Extending a string of 2017 de-regulatory moves, Ajit Pai, President Donald Trump’s appointee to lead the FCC, has formally begun the process of reviewing rules limiting the number of TV stations a single owner can control.
If the ownership cap is eased, as expected, by the Republican-controlled, 5-member commission, it would be a boost to Sinclair Broadcast Group as it looks to close its $3.9 billion purchase of Tribune Media. It also comes on a day when the FCC announced plans to review its rules preserving “net neutrality,” a debate that threatens to become a hornet’s nest involving a host of internet and broadband stakeholders.
Long set at 39%, the ownership cap is accompanied by a rule known as the “UHF discount,” a method of counting stations that dates to the days when stations were tuned in with a VHF/UHF dial. UHF stations are counted at a lower level in overall station tallies than VHF ones with stronger signals, enabling one owner to amass more net stations. The FCC recently reinstated the discount, which had been thrown out after being deemed anti-competitive by the FCC during the Obama administration.
Pai said the review of the “national television multiple ownership rule,” or the national cap, was part and parcel with the decision on the UHF discount.
The reinstatement of the discount “effectively tightened the cap without determining whether that was in the public interest,” Pai explained in a statement. “Because the national cap and the UHF discount are inextricably linked, any review of one component of the rule must include a review of the other.”
Pai, who has repeatedly rejected claims that the FCC is making rules changes with Sinclair in mind, said the review will include public input. He added, “A comprehensive review of the rule is warranted in light of considerable marketplace changes, such as technological developments and increased video programming options for consumers, since the cap was last modified in 2004.”
The latest proposals, following last week’s decision to loosen decades-old limits on “cross-ownership” (owning newspapers and broadcast properties in the same market) and reset the way joint-sales agreements affect station tallies, help Sinclair. When combined with Tribune, the company would reach a startling 72% of U.S. households — far north of the current 39% cap — and bring a potent, mercurial and Trump-connected broadcaster into major markets like New York, Los Angeles and Chicago.
Because of many elements of the situation, Democrats and activists have become alarmed at the speed of the regulatory rollbacks at the FCC. Fifteen Democratic senators signed a petition calling for Pai’s alleged ties with Sinclair to be investigated.
As a different M&A event enters a critical stage — the looming legal battle between the U.S. Department of Justice and AT&T over its acquisition of Time Warner — it will be interesting to see how much notice the Sinclair-Tribune situation manages to attract.