The Federal Communications Commission (Commission or FCC) and Congress have recently taken, or have proposed to take, a series of actions that together have the potential to reshape the media landscape. Below, we explain each of these actions and the effect they are likely to have on the media industry.
First, on April 21, the FCC reinstated what is known as the “UHF discount.” The UHF discount enables more consolidated ownership of TV stations by allowing media companies to count only half of the coverage area of their UHF stations in evaluating compliance with the statutory 39% national audience reach cap. Last year, under the leadership of Chairman Wheeler, the FCC eliminated this UHF discount, finding that it was no longer needed to mitigate the competitive disadvantages that UHF stations experienced in comparison to VHF stations during the analog era, when the technical capabilities of UHF stations were inferior to VHF for broadcasting purposes. The impact of the decision was to further limit the number of TV stations one entity could own. Under the leadership of Chairman Pai, the FCC reconsidered and reversed this decision, concluding that the agency had acted arbitrarily and capriciously in eliminating the discount without even considering whether to change the national audience reach cap. In doing so, the Commission stated that it would “launch a comprehensive rulemaking proceeding later this year to determine whether to retain [the UHF discount] and/or modify the national cap.”
Free Press and other groups have filed a petition for review of the Reconsideration Order with the DC Circuit, and sought an emergency stay of the decision pending judicial review. On June 1, the FCC filed a brief opposing the stay request, in which it argues that petitioners are unlikely to succeed on the merits of their challenge, because the FCC reasonably found in the Reconsideration Order that it was arbitrary and capricious for the agency to have eliminated the UHF discount without even considering whether to also modify the national ownership cap. The FCC further contends that petitioners have not demonstrated irreparable harm because petitioners tie their injury to transactions (e.g., SinclairTribune) that the FCC has not yet approved and because, in any case, petitioners retain the full range of remedies in the event the FCC in fact approves any such transactions. Sinclair Broadcast Group also filed an opposition to the stay request, noting, among other things, that a stay could harm pending transactions between broadcasters by forcing premature divestitures. The new rules were scheduled to go into effect on June 5th. However, on June 1st, the DC Circuit issued a temporary, administrative stay of the UHF discount’s reinstatement to allow additional time to consider the parties' arguments for and against staying the FCC’s decision while the appeal is pending.
Second, on May 3, Congress passed an appropriations bill that preserved the right of TV stations to enter joint sales agreements (JSAs)—i.e., agreements that allow a party to acquire some level of operational and/or financial control over a TV station’s advertising without acquiring an ownership interest. Under Chairman Wheeler, the FCC had attempted to reform and rein in the use of such agreements by, among other things, requiring review and approval of JSAs as part of the Commission’s TV license transfer process. Specifically, the appropriations bill, which was signed into law by President Trump, includes a provision prohibiting the FCC from requiring the termination or modification of JSAs as a condition of the transfer of a station license. The law further requires the FCC to, at the request of the transferee or assignee, “eliminate any such condition that was imposed after March 31, 2014, and permit the licensees of the stations whose advertising was jointly sold pursuant to such agreement to enter into a new joint sales agreement on substantially similar terms and conditions as the prior agreement.” The change follows on the heels of the Media Bureau’s announcement that it was rescinding its March 2014 JSA review guidance, and may bolster Chairman Pai’s efforts to rescind the JSA attribution rule, as well.
Third, on May 18, the Commission initiated a review of its rules applicable to media entities, including television and radio broadcasters, cable operators and satellite television providers. The stated objective of the review is “to eliminate or modify regulations that are outdated, unnecessary or unduly burdensome,” and the Commission has sought comment from the public as to what rules should be modified or repealed as part of the review. Included in the Commission’s review will be its rules governing broadcast licenses generally (Part 1); radio frequency devices (Part 15); construction, marking and lighting of antenna structures (Part 17); satellite communications (Part 25); radio broadcast services (Part 73); experimental radio, auxiliary, special broadcast and other distributional services (Part 74); and multichannel video and cable television service (Part 76). Excluded are the Commission’s media ownership rules, which the Commission is already required to review every four years, and the Commission’s video accessibility rules, which only recently went into effect. According to the Commission’s Public Notice announcing the review, “[s]ubmissions should identify with specificity the rule or rules that the commenting party believes should be modified or repealed, and explain why and how the rule or rules should be modified or repealed.” Comments are due on July 5 and Reply Comments on August 17.
In the near term, these actions are likely to pave the way for greater media consolidation without violating the Commission’s media ownership rules. Indeed, within a few weeks of the Commission’s reinstatement of the UHF discount, Sinclair Broadcast Group announced that it had reached a $3.8 billion deal to buy the Tribune Media Company.
The long-term impact of these actions on the media industry remains to be seen. Proponents of the measures see them as removing, or having the potential to remove, burdensome and often outdated regulations that stifle competition, innovation and investment. Opponents, on the other hand, fear that the actions will lead to a new era of media consolidation and the elimination of rules designed to enhance viewpoint diversity. Regardless of the consequences of the Commission’s actions, however, the media landscape is likely to look different in a few years than it does today.