NAB Pushes to Eliminate AM Subcaps, Relax FM Ones

The FCC should relax radio subcap rules, entirely removing limits on owning AM stations and relaxing limits on FM stations, said NAB in a letter to Media Bureau Chief Michelle Carey Friday. The proposal would allow licensees in the top 75 markets to own up to eight FM stations instead of the current five, and do away with FM subcaps in other markets. AM subcaps would be eliminated nationwide, and licensees in the top 75 markets could increase their limit to 10 FM stations by acting as incubators for new entrant broadcasters. Though some broadcast officials called this a compromise, National Association of Black Owned Broadcasters President Jim Winston said it would be “a drastic relaxation” of ownership rules that would hurt diversity and kill the AM band. The FCC is expected to address subcaps when it tackles the 2018 quadrennial review later this year.

Rules “should account for the increased competition in the audio space,” NAB said. “Broadcasters must be able to create ownership structures that better ensure their financial viability” to continue being able to offer their programming, NAB said.

The proposal would stimulate mergers and acquisitions in radio and attract investors, said Alpha Media CEO Bob Proffitt in an interview. Broadcasters outside the top 75 could consolidate radio in a given market, making them attractive to Wall Street, he said. When a broadcaster owns multiple stations in a market, there's more incentive to offer different formats, Proffitt said. “Numerous empirical studies, including those commissioned by the FCC, have shown that common ownership leads to greater programming diversity,” NAB said.

The plan would lead to smaller radio owners getting “squeezed” by bigger broadcasters and eventually snapped up, Winston said. Broadcasters could be incentivized to dump their AM stations and buy FM, he said. That could snowball until manufacturers no longer make AM equipment and engineers no longer serve AM stations, Winston said. Proffitt disagreed the plan would lead to the death of AM and praised the NAB board for widely vetting the plan. The lack of a cap on AM ownership is good for AM owners, and with the increasing prevalence of cross-band translators operating as FM's, it would still be a viable industry, Proffitt said.

The incubator plan runs counter to the recommendations of the FCC Diversity and Digital Empowerment Committee, said Winston, who represents NABOB there. The diversity committee advised that an FCC incubator program shouldn’t include relaxations of ownership rules as incentives, Winston said. The committee instead said tax credits should be used as incentives, a plan Commissioner Mike O’Rielly objected to (see 1803270041).

The proposal is aimed at finding a way to raise the caps for FM in a way that FCC Chairman Ajit Pai will find acceptable, attorneys said. Pai has been a vocal proponent of AM revitalization, so a subcap proposal that could hurt the band wouldn’t be expected to go far at the agency, lawyers said.