Wheeler JSA Draft Likely to Pass Mostly Unchanged, Officials Say

A draft order that would make TV joint sales agreements attributable for the purposes of calculating broadcast ownership is likely to be approved by FCC members Monday with few changes from the way it was initially presented by Chairman Tom Wheeler despite intense opposition lobbying efforts by broadcasters, said agency officials and broadcast attorneys in interviews this week. Although last-minute changes are possible and FCC offices are putting forward possible edits, they're unlikely to shift the core of the draft order, said an agency official. The order (CD March 21 p1) would make JSAs where one company is in charge of more than 15 percent of another’s ad sales attributable and give companies two years to unwind such arrangements. If that version of the draft order becomes a rule Monday, broadcasters are likely to go directly to the courts, several broadcast industry observers told us. A court finding that the rule is arbitrary and capricious is “likely,” said an industry official. An NAB spokesman declined comment.

The offices of commissioners Ajit Pai and Mike O'Rielly submitted suggested edits to the draft order Wednesday that would include shifting the proposal to make JSAs attributable to a comment-seeking NPRM, completing the 2010 quadrennial review, and repealing radio/TV and newspaper/TV cross-ownership rules, said FCC officials. The suggested edits also include the establishment of an incubator program to promote diversity, a plan Pai has endorsed several times. As Wheeler originally announced it (CD March 6 p7), the draft order instead seeks comment on the future of cross-ownership rules, and rolls the 2010 quadrennial review into the 2014 proceeding without completing the 2010 version. The Republican edits are unlikely to be incorporated into the order, and when it goes to vote Monday, the Democrat majority is expected to have enough votes to pass the items, said an agency official. Without their changes being incorporated, the Republican commissioners are likely to dissent, said agency officials. A spokeswoman for the Media Bureau, which drafted the order, declined to comment.

Some edits that may make the final version of the order involve the provisions for stations with JSAs to receive waivers, an FCC official said. A spokesman for Commissioner Mignon Clyburn’s office had said she favors clarity and clear deadlines in such waiver rules (CD March 21 p1). Though Wheeler’s office has presented the waiver provision as a way to allow deserving JSAs to survive, many broadcasters don’t view it as a viable solution, said a broadcast attorney. Transactions that require a waiver to succeed are extremely difficult to find financing for, making a waiver system a considerable barrier to entry, the attorney said. A recent NAB proposal to broaden the waiver provision so that it would include many existing JSA arrangements was opposed in recent filings by Free Press.

Broadcaster lobbying against the proposal has been intense in recent weeks, according to filings in FCC docket 09-182 (http://bit.ly/1dRG7jl). LIN, Sinclair and Univision along with Republican legislators have asked the commission to not pass the rule, to grandfather existing arrangements or to link the rule change to a broader reform of broadcast ownership rules. Meanwhile, Wheeler’s draft order has been supported by the Department of Justice (CD Feb 12 p1), multichannel video programming distributors and numerous public interest groups. The draft order has also been linked to a general decline in broadcast stocks (CD March 18 p5).

If the JSAs are made attributable, broadcasters are likely to take the matter straight to court rather than trying to appeal the order to the FCC, broadcast attorneys said. The same commission that approved the order would hear any FCC appeal, and the two-year grace period the order is said to include would motivate broadcasters to act quickly, the attorneys said. Companies would hope to have the appeals process completed before the two-year time limit was up, the attorneys said. Free Press Policy Director Matt Wood said the FCC should not let the threat of court action deter it from tightening JSA rules.

Broadcasters will likely also try to find workarounds to continue their sharing arrangements without using JSAs, said industry attorneys. Those may come through judicious use of the less specific shared service agreements -- which are not targeted by the order -- or through other means, the attorneys said. One possibility is swapping, which depends on the purchasing options many broadcasters in JSAs have with their sidecar companies. Such purchasing options are often transferable, the attorneys said, which would allow an owner of multiple stations in a single market to swap purchase rights with another station owner in a different market in the same situation. Such a swap would allow large broadcasters to receive value for their stations without running afoul of FCC ownership rules, the attorneys said. -- Monty Tayloe (mtayloe-warren-news.com)