Media Ownership Reconsideration, ATSC 3.0 Drafts, Not Net Neutrality Expected for Vote Nov. 16

A draft order on reconsideration that would eliminate cross-ownership and duopoly rules was circulated to the eighth floor to be voted at the FCC’s Nov. 16 meeting (see 1710250037), as expected, Chairman Ajit Pai told the House Communications Subcommittee during an oversight hearing (see 1710250050) Wednesday. The November meeting is widely expected to include a vote on authorizing ATSC 3.0, industry officials said. FCC action on net neutrality rules isn’t expected until December, agency and industry officials told us.

The media ownership recon order has been expected for months (see 1709110068) and will include eliminating newspaper/broadcast and radio/TV cross-ownership rules and joint sales attribution rules, Pai said Wednesday. The eight-voices test designed to keep broadcasters from owning too many stations in a single market will also be eliminated, and a rule limiting how many top-four network stations can be owned in a single market would be relaxed on a case-by-case basis, Pai said. Relaxing the rules is intended to remove the government’s influence over broadcasters and newsrooms, Pai said. ”I stand on the side of the First Amendment,” he said. Pai recently faced questions about FCC oversight of news content after tweets by President Donald Trump suggesting NBC’s “license” could be pulled over “fake news.” The recon order stems from a petition for reconsideration of the previous FCC’s actions on media ownership filed by NAB.

Pai is “fulfilling a longstanding industry wish list and ignoring how decades of runaway media consolidation have significantly harmed local news and independent voices,” said Free Press President Craig Aaron. Media ownership rules are a “nonsensical regulatory approach” that “harmed the economic underpinning of newspapers, reduced local journalism jobs, and punished free and local broadcasters at the expense of our pay TV and radio competitors,” NAB said. "Outdated regulations preventing investment in one sector of the media market do not make sense, particularly when newspapers compete with countless sources of news and information every day," said News Media Alliance CEO David Chavern. "The news media industry must have economies of scale to compete."

Both the ATSC 3.0 draft order and the media ownership recon order could face party line 3-2 votes, industry officials said. Commissioners Mignon Clyburn and Jessica Rosenworcel are seen as critics of Sinclair buying Tribune, and both showed support Tuesday for a Newsmax CEO commentary linking looser media ownership rules to that deal (see 1710240049). FCC action relaxing media ownership would make it easier for Sinclair/Tribune to be consummated, United Church of Christ Office of Communication policy adviser Cheryl Leanza said in an interview. “Pai is clearly committed to doing the bidding of companies like Sinclair and clearing any obstacles to their voracious expansion,” Aaron said.

The recon order also contains a provision to establish an incubator program to encourage minority and new entrant media ownership, Pai said. That’s a concept that was endorsed by both Pai and Clyburn, and could complicate negotiations over the order. The recon order draft also keeps a rule requiring disclosure of shared service agreements, which was established by the previous FCC.

A recon order on media ownership is nearly guaranteed to face a legal challenge from public interest groups, said numerous industry officials. Prometheus Radio Project and others have an ongoing case in the 3rd U.S. Circuit Court of Appeals against the last media ownership action, but a challenge or request for stay of an FCC recon order would likely be a new proceeding, attorneys said. Since the FCC hasn’t gathered any new information as a basis to change the ownership rules, public interest groups will be able to argue there’s no foundation for an about-face, Leanza said. Media distribution is changing very rapidly, and the FCC will be able to argue the changed market merits different rules, said Fletcher Heald broadcast attorney Peter Tannenwald. Media ownership rules are a “complicated jungle” that skilled lawyers can work around, and regulations should be changed to be more straightforward, he said.

3.0 Order

The ATSC 3.0 draft order is expected to require broadcasters to simulcast ATSC 1.0 signals that are substantially similar but not identical to their 3.0 signal, and isn’t expected to contain provisions barring 3.0 from being a factor in retransmission consent negotiations, industry officials said (see 1710170048).

The American Cable Association is joining American TV Alliance (see 1708100033) and Charter Communications (see 1710230049) urging the FCC to require carriage negotiations of 3.0 streams be held separately from talks about continued carriage of ATSC 1.0 signals. In a docket 16-142 ex parte filing Tuesday, ACA said if the FCC doesn't do so for all MVPDs, it should at least do so for small ones "uniquely susceptible to broadcast coercion" in carriage talks. Alternately, the agency could bar broadcasters from demanding carriage in a format the MVPD doesn't yet carry, ACA said. NAB didn't comment.

Recapping a meeting with Office of Engineering and Technology staff and Media Bureau Chief Michelle Carey, ACA said the FCC should make clear parties can agree to carry 3.0 signals in formats other than those transmitted over the air, including formats compatible with existing cable equipment, so there's no question down-conversion is allowable. ACA urged that the FCC not allow 3.0 flash cuts, or at least only until equipment becomes commercially available that would let MVPDs receive, down-convert and deliver the signals in a viewable format.

NAB criticisms of Verizon's stance on 3.0 (see 1710240072) don't account for the effects of the new standard on MVPD customers, a Verizon spokesman emailed. "Any mention of consumers or the new equipment or higher programming costs that could hit them if the transition to ATSC 3.0 is forced on them prematurely before there's market demand" was "notably absent" from a recent NAB filing attacking the pay-TV company, the spokesman said. "We’re supportive of innovative new technologies, and have no beef with ATSC 3.0."

Other Items

Pai doesn't seem likely to circulate a draft order Thursday to roll back net neutrality regulation under Title II of the Communications Act, an FCC official and industry representatives told us.

"We're not aware of net neutrality being scheduled for November," said a commission official. A December vote seems more likely, said the official. Industry attorneys and consultants agreed. One attorney said the extra time would allow the Office of General Counsel to make the order "as bulletproof as possible."

"My expectation is that the Title II item will be up for a vote in November or December. At least that’s my hope," emailed Randolph May, Free State Foundation president. "The Commission will have had time to write a solid order, and I don’t see much benefit to anyone to letting the proceeding drag into next year. After all, there is still much to accomplish in 2018 in the way of reform other than what the Restoring Internet Freedom order will achieve.”

An item on Lifeline USF is a possibility for the November tentative agenda, some industry representatives said. It's "50-50 we see a draft item released Thursday," said one. Pai is looking to respond to a GAO report criticizing the regulatory oversight of the program (see 1706290037), and a subsequent Senate hearing, said another.

A USF rural healthcare item is another possibility, though very iffy, said an FCC official. There's increasing pressure on the RHC program after it hit a $400 million annual budget cap for the first time, combined with some allegations of fraud, said the official: "I wouldn't be surprised if they kicked off a rulemaking," which could come in November, December or early next year.