Television-station owners including Sinclair Broadcast Group Inc. couldn’t control multiple outlets in small markets and would lose some power to negotiate fees with cable providers under changes set for a vote March 31 by U.S. regulators.
Tom Wheeler, Federal Communications Commission chairman, also will suggest retaining the ban on a company owning a daily newspaper and TV station in the same local market, said an agency official who described the proposal on condition of anonymity because the matter hasn’t been made public.
The proposal to roll back shared-service relationships between local TV stations that some public interest groups call an evasion of U.S. ownership limits needs to win a vote at the five-member commission, where Wheeler leads a Democratic majority.
The proposal inserts the FCC into a long-running battle over whether bigger media companies serve or run roughshod over communities’ needs for news and information from diverse sources, and whether rule changes are needed to protect consumers from the escalating cost of cable-TV service.
Under the proposed rule, leading stations in a market couldn’t join together to negotiate with cable providers. The practice has become more common and led to higher cable bills, the FCC official said.
The FCC would assume a TV station that provides 15 percent or more of the advertising for another station in the same market controls that other property, according to the official and a fact sheet the agency distributed.
The commission would consider those stations commonly owned, meaning the relationship would violate rules that forbid ownership of multiple stations in a market.
Companies would have two years to come into compliance, which they could do by selling a station or altering or abandoning the sharing arrangement. The FCC would consider waivers, the official said.
The changes could force station sales upon companies such as Sinclair - one of the largest U.S. television-station owners - Lin Media LLC and Nexstar Broadcasting Group Inc.
Sinclair gets about 20 percent of its revenue from sharing arrangements, David Amy, the company’s chief financial officer, said on an earnings conference call Feb. 12.
About 70 percent of Irving, Texas-based Nexstar’s revenue comes from markets where the company derives an economic benefit from more than one station, Chief Executive Off icer Perry Sook said on a Feb. 26 earnings call. Nexstar owns or is involved with 74 stations reaching 44 markets, according to its website.
It’s not fair to require companies to unwind sharing arrangements previously approved by the agency, Rebecca Hanson, a Sinclair senior vice president, said at a Feb. 24 meeting with FCC staff, according to a filing. Barry Faber, Sinclair’s general counsel, didn’t return a telephone call.
In the arrangements Wheeler is targeting, a broadcaster owns one station and sells advertising for another in the same city.
Defenders say small-market stations would go out of business without such arrangements.
The FCC in 2004 said it allowed the arrangements known as sidecars because control isn’t as complete as ownership.
U.S. Assistant Attorney General William Baer, in a Feb. 20 filing to the FCC, said it’s appropriate to treat stations participating in sharing agreements as being under common ownership. Even where sharing doesn’t cross “bright-line rules,” the FCC should scrutinize arrangements on a case-by-case basis, said Baer, President Barack Obama’s top antitrust official.
At times the arrangements are used “to patently circumvent the ownership rules” the FCC puts in place to prevent a corporation from dominating local broadcasting, Democratic FCC Commissioner Mignon Clyburn said in a Feb. 25 speech.
Clyburn said the issue leaves her in “a quandary” because the arrangements can help pay for news and other local programming in small and medium markets.
Sidecars help new entrants to the broadcast industry and allow stations to serve the local community better, Ajit Pai, a Republican FCC member, said in a blog posting Thursday.
Uncertainty caused by Wheeler’s proposal has caused a decline of 25 percent to 30 percent in the share values of pure-play TV companies active in sharing arrangements in small and midsized markets, Sook told FCC officials Feb. 24, according to a filing.
Sinclair owns, operates or provides services to 149 stations in 71 markets.
It provides nonprogramming services such as sales and management to 20 stations in 17 markets and would create shared-services arrangements in three more markets through an acquisition of stations owned by the Allbritton family.
That deal is awaiting FCC approval.
The Justice Department’s filing provides “valuable political and substantive support for any restrictions the FCC wants to impose on sidecars,” Paul Gallant, a Washington-based managing director for Guggenheim Securities, said in a Feb. 21 note.
Gallant said it’s not clear how many stations would qualify, “but our working assumption is that a majority of sidecars exist because FCC rules would not permit common ownership of the stations (and thus a majority of sidecars would need to be eliminated),” Gallant said in the note.
Business, Pages 29 on 03/08/2014