FCC Revives Rule That Could Make It Easier For TV Station Groups To Merge

FCC Chairman Ajit Pai made good today on his vow to reinstate a rule that makes it easier for big TV station owners to grow bigger.

In a 2-to-1 party line vote, the regulatory agency revived the so-called UHF discount. It enables station owners to just count half of the viewers reached by UHF stations in the calculation to determine when they hit the ceiling that limits them to reaching 39% of all households.

In August, the FCC, under former Chairman Tom Wheeler, voted to end the UHF discount. The 30-year rule was designed to account for the weaker over-the-air reach of UHF stations. But that no longer made sense following the 2009 national conversion to digital over-the-air broadcasts, the agency concluded.

The FCC says today that the decision restricted deals “without any analysis of whether this tightening was warranted given current marketplace conditions.” It plans to examine the 39% cap and the UHF discount “later this year.”

The decision cheered broadcasters.

National Association of Broadcasters CEO Gordon Smith says it’s “a rational first step in media ownership reform policy allowing free and local broadcasters to remain competitive with multi-national pay TV giants and broadband providers.”

Tribune Media — which is eyeing a potential sale to Sinclair Broadcasting — echoed that view added that it will “serve the important interest of localism by enabling broadcasters to better serve their communities.”

Gray Television also could benefit by “opportunistically acquiring divested stations and smaller groups looking to sell,”  ?says RBC Capital Markets’ Steven Cahall.

But consumer activists say the FCC took a step backward.

Longtime FCC watcher Andrew Schwartzman of Georgetown University Law Center’s Institute for Public Representation calls it “a cynical political ploy to help large broadcast companies become larger, notwithstanding the lack of any sustainable legal rationale for doing so.”

Former FCC Commissioner Michael Copps, now a Special Adviser to Common Cause, says that reinstating the UHF discount “clears the way for unprecedented levels of consolidation, which has historically led to newsroom redundancy and layoffs and a diminution of localism and diversity. The move also increases leverage for broadcasters enabling them to charge cable companies higher fees to carry their signals, a price ultimately borne by higher cable rates for consumers nationwide.”

American Cable Association CEO Matthew Polka agrees that broadcast consolidation “will give local broadcasters only greater leverage in carriage negotiations, allowing them to drive prices higher and cause even more harmful blackouts.”

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