to promoting minority ownership in all media. Now that the report has been submitted, the FCC needs to wait for public comment on its findings before any decisions in the ownership proceeding are made. Comments on the report are due on July 22, and Replies can be filed through August 6.

The FCC has already delayed the ownership proceeding at least once while taking comments on minority ownership issues. See our article from December, when the FCC asked for comments on the impact of cross-ownership on the prospects for minority ownership. The call for the December comments was initiated by the release of an FCC summary of minority ownership gleaned from FCC ownership report filings. In filings made in response to the FCC’s December comment deadline, some parties suggested that the findings of the FCC data revealed that minority ownership prospects were bleak, and that cross-ownership would make them bleaker, while others suggested just the opposite. Others contended that the two questions really were not related – that there were other reasons, like the lack of access to capital, that really explained the difficulties that all potential new media entrants have.  The release of the new study is quite likely to prompt a similar response, with comments likely to present a spectrum of opinions. 


Continue Reading FCC Seeks More Comments on the Effect of Newspaper-Broadcast Cross Ownership on Minority Ownership of Broadcast Stations

Two weeks ago, comments were filed in the Commission’s proceeding examining whether to adopt a more relaxed view of the foreign ownership provisions of the Communications Act (see our article about that proceeding here). While the Communications Act limits foreign ownership in communications licensees to 20% (or 25% of a licensee holding company), the Act also allows the Commission to allow greater foreign ownership if it would not adversely affect the public interest. In areas other than broadcasting, the Commission has routinely allowed ownership of more than 25% of a communications licensee, but the limit has been strictly enforced in the broadcasting world. Many of the comments filed in response to the Commission’s request made exactly that point – that in a multimedia world, why should a wireless company or a cable programmer be allowed to be foreign owned, while a competing broadcaster can’t have foreign investors holding more than 25% of its equity?  In what is perhaps a telling indication of where the FCC is going, the statements of three FCC Commissioners, in connection with a recent FCC decision to further streamline the approval process for alien ownership in excess of the 25% limitations in FCC-regulated areas other than broadcasting, suggested that the relaxation of the limits should also be extended to broadcasting.

Two weeks ago, in relaxing rules on the investment of non-US companies and individuals in common carrier licensees and those in certain other non-broadcast services, the Commission vastly simplified the reporting and approval process for alien ownership in excess of the statutory limits. The Commission already had in place a policy of reviewing potential foreign ownership in non-broadcast companies where, through a petition for declaratory ruling, a company could seek FCC approval for ownership, and even control, of these entities by non-US citizens or companies. In the recent proceeding, the FCC made such investment even easier, in very general terms easing certain reporting requirements for alien ownership where the interest of a specific alien investor was less than 5% (10 % in some instances), and also allowing an alien individual or group, once approved, to increase ownership without further approval (if the interest is a minority ownership interest, to 49%, and if it was controlling, to 100%), as long as the interest in possibly doing so is revealed in the original request for approval. Allowing investments by affiliates of the foreign owner, and allowing the company that is approved to seek additional licenses, all without additional approvals, was also allowed in many instances. All these changes were allowed subject to the FCC’s right to reexamine any holdings if specific issues were raised.  But what was most interesting to those in the broadcasting industry were the statements of three of the Commissioners praising these relaxations, and the hopes that the examination of applying these reforms in the broadcast world would move forward quickly.


Continue Reading A Change in the FCC’s Broadcast Foreign Ownership Rules In the Near Future?

We wrote in December about the delays in the FCC’s proceeding to consider whether changes should be made to its multiple ownership rules. The December delays were to allow for public comment on ownership information obtained from broadcasters in their Form 323 Ownership Reports. Specifically, the public was asked to comment on the what the ownership information revealed about ownership of broadcast properties by members of minority groups, and whether proposed reforms in the ownership rules would affect minority ownership.  Comments from certain public interest groups suggested that any relaxation of the newspaper-broadcast cross-ownership rules or the rules limiting radio-TV cross-ownership would further adversely affect minority ownership, a position that seemingly made certain of the FCC Commissioners reluctant to approve any changes in the ownership rules. This week, the Commission announced another delay in any resolution of this proceeding as the MMTC (the Minority Media and Telecommunications Council) has commissioned a study of the impact of any further consolidation in media ownership on minority broadcast operators.

