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FCC Eliminates UHF Ownership Discount


The Frog

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Bloomberg Intelligence's Mike Schettenhelm states that the case might begin around the middle of next year.

 

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If the process will last until the middle of next year, wouldn't that be an issue, considering the Sinclair-Tribune deal is estimated to be under government review through the end of this year and receive approval between late this fall and the beginning of 2018? Prior attempts to scuttle the deal by withholding the discount's re-implementation were denied by the courts. If it ends up being ruled upon that the FCC overstepped its bounds in reinstating the discount, and something tells me that it may have (especially considering it did so with only input by media companies), what would happen then?

 

There has never been a M&A deal that was derailed after it was approved by the FCC, DOJ and company shareholders.

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If the process will last until the middle of next year, wouldn't that be an issue, considering the Sinclair-Tribune deal is estimated to be under government review through the end of this year and receive approval between late this fall and the beginning of 2018?

 

That is a very good point. The Allbritton acquisition dragged on long enough that the Outside Date started coming into view. It became clear that in that environment, Allbritton and SBG were increasingly desperate to get a completed deal approved.

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That is a very good point. The Allbritton acquisition dragged on long enough that the Outside Date started coming into view. It became clear that in that environment, Allbritton and SBG were increasingly desperate to get a completed deal approved.

Yes, and the same issues that dragged on that deal are apparent, and more glaring, here. The DOJ process is going to be the biggest issue, as the antitrust division's acting attorney general Makan Delrahim (yes, for those who thought that, Jeff Sessions doesn't run the division the deal has to pass antitrust law muster with) and the Telecommunications and Media Enforcement Section have a big job to undertake reviewing that deal, with so many market conflicts plus the fact that the combined company would still surpass the current national broadcast reach cap even with the discount.

 

Despite the Trump administration being deregulation nation, I wouldn't count out the DOJ review creeping close to the UHF Discount's trial date. Not to mention that one of the FCC's Republican commissioners approved the UHF Discount with reluctance, so it's even debatable whether the merger review will conclude before its estimated end point.

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Yes, and the same issues that dragged on that deal are apparent, and more glaring, here. The DOJ process is going to be the biggest issue, as the antitrust division's acting attorney general Makan Delrahim (yes, for those who thought that, Jeff Sessions doesn't run the division the deal has to pass antitrust law muster with) and the Telecommunications and Media Enforcement Section have a big job to undertake reviewing that deal, with so many market conflicts plus the fact that the combined company would still surpass the current national broadcast reach cap even with the discount.

 

Despite the Trump administration being deregulation nation, I wouldn't count out the DOJ review creeping close to the UHF Discount's trial date. Not to mention that one of the FCC's Republican commissioners approved the UHF Discount with reluctance, so it's even debatable whether the merger review will conclude before its estimated end point.

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And if the merger drags on past 1Q '18 could both Sinclair and Tribune become desperate in getting merger approvals? And if that becomes the case could Sinclair pull the same triggers that they did in getting the Allbritton deal approved in 2014? I wouldn't be surprised if they did

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  • 1 month later...

So the advocacy groups have filed their first arguments for its pending court case to the D.C. circuit yesterday.

Late Monday (Sept. 25), a coalition of nonprofit media consolidation critics including Free Press, Common Cause, the National Hispanic Media Coalition and Prometheus Radio Project, laid out their case for why the decision to reinstate the discount was arbitrary and capricious and not in the public interest.

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The groups, filing their opening brief in the U.S. Court of Appeals for the D.C. Circuit, said the FCC did not present any "valid or factual legal basis" for the discount's return.

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"The best indication that reinstating the discount was not actually intended to maintain the status quo, is the fact that, just two weeks after the Commission issued its decision reinstating the discount, Intervenor Sinclair announced plans to acquire Intervenor Tribune," they told the court. That deal could give Sinclair, already the largest TV station group at slightly under the 39% cap, a reach of over 70% of the country.

 

They said the decision to reinstate the cap is arbitrary and capricious—and thus violates the Administrative Procedure Act—because it is premised on a move—reconsidering the 39% cap—that the FCC does not have the authority to make because the 39% figure was established by Congress.

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If there's one thing the advocacy groups have a valid point on it's this:

 

the FCC does not have the authority to make because the 39% figure was established by Congress.

