FCC Criteria for Top-4 Duopolies Based on Competition, to Be Refined; Among Items for Nov. 16 Vote

The FCC plans Nov. 16 votes on media ownership and ATSC 3.0, as expected, (see 1710250049), and wireless and wireline infrastructure and cable items, Chairman Ajit Pai blogged, although drafts of the items have not yet been issued. Commissioners also will vote, as expected (see 1710100063), on the next phase of the FCC's spectrum frontiers initiative, setting aside high-frequency spectrum for 5G. The order would make available another 1,700 MHz of high-frequency spectrum “for flexible terrestrial wireless use while providing 4 gigahertz for core satellite use,” Pai said. The FCC approved the first order under ex-Chairman Tom Wheeler in July 2016 (see 1607140052).

Also on the agenda are draft items to expedite copper-to-fiber transition and revise the Lifeline USF program, as some saw (see 1710250049). A robocall order on "Do-Not-Originate" requests also is set for a vote. The ATSC 3.0 vote is "whether to allow television broadcasters to use Next Gen TV on a voluntary, market-driven basis," Pai said. Commissioner Brendan Carr meantime has been asked to oversee the wireless infrastructure push (see 1710260038).

Criteria whether to approve a transaction that would allow a broadcaster to own two top-four network stations in a market under proposed media ownership changes will be based on competitiveness of individual markets and will be refined during the upcoming ownership quadrennial review process, senior FCC officials said during a call with reporters, speaking on condition they not be identified or quoted verbatim. That review process is unlikely to start in early 2018, the officials said, though they said the agency will begin a proceeding examining the national ownership cap by this year. Since a national ownership cap item wasn't listed among tentative agenda items for the November meeting, broadcast attorneys believe it’s likely planned for the December meeting. Some also expect a vote then on net neutrality deregulation.

Circulation to the eighth floor of some items Wednesday was delayed by a House oversight hearing where the media ownership order was announced (see 1710250050), and commissioners asked to have 24 hours to read the items before they are released, an FCC spokesman said. The media ownership item is confined to items raised in petitions for reconsideration filed by NAB, Nexstar and Connoisseur Media, the FCC officials said. Other rule changes, such as to AM/FM subcaps, would have to be part of the quadrennial review process, the officials said.

Sinclair/Tribune

Relaxation of the top-four network rule and elimination of an eight-voices test and joint sales agreement attribution rules would remove obstacles to Sinclair buying Tribune but could add in delays the deal wouldn’t face if stations were divested in some overlapping markets, said broadcast attorneys and public interest officials. A Sinclair/Tribune combine would include top-four network duopolies in possibly nine markets, said deal opponent Free Press.

Though the changes to the ownership rules would now allow those combinations to be approved, the top-four network case-by case process is likely to take more time, broadcast attorneys said. If the proposed media ownership changes are approved, Sinclair/Tribune would still be over the national cap, and would have to wait for the FCC to act if it sought OK without divestitures, a broadcast attorney said.

The senior officials rejected the idea that the media ownership rule changes were related to Sinclair/Tribune. Some weren't swayed. “There’s no question this will remove obstacles to Sinclair,” said Free Press Policy Director Matt Wood in an interview. Said deal opponents the Coalition to Save Local Media: “Rather than weakening existing media consolidation rules, the FCC should seek further answers from Sinclair-Tribune on how they plan to comply with current law and how their proposed mega-merger is in the public interest."

Court Battle?

The FCC expects the media ownership changes to be challenged in court, officials said. Though opponents of the changes have suggested the courts would object to the FCC not having a basis for making the changes, the officials said there's a robust record supporting the proposal, and the 3rd U.S. Circuit Court of Appeals' ruling on the 2014 quadrennial review indicated it might look favorably on elimination of the newspaper cross-ownership rule. The FCC has been hung up before on not having evidence that proposed changes would help viewpoint diversity, Wood of Free Press said. That is one possible reason for the order’s inclusion of a provision on an incubator process for media ownership, broadcast attorneys said. Specifics of that incubator system will be fleshed out through an NPRM accompanying the media ownership order, the FCC officials said.

If approved, the ownership rules would take effect 30 days after Federal Register publication, the officials said. Asked if they might be applied to transactions before that effective date, the FCC officials said no. Once the rules take effect, they're likely to trigger a wave of deals, a broadcast attorney said. In smaller markets, duopolies are very practical, said Wilkinson Barker broadcast attorney David Oxenford in an interview. The cost of running stations in smaller markets is similar to large markets but the revenue is less, so allowing more duopolies would make such operating in markets more viable, he said.

