Coming Spectrum Auction Cited by Broadcasters Seeking Ownership Deregulation

TV stations need ownership flexibility because the spectrum auction the FCC wants to hold could hurt the industry unless it continues to use multicasting and other arrangements linking separately owned stations within a market, some broadcasters said. Networks and affiliates alike cited last month’s passage of spectrum legislation in saying the agency shouldn’t place new limits on use of multicast channels to transmit signals of two or more network affiliates. But networks and affiliates disagreed on whether the agency should lift a ban on common ownership of more than one top-four rated broadcast network. And nonprofits and station owners of all stripes disagree, in comments on a media ownership rulemaking notice, on whether new media ginned up enough competition to TV to warrant more broadcaster mergers and acquisitions, much as they disagreed in the last quadrennial review.

The FCC must square Chairman Julius Genachowski’s desire to hold a voluntary incentive auctions of TV frequencies to free up spectrum for broadband with the reality that the Internet has created ample competition to broadcasters, some companies said in comments filed in docket 09-182 (http://xrl.us/bmw9vw). The agency also must not limit common ownership to two TV stations in a market because more M&A may help diversity by keeping programming on-air that otherwise would disappear post-auction, some said. Nonprofits that have long opposed broadcaster M&A said the rulemaking goes in the wrong direction by proposing to allow common ownership of radio or TV stations and daily newspapers in the same market and suggesting ending radio-TV cross-ownership rules. Broadcasters and newspaper owners said the 1975 ban on cross-ownership of dailies and stations was long ago made unnecessary because of competition from new media.

A Genachowski statement that incentive auctions will find the right number of stations in each market shows “it simply makes no sense to limit an owner to just two,” CBS said. “The premise that television voices can be eliminated entirely without causing harm cannot be squared with a regulatory regime that restricts ownership of more than two stations in a market with many [stations] based upon a supposed desire to promote diversity.” The spectrum law “provides an additional reason for preserving broadcasters’ flexibility and declining to regulate either network affiliations or cooperative arrangements,” the company said. “If the auction process ultimately diminishes the number of full-power television stations located in a market, dual affiliations involving D-2 [multicast] channels may be necessary to ensure that viewers have access to all of the major television networks.” The “flexibility that cooperative and costsharing agreements provide” will keep content available “that might otherwise be rendered unavailable” when a station seeks to sell spectrum, CBS said.

Affiliates of three of the Big Four said the dual network rule must remain. It’s “an important structural principle that serves similar ends in a complementary fashion to the Commission’s behavioral rules by prohibiting two or more top-four networks from merging,” said the ABC, CBS and NBC affiliate groups. They said it’s “an important reinforcing mechanism for maintaining a proper balance in the network-affiliate relationship.” For News Corp.’s Fox, “the time has come (indeed, has long since passed) for the Commission to embrace its mandate” under Section 202(h) of the Telecom Act to “dismantle the decades-old structural ownership rules once and for all,” the broadcaster said.

Broadcasters identified a dichotomy between FCC media and wireless policies, viewing the former as stuck in time and the latter evolving. “The FCC has been admirably forward-thinking in addressing the fast-changing world of modern technology, aligning its policies for the Internet and personal wireless communications market segments, among others, toward the future,” Fox said. “Yet the Commission’s regulation of broadcasting remains stuck in a time warp. It is simply unfathomable that the vast changes to the modern media marketplace since the 1996 Act have been met with minuscule changes to the outmoded rules.” Sinclair deems the FCC’s auction plan the most “explicit acknowledgment that there is active, vital and adequate competition in both the television and the overall video marketplace,” the company said. “Strikingly, it is the Commission that is now encouraging television broadcasters to surrender their channels so that they can be used to provide even more spectrum to a competitive medium which the Commission refuses to even recognize as a competitor to television for viewership or advertising dollars -- the broadband industry."

The FCC’s report on media’s future and other studies show new media didn’t supplant broadcasters and papers in local news, nonprofits said. But Sinclair said “we live in the world of YouTube, Facebook, Twitter, Netflix, blogging, MySpace, Hulu, BitTorrent, TV Everywhere, TiVo, 24/7 cable news and the overall explosion of video competition” online. Online and offline, local news sources are the same, Free Press said. “While new media technologies may offer the promise of supplemental news services, they have not come close to replacing the local news gathering and information programming of broadcast television, radio, and newspapers.” The rulemaking is off to a “bad start” because it doesn’t address the 3rd U.S. Circuit Court of Appeals remand of an eligible entity definition from the last quadrennial review, Free Press and others said. Saying the next review will tackle the subject “disregarded the court’s instruction,” Free Press said of the rulemaking.

Seven other nonprofits floated a seven-point test to see whether a station in a joint arrangement with another in the same market should attribute the deal under FCC ownership rules, which often would bar common ownership. If the broadcaster providing services to another station under a shared service arrangement (SSA) or other deals provided most local news to the other station, if the outlets share managers, if they don’t keep different offices or if other criteria were met, the combination would be attributable under the proposal from the Communications Workers of America, Common Cause, National Organization for Women Foundation, United Church of Christ and others. The Diversity and Competition Supporters group of 50 other organizations said “the diminished state of print journalism has reduced the amount of original content needed by growing (and increasingly diverse) online media,” so they don’t oppose relaxing cross-ownership rules. The FCC shouldn’t OK more TV-station duopolies because the arrangements have hurt minority ownership, said the Minority Media and Telecom Council, National Association of Black Owned Broadcasters, National Urban League, Rainbow PUSH Coalition and others.

For some broadcasters, the spectrum legislation made clear Congress wanted the FCC to keep letting one network affiliate multicast another and other sharing arrangements. “Any change to the Commission’s attribution rules could undermine Congress’ clear intent in the spectrum auction process to foster cooperative channel sharing and other similar arrangements between stations,” said Belo Corp. An auction means there’s “further justification for regulatory forbearance,” said Gray TV. “Following the auction, there will presumably be fewer voices in many markets. The stations remaining will need the flexibility provided by cooperative and cost-sharing agreements to meet the public’s demand for content that could otherwise be lost.” The auction means “there will be fewer television stations available to provide local programming in some markets,” Nexstar said.

Many multichannel video programming distributors asked the FCC to use the proceeding to force SSAs to be attributed and to bar separately owned stations from jointly negotiating retransmission consent deals with MVPDs. “The Commission should recognize that any such agreement creates a cognizable interest,” DirecTV said. Mediacom and Suddenlink want the agency to “close the gaps in its current rules that allow duopolies to be created,” they said. Such deals shouldn’t be grandfathered, the American Cable Association said. Broadcasters defended such deals. Local service accords have led to more news production, and MVPDs ask the commission to “contort its ownership rules” to address retrans, which is “absurd,” said a group of 13 station owners. “The Commission opened a separate docket considering retrans.” NAB noted the benefits of common ownership have been “well documented.”