Nexstar/Media General Opposed by Cox, Dish, ACA, CWA, Free Press

Nexstar’s proposed deal to buy Media General would create an overly large broadcaster with too much power in retransmission consent negotiations and disregards FCC rules for joint sales agreements, said petitions against the transaction filed in docket 16-57 by several public interest groups, the American Cable Association, Dish Network, ITTA and Cox Communications. The public interest groups’ petition is framed as a petition to deny the proposed sale. ACA, Dish and ITTA is styled as a petition “to deny or impose conditions” and the Cox filing is a “petition for conditions.”

“This transaction would create a new broadcast ownership conglomerate of unprecedented size and scope,” said Dish, ACA and ITTA in a joint filing. “Nexstar’s proposed acquisition of Media General is manifestly contrary to the public interest,” said a joint filing from the Communications Workers of America, Free Press, Common Cause, Public Knowledge and the New America Foundation’s Open Technology Institute. Nexstar “has not even attempted to meet its affirmative burden of establishing that the public interest benefits outweigh the significant losses to diversity that would result from grant of the applications,” said the filing.

The Media General transaction is "in full compliance with the FCC’s rules regarding ownership of television stations," a Nexstar spokeswoman said via email. "Nexstar and Media General will be submitting their responsive filings (as is our right) in a timely manner."

The Nexstar proposal contains little mention of how the deal would benefit the public interest, the public interest groups said. Though Nexstar said the public would benefit from the increased efficiencies from the sale, “it does not mention a single way in which it will deploy its new scale to improve or expand the diversity of its programming or otherwise share its increased revenues with anyone except its shareholders,” the public interest groups said. Since the transaction will result in numerous new duopolies and cross-ownership situations, it will be “a significant loss of competition and diversity,” the groups said. The increased size of the company would give it “even more leverage than the two companies standing alone have now” to demand higher retrans fees and engage in blackouts “to the detriment of the public interest,” said Dish, ACA and ITTA.

The proposed deal shows a “cavalier disregard” for the FCC joint sales agreement rules, the public interest groups said. The new company would include six “legacy” JSAs that aren’t in compliance with the FCC’s 15 percent attribution rule on such arrangements, and promises to get them into compliance by the current grandfathering deadline, the public interest groups said. The Media Bureau has said such JSAs will be treated as new arrangements, and the bureau’s recent intervention in a Georgia court case involving a JSA between Gray Television and Media General (see 1603140065) demonstrates it's dedicated to that policy, communications attorneys told us. That court fight, Nexstar’s apparent intentions not to unwind the JSAs in the agreement, and recent activity in Congress may be a sign of a concerted effort to oppose the FCC’s JSA policy, Georgetown Law Institute for Public Representation Senior Counselor Andrew Schwartzman told us.

With the JSAs intact, it doesn’t seem likely the bureau would approve the Nexstar transaction, one communications lawyer told us. Though a possible leadership change at the FCC could come relatively soon with the upcoming presidential election, there aren’t many ways Nexstar could stall for time, short of withdrawing the deal and resubmitting it to a new FCC, the attorney said. That could be problematic given the contested way the sale was proposed (see 1601070043), the attorney said.

Nexstar and Media General have a history of causing blackouts to gain leverage in retrans negotiations, said the pay-TV petitioners. Nexstar uses “threats of blackouts -- often timed to exploit multichannel video programming distributor (MVPD) subscribers’ fear of losing access to marquee events like the Super Bowl -- as a brinkmanship tactic to extract increased fees,” said Cox. The new company created by the deal would control a substantial amount of stations in Cox's footprint, said that cable operator. ACA, Dish, ITTA and Cox proposed conditions to limit Nexstar’s leverage in retrans talks and ability to cause blackouts. Cox wants the FCC to require Nexstar to use mediation in retrans disputes, to be prevented from blacking out during mediation, and to prohibit Nexstar from spinning stations off to “sidecar” companies like Mission Broadcasting. ACA, Dish and ITTA want the deal denied. If it's approved, they want an arbitration requirement and a rule that Nexstar can’t have retrans rights on existing Media General retrans agreements set to Nexstar rates until the original deals expire. The public interest groups didn’t request any conditions, only denial.