Broadcasters are likely to want more clarity about how the commission will weigh applications involving top-four network duopolies, industry lawyers told us. Officials said the commission would take a hybrid approach that will let it judge the competition in each market where such combinations are sought. The hybrid approach shouldn’t be characterized as a waiver process, the FCC officials said, though a broadcast attorney said it sounds functionally similar to one. DOJ antitrust rules barring a single entity from having control of a market will still apply, the officials said. The commission will establish criteria through the applications it rules on and would likely seek comment on the criteria during the 2018 quadrennial review, the officials said.

“Giving our industry a level playing field ... will allow local broadcasters to compete more effectively in the modern media landscape,” said Nexstar CEO Perry Sook in praise of the draft media ownership order. The proposal doesn’t advance values of the First Amendment as Pai claimed Wednesday, the Benton Foundation said. The FCC should instead be considering policies that increase viewpoint, outlet, source and program diversity, Benton said. Tegna commends "Pai for acknowledging the realities of the modern video and media marketplace, and for planning updates to broadcast ownership rules enacted in the last century before the internet became ubiquitous,” said CEO Dave Lougee.

Telco Infrastructure

Pai said the wired infrastructure item would speed the shift to fiber from legacy copper networks, saying the item contains "common-sense measures that would make it easier for providers to modernize their networks." Incumbent telcos pressed for removing what they see as regulatory barriers to fiber deployment, but some rivals and others objected to removing competitive and consumer safeguards.

The Lifeline item would crack down on waste, fraud and abuse and explore ways to better target program subsidies to low-income consumers, said Pai, noting lawmaker calls for "serious reform." Since service costs are "far lower" in urban areas than in poor, rural areas, he said it's a "waste of money" for recipients in cities such as Tulsa and Reno to receive an enhanced tribal monthly subsidy of $34.25. The commission "will aim to close this loophole and limit the enhanced Tribal subsidy to those actually living on lands in rural areas," he said.

The item would invite input on "how to effectively and efficiently direct Lifeline funds" to where they're most needed, consistent with the law, Pai said. "We’ll give Lifeline recipients better service and more choices -- such as by eliminating a current prohibition on Lifeline broadband beneficiaries changing service providers for an entire year." The Wireline Bureau opened a docket 17-287 on "Bridging the Digital Divide for Low Income Consumers."

"This is a sad day for anyone who believes in truly universal service," said Benton Foundation Executive Director Adrianne Furniss. "Chairman Pai’s proposal turns America’s back on our commitment, enshrined in law, to make sure world-class telecommunications are available and affordable for all," she said. Pai is "gutting the only [USF] program that directly benefits consumers instead of carriers. His changes will mean fewer low-income households are served by fewer competitive options."

Blogging that there's "no valid reason" why a legitimate caller would spoof caller ID so the call seems to come from an invalid or unassigned number, Pai said the November meeting also will include an order letting carriers block calls that come from such numbers. He also said the order would let carriers block calls purporting to come from a phone number when the subscriber of that number makes a "Do-Not-Originate" request that those calls be blocked.

ATSC 3.0

ATSC 3.0 "would be the first standard to marry the advantages of broadcasting and the Internet," Pai blogged. "I want America to be at the forefront of innovation in the broadcast sector, the wireless sector, and every other sector of the communications industry." Release of a draft 3.0 was viewed as imminent.

Pay-TV providers are concerned about how the 3.0 order (see 1710250049 or 1710250052) will treat the expected simulcasting requirement and handle retransmission consent negotiations, said officials from the American TV Alliance on a media call Thursday. “The devil will be in the details,” said Harris Wiltshire attorney Michael Nilsson, who represents ATVA. Without restrictions on simulcasting to show the same programming or serve the same contour area, broadcasters could leave neighborhoods without 1.0, or show such viewers a shopping network while the Super Bowl airs on 3.0, Nilsson said. MVPDs are concerned that without restrictions on how 3.0 plays into retrans negotiations, broadcasters could require MVPDs agree to transmit 3.0 signals before stations are sure how they will use the signal, Nilsson said.

Such restrictions would also protect consumers, said Michael Calabrese, director of the Wireless Future Project at the New America Foundation. The transition could leave consumers without service, and since the standard isn’t backward compatible, they could face costs of upgrading TVs, Calabrese said. The switch also could cost federal, state and local governments, said Ross Marchand of the Taxpayers Protection Alliance. Governments own thousands of sets, and the move would mean they need to upgrade that equipment, Marchand said.

The FCC also opened docket 17-290 on Form 325 data collection, the Media Bureau said in a public notice Thursday, as Pai seeks to modernize media rules. Cable systems annually fill out Form 325, and the industry has criticized it as an unnecessary burden (see 1008170070). "We're going to seek the public's views on whether to eliminate Form 325 -- because much of this information is now available from commercial sources -- or, alternatively, whether to modernize and streamline the form to reflect technological and other changes," wrote Pai.