FCC Lifts Ban on Local Media Cross-Ownership, Inviting Consolidation

FCC Lifts Ban on Local Media Cross-Ownership, Inviting Consolidation

Original Article on The Street

A pillar of U.S. media ownership restrictions for more than 40 years has fallen.

Owners of local television stations will be permitted to buy a local radio station or newspaper in the same market after the Federal Communications Commissions on Thursday, Nov. 16, voted to lift the ban on cross-ownership that had stood since 1975. The agency, which has been fast eliminating restrictions long opposed by TV station companies, also eliminated a ban on two TV stations in the same market from entering into joint sales agreements to sell advertising.

FCC Chairman Ajit Pai, a Republican who orchestrated the changes, said the bans and other restrictions were no longer relevant given the advent of online news sources and the shrinking circulations of most local newspapers. The two Democrats on the five-person commission, echoing other critics, countered that Pai understated the importance and impact that local media sources continue to have despite the rise of Facebook Inc. (FB – Get Report) and other social media platforms.

The commission, however, did let stand a ban that prevents two of the top four TV stations in a single market from sharing the same owner.

“It’s a simple proposition,” Pai said at the November Open Commission Meeting. “The media ownership regulations of 2017 should match the media marketplace of 2017. That’s the proposition the FCC has today, nothing more, nothing less. It’s about time.”

Debate over so-called cross-ownership of a newspaper and local TV station has been a source of disagreement at the FCC for years. Pai, who was promoted to chairman in February, argued that because Facebook and Google, a unit of Alphabet Inc. (GOOGL – Get Report) , are swallowing the bulk of new advertising spending, it’s imperative that local TV station owners be given more options to create scale if they’re to have any chance of competing against the online giants.

Conversely, Mignon Clyburn, a Democratic commissioner appointed by President Obama in 2009, warned that the changes will accelerate mergers and acquisitions of media outlets at the local level, striking a blow to the FCC’s historic commitment to sustain a diversity of news outlets.

“The order is not really about helping small struggling broadcasters or newspapers,” Clyburn said at the hearing. “We have paved the rule for a new crop of broadcast media empires that will be light years removed from the very local communities they are supposed to serve. These media titans will have degrees of power far beyond the imagination of our local community.”

For Democrats and consumer advocacy groups, this latest round of deregulation has sparked an outcry that Pai is rewriting media ownership rules to benefit large media companies, in particular Sinclair Broadcast Group Inc. (SBGI – Get Report) , that have been particularly outspoken in their support of President Trump and Republican officeholders.

The rule changes come as Sinclair is lobbying regulators to approve its proposed $6.6 billion acquisition of Tribune Media Co. (TRCO – Get Report) . The deal would combine the largest- and sixth-largest TV station owners in the country to create a behemoth reaching 72% of U.S. households. Sinclair has drawn criticism for news coverage that often parrots the company’s own libertarian position on regulatory issues and political campaigns.

“By eliminating media ownership limits, the FCC is delivering a blow to localism and diversity in our broadcast media,” U.S. Sen. Bill Nelson said in an e-mailed statement. “This act will pave the wave for massive broadcast conglomerates to increasingly provide local viewers with nationalized cookie-cutter news and corporate propaganda that’s produced elsewhere.  This is not the type of local broadcasting Floridians and other Americans and have come to expect and deserve.”

Indeed, Sinclair, which wasn’t immediately available for comment, stands to benefit from the FCC’s vote to lift the ban on joint sales agreements. For years, Sinclair has skirted the joint sales rule by creating so-called sidecar companies that own another TV station in the same market. Those sidecar arrangements may no longer be necessary.

Despite Thursday’s vote, fears of rampant consolidation of local media outlets may be unfounded, according to David Chavern, president of the Washington-based News Media Alliance, the country’s largest newspaper lobbying group. The number of cross-ownership deals is likely to be small, he said, and for some newspapers vulnerable to bankruptcy, lifting the ban could fuel their return to stability.

“This is about whether a newspaper that needs investment can reach out to their most likely buyer,” Chavern said. “And that buyer is probably the other local news organization in town that likes the brand or likes the newsroom. This is an old, outdated regulation, well past its usefulness.”

Pai has been quick to assert that he, too, sees the potential harm in media consolidation, and thereby didn’t seek to eliminate the TV station duopoly rule. Additionally, the FCC has yet to lift or increase a cap that blocks companies from reaching more than 39% of U.S. TV households. Sinclair has long sought to raise the cap.

Sinclair’s unbridled support for President Trump and conservative causes has prompted Democrats and a variety of consumer and industry groups, both liberal and conservative, to oppose the deal on grounds that the broadcaster has failed to demonstrate a willingness to produce impartial news reports.

Pai, a former attorney with Verizon Communications Inc. (VZ – Get Report) , has argued the rule changes are necessary to prevent TV stations from going the same route as newspaper publishers and radio station companies. Dozens of U.S. newspapers have had to cut staffs as circulation and ad sales have declined over the past 15 years. America’s two largest radio station owners, iHeartMedia Inc. and Cumulus Media Inc., are in restructuring talks with creditors that could end in bankruptcy court.

Already this year, the FCC has approved rule changes long sought by Sinclair. In the spring, Pai’s FCC restored the so-called UHF discount, which allows Sinclair and other station owners to skirt the 39% ownership cap — the change reduced the reach of a combined Sinclair and Tribune to about 45% from 72%. In September, the commission voted along party lines to eliminate the Main Studio Rule, a cornerstone of the landmark Communications Act of 1934 that required TV broadcasters as well as radio station owners to maintain a studio, or office, in or near the local community where they hold each license.