The study, to be conducted by the broadcast financial analysis firm BIA Kelsey, is supposed to be conducted quickly – in the next 60 days. It is also supposed to be peer reviewed to analyze its methodology and conclusions, and will probably be subject to further public comment at the FCC once it is filed in the record of the multiple ownership proceeding. So this means that there will be likely no decision as to changes in the ownership rules for at least 3 or 4 months – and perhaps longer.


Continue Reading Further Delay in Multiple Ownership Proceeding as the FCC Awaits New Study on the Impact on Minority Ownership of Any Relaxation of the Cross-Interest Rules

The limits on the ownership of broadcast stations by those who are not US citizens is being re-examined by the FCC according to a recent Public Notice. Under Section 310(b)(4) of the Communications Act, foreign ownership of a broadcast licensee is limited to 20% of the company’s stock, or no more than 25% of a parent company of the licensee. Over the years, there has been a significant body of precedent developed about applying these caps to other business organizations, including LLCs and Limited Partnerships.  But the caps remain in place, limiting foreign ownership.  While the statute gives the FCC discretion to allow greater amounts of "alien ownership", the FCC has not exercised that discretion for broadcast companies (though, for non-broadcast licenses, the FCC has many times found greater percentages of foreign ownership to be permissible). A coalition of broadcast groups last year filed a request asking that the FCC exercise the discretion provided under the Act, and consider on a case-by-case basis whether alien ownership combinations in excess of 25% should be permitted. The Commission has now asked for public comment on that proposal. Comments are due on April 15, with replies due on April 30.

Why is this important? Many broadcasters have pushed for revisions in the alien ownership limits for decades – seeing foreign investors as a potential source of capital to allow new companies to buy stations or existing companies to expand their holdings. Many minority advocacy groups, too, have thought that relaxation of the alien ownership rules would provide more sources of capital for minority owners to get into the broadcast game. Spanish language broadcasters, in particular, see broadcasters and other investors from other Spanish-speaking countries as being likely sources of new investors in broadcast companies or new buyers for US broadcast stations. 


Continue Reading FCC To Consider Allowing Alien Ownership of More Than 25% of Broadcast Licensees – Comments Due April 15

One of those stories on which I’ve been meaning to comment was the story from the week before last where trade press reports summarized a legal action being brought against a television station in Cleveland for having improperly used Arbitron information in connection with its efforts to sell local advertising time on Pandora, the Internet radio company. I don’t want to write about the merits of that proceeding (though it does highlight that stations need to avoid using Arbitron information without permission, as the company is aggressive in protecting what it perceives to be its intellectual property rights), but instead to ask a broader question about what such cross-selling indicates for the FCC’s ongoing analysis of the current media markets in connection with its review of the multiple ownership rules. The cross-selling between a traditional media company and a company like Pandora, which claims radio station-like ratings in many radio markets, or with any other new media company delivering audio or video, are outside of the FCC’s ownership prohibitions. Thus, traditional media companies, like the TV station involved in this case, can sell the new media company’s advertising, or theoretically even provide programming to the new media company, without any cross-interest implication. But a combination between a daily newspaper (no matter what its circulation) and a broadcast station is effectively prohibited under the FCC rules – even though the newspaper may have a smaller audience than the new media outlet in some markets.

As services like Pandora grow, claiming audiences for audio entertainment as large as many local radio stations, these companies could enter into agreements for cross-selling with traditional media companies, and could theoretically enter into arrangements for programming as well, with no restrictions short of those potentially imposed by antitrust laws. So a new media company can cross-sell with television stations (or newspapers, though according to an article last week, both Pandora’s partnerships with television stations and newspapers for joint sales are being phased out and replaced with their own sales forces), without any FCC regulation. A service like YouTube, serving up an amazing amount of video content each day, could enter into partnerships with daily newspapers or multiple radio station owners without triggering any of the cross-interest issues raised by a similar agreement with a television station. Any of these large scale Internet audio or video services could even buy radio or television properties without triggering any FCC concern at all. Yet, we are still arguing over whether the cross-ownership of a newspaper and broadcast station should be allowed. 


Continue Reading TV Station Sued by Arbitron for Using Ratings Data to Sell Local Pandora Ads – What Does This Say About the FCC’s Cross-Ownership Rules?