FCC Makes JSAs Attributable and Kicks Off 2014 Quadrennial Review; Pai and O'Rielly Dissent

The FCC made joint sales agreements attributable for ownership calculations and kicked off the 2014 ownership quadrennial review with a 3-2 vote split along party lines, at Monday’s open meeting. Commissioners Ajit Pai and Mike O'Rielly voted against what Pai called “a thumb in the eye of Congress.” As expected (CD March 28 p1), the new JSA rule gives existing arrangements where one company accounts for more than 15 percent of another’s sold advertising time two years to be unwound and includes an expedited waiver process, the Media Bureau said. The FNPRM that begins the new ownership proceeding incorporates the 2010 quadrennial review, seeks comment on changes to cross-ownership rules and proposes rules for requiring disclosure of shared service agreements. Commissioner Mignon Clyburn said JSAs had been used to skirt the commission’s rules, though the ownership rule change is “admittedly not perfect.” Chairman Tom Wheeler praised it for closing “an end run around the rules” that allowed large companies to amass too much market power.

Clyburn highlighted the JSA rule’s waiver provisions, which include allowances for JSAs involving educational institutions, as being in the public interest or that promote the sidecar company eventually taking full control of its sales, and a 90-day waiver shot clock. That should prevent companies from ending up in “FCC purgatory,” she said. Clyburn was prepared to walk away from the vote if her requests for clarity in the waiver provision were not met, an eighth-floor official told us. She unsuccessfully pushed for giving companies an unwinding period longer than two years, the official told us.

The waiver process will be delegated to the bureau, which will have discretion over which companies are awarded waivers, Wheeler said. JSA situations that don’t show signs of “effective influence” by the brokering company or financial entanglements should move through the waiver process quickly, said bureau Chief Bill Lake. The bureau will be “very careful” in examining JSAs involving a “myriad of arrangements,” Lake said. Such arrangements would need to show necessity and public interest benefits to pass through the waiver process, he said. The length of such waivers would also be decided on a case-by-case basis by the bureau, Lake told us.

Putting the decision in the hands of the bureau may also be a way to control appeals of JSA waiver decisions, a broadcast attorney told us. In issues such as program carriage, applications for commission review of Media Bureau decisions have been allowed to sit for years without any action being taken, and the existence of an open appeal at the commission can make it hard to take such a matter to the courts, the attorney said.

The waiver provision is “a fig leaf” that won’t “provide broadcasters with any certainty,” said Pai. He and O'Rielly condemned the vote for allowing the wielding of too much power under delegated authority. The new JSA rule “puts all stations at the mercy of arbitrary and capricious decision making,” O'Rielly said. Pai said he hoped for court intervention in both the JSA and ownership proceedings -- the commission had abdicated its responsibilities by not finishing the 2010 quadrennial review, he said. The U.S. Court of Appeals for the District of Columbia Circuit “would now be justified in ordering the commission to remove the newspaper-broadcast cross-ownership rule from our books,” Pai said. “Today’s lack of action, in my judgment, is an unlawful effort to evade court review. The administrative process has gone off the rails, and the time has come for judicial intervention."

The 2014 quadrennial review item tentatively concludes that cross-ownership restrictions on TV and newspapers “should remain” and seeks comment on possible modifications, and on eliminating radio/TV and radio/TV cross ownership in favor of local TV and local radio rules. It also proposes retaining the dual network rule, the local radio rule and modifying the way local TV markets are defined to reflect the digital transition, the bureau said. Pai decried the commission’s “dereliction of duty’ in not issuing a decision on the 2010 quadrennial review. “Our regulations should keep pace with the fast-changing media marketplace, but they have not, are not, and after today, will not,” he said.

The FCC decision is “a step backwards in bringing media policy in line with 21st century market realities,” said Sinclair Executive Vice President Rebecca Hanson, in an email. “For a decade, Republican and Democratically-controlled FCCs have approved JSAs,” NAB said in a news release (http://bit.ly/1gUZtKk). “That model is now declared illegal, based on the arguments of pay TV companies whose collaborative interconnect advertising sales practices make JSAs seem pale by comparison.” Senate Commerce Committee Chairman Jay Rockefeller, D-W.Va., praised the commission’s “positive step forward.” Public interest attorney Andrew Schwartzman praised “the willingness of the Commission majority to do the right thing in the face of intense political pressure,” lamenting that disclosure rules on shared service agreements hadn’t been included in the item. “While today’s vote focuses only on Joint Sales Agreements, it signals that ... Wheeler is willing to break with the past and stop broadcasters from using shell companies to skirt the agency’s ownership limits,” said Free Press CEO Craig Aaron.-- Monty Tayloe (mtayloe@warren-news.com)