 

The judge is probably going to examine that part of their claim very carefully before making a ruling on that case

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  • 1 month later...

And the FCC has filed their first arguments to the D.C. Circuit yesterday.

 

The FCC has told a federal court that it was reasonable to reinstate the UHF discount immediately while it considers adjusting the national audience reach cap, that it has the authority to adjust that cap, and that the discount and the cap have to be considered together because the UHF discount is meaningless except in relation to the cap.

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"The FCC’s decision to restore temporarily a settled framework that had previously been in place for three decades rests well within its discretion under the Administrative Procedure Act, other Congressional enactments, and its own rules," the FCC told the court in asking it to reject the various groups' challenges.

 

The FCC argues the cap and discount are inextricably linked, so must be reconsidered together given the potential impact of eliminating the discount without raising the cap to mitigate the impact, and given the increased competition in the marketplace that could justify raising the cap. "[T]he percentage ceiling and the UHF discount reflected a collective policy judgment on the extent to which a single broadcaster could permeate the national market consistent with the public interest," it said.

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The FCC told the court that eliminating the discount amounted to a stricter cap without any showing that that furthered the public interest, which it says made that decision arbitrary and capricious, which violates the Administrative Procedures Act requirement that an agency justify its regulations.

 

So, says the current FCC, "Rather than assume that the public interest is best served by the existing cap, no UHF discount, and grandfathered exemptions, the Commission has now decided to solicit a robust public record on, and consider the need for, the present cap and the discount as a whole in light of current marketplace realities."

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  • 2 weeks later...

Pai has sent a draft to the commissioners on a Notice of Proposed Rulemaking of a review of the National Ownership Cap. The NPRM will be up for a vote in the December 14 FCC meeting.

 

He said back in April (after he rescinded Wheeler's elimination of the UHF loophole) that he would do a review of the cap.

 

But reading the part of this release, shocked the hell out of me.

With respect to legal authority, in 2016 the Commission ‘conclude[d] that [it] has the authority to modify the national audience reach cap, including the authority to revise or eliminate the UHF discount’; we will take a fresh look at this issue as well.

 

FCC does not have the authority to modify the cap themselves (even Commissioner O'Rielly said it). The ones that can do that is both houses of Congress.

 

Should they take it upon themselves to modify the cap, that would be illegal.

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Pai has sent a draft to the commissioners on a Notice of Proposed Rulemaking of a review of the National Ownership Cap.

 

He said back in April (after he rescinded Wheeler's elimination of the UHF loophole) that he would do a review of the cap.

 

But reading the part of this release, shocked the hell out of me.

 

 

FCC does not have the authority to modify the cap themselves (even Commissioner O'Rielly said it). The ones that can do that is both houses of Congress.

Clearly, Pai's twisting O'Rielly's words on purpose. He [O'Rielly] specifically said that he does not believe the FCC has the authority to modify the discount, but did not say anything about the agency having any authority to modify the national ownership cap.

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Pai has sent a draft to the commissioners on a Notice of Proposed Rulemaking of a review of the National Ownership Cap. The NPRM will be up for a vote in the December 14 FCC meeting.

 

He said back in April (after he rescinded Wheeler's elimination of the UHF loophole) that he would do a review of the cap.

 

The fact sheet is up.

 

The NPRM of this broad review of the cap would seek public comment on the following:

  • On the Commission’s authority to modify or eliminate the 39% national audience reach cap and UHF discount.
  • On whether the rule should be modified or eliminated in light of increased video programming options for consumers, technological developments since the current cap became law, or other factors.
  • On whether a 39% national audience reach cap continues to serve the public interest and should be retained, modified, or eliminated.
  • On how compliance with any retained national audience reach cap should be calculated.
  • On whether the UHF discount should be eliminated.
  • On the benefits and costs of a national audience reach cap.
  • And on whether and how the Commission should grandfather any broadcast television station groups if any action in this proceeding causes such groups to no longer be in compliance with any retained national ownership limit.

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I still think that the ownership cap serves in the piublic interest (therefore we shouldn't eliminate the cap) BUT we should modify the ownership cap from 39% to 40%

 

Now, my question becomes does the FCC even have the authority to modify or eliminate the national ownership cap? If so, where in the document does it say that the FCC, not Congress, has the authority to modify or eliminate the cap?

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Pai has sent a draft to the commissioners on a Notice of Proposed Rulemaking of a review of the National Ownership Cap. The NPRM will be up for a vote in the December 14 FCC meeting.

 

He said back in April (after he rescinded Wheeler's elimination of the UHF loophole) that he would do a review of the cap.

 

But reading the part of this release, shocked the hell out of me.

 

 

FCC does not have the authority to modify the cap themselves (even Commissioner O'Rielly said it). The ones that can do that is both houses of Congress.

 

Should they take it upon themselves to modify the cap, that would be illegal.

 

That would end up in a 4-1 vote against Pai's motion? Since the other GOP commissioners have made sane decisions from time to time, while Pai is literally a toady for Sinclair and Trump.

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That would end up in a 4-1 vote against Pai's motion? Since the other GOP commissioners have made sane decisions from time to time, while Pai is literally a toady for Sinclair and Trump.

As well as for the telecom industry, let's not forget.

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Now, my question becomes does the FCC even have the authority to modify or eliminate the national ownership cap? If so, where in the document does it say that the FCC, not Congress, has the authority to modify or eliminate the cap?

 

That's what this document is questioning. Historically, the Commission has modified the cap themselves.

The Commission first imposed national ownership restrictions for television stations in 1941 by limiting the number of stations that could be commonly owned, operated, or controlled to three.3 This limit was eventually broadened to seven stations in 19544 and eventually to 12 stations in 1984.5 In 1985, on reconsideration of its decision to relax the limit from seven to twelve stations, the Commission found that relaxation would serve the public interest and would not contravene the Commission’s diversity and competition goals but nonetheless concluded that an incremental approach in the form of relaxation was preferable to outright elimination of the numerical limit. ... Along with the creation of the 25 percent national audience reach cap in 1985, the Commission also adopted a 50 percent UHF discount to reflect the fact that, in the analog television broadcasting era, UHF signals reached a smaller audience in comparison with VHF signals.

 

Then in 1996, Congress directed the FCC to change the cap and eliminate restrictions, to which they complied in 1998.

In the Telecommunications Act of 1996 (1996 Act), Congress directed the Commission to amend its rules to increase the national audience reach cap from 25 percent to 35 percent and eliminate the restriction on owning more than 12 broadcast television stations nationwide. The Commission reaffirmed the 35 percent cap in its 1998 Biennial Review Order

 

In 2002 the Commission on it's own raised the cap to 45%. In 2004 Congress again directed the commission to change it back to 39%.

Following adoption of the 2002 Biennial Review Order, and while an appeal of that order was pending, Congress partially rolled back the cap increase by including a provision in the 2004 Consolidated Appropriations Act (CAA) directing the Commission “to modify its rules to set the national cap at 39 percent of national television households.”

 

What this document is doing is seeking comment on whether or not the Commission can change it themselves. I'm going to make a wild guess and say as long as Congress doesn't come back and say "No, we have to do that" (and given the current political climate, the chances of them doing that are very slim), that the Commission will change the rules themselves as they have in the past, and if Congress has a problem with it, they will direct the Commission to adjust it again.

 

Basically, they're asking for Congress' silent approval.

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  • 3 months later...
The NAB has an idea: put in a VHF discount along with the UHF discount, effectively raising the cap to 78%. This is a compromise between Sinclair and Nexstar, which want the cap completely eliminated, and the other station groups, which are OK with the 78% but want a hard 39% cap on the O&Os.

So essentially they want a 78% cap on everybody but the Network O&Os (which would be limited to 39%) from what I've read correct?

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Not necessarily, as the FCC could then appeal to the Supreme Court, which would probably overturn any decision to eliminate the UHF discount.

 

But that's ONLY if the the Supreme Court accepts the case.

SCOTUS gets over 700 request for review each year...they only hear a select few. The remainders get bounced back to the lower courts for decisions, or just to sit and stew.

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The NAB has an idea: put in a VHF discount along with the UHF discount, effectively raising the cap to 78%. This is a compromise between Sinclair and Nexstar, which want the cap completely eliminated, and the other station groups, which are OK with the 78% but want a hard 39% cap on the O&Os.

If anything, I’d be okay with the O&Os being at 78%, not some of these independent groups.

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