O’Rielly: Alter ownership proposal before vote

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Michael O'RiellyRepublican FCC Commissioner Mike O’Rielly has again voiced his concerns on FCC Chairman Tom Wheeler’s proposal to prohibit JSAs between TV stations and unwind the ones that currently exist. He announced his opposition to the proposal and called for it to be altered before any commission vote: “The JSA proposal being put forward appears flawed and not in the public interest. My meetings and the record indicate that the JSA portion could significantly impair the ability of broadcasters with diverse voices to offer local programming, such as news, to meet consumer needs. Moreover, the proposal would establish a very subjective ‘Mother-May-I’ approach to obtain or retain a JSA, which is a recipe for market uncertainty and reduced offerings.”


Under Wheeler’s proposal, the FCC would start counting stations in a JSA as being “owned” by the broadcaster in control, forcing the media companies to either sell the licenses or seek waivers.

Wheeler’s other proposal would prevent two or more local affiliates from banding together to negotiate retransmission rates with cable systems.

On 2/19, O’Rielly posted his thoughts on JSAs and SSAs and the need for the FCC to move forward on its review of media ownership rules:

“It used to be that Americans had few choices for watching television—options included a handful of broadcast networks and maybe a cable subscription with 30 channels, if consumers were lucky.  Today, the choices for entertainment and news are seemingly limitless and available on multiple platforms (i.e., free-over-the-air, cable, telco, satellite, wireless).  The Internet and advances in digital technologies have transformed the media marketplace so that Americans can watch whatever they want, whenever they want.  Local broadcasters—once the only content providers in town—must now compete fiercely for viewers.  They must also compete with online entities such as Groupon, Google and Amazon.com for local advertising revenues.

Generally, other video platforms are free to enter into partnerships, legal agreements, or economic relationships that enable such entities to take advantage of economies of scale.  But, for numerous reasons, the FCC maintains rules that prevent broadcasters from doing the same.

Section 202(h) of the Telecommunications Act of 1996, as amended, was designed to force the FCC to update its rules—rules that affect not just television broadcasters, but radio and newspapers as well—to reflect current market realities and to make fact-based decisions even when facing exceeding political pressure.  It requires the FCC to review certain ownership rules every four years and to repeal or modify the ones that are no longer in the public interest due to competition.  As I have explained in the past, the FCC has not complied with this Congressional mandate.  It has yet to complete its 2010 review.  As a result, the ownership rules haven’t been reviewed since the 2006 proceeding (completed in 2007).  In the meantime, broadcasters have had to respond to meet consumer needs in the increasingly competitive marketplace.

Local programming, especially news, is expensive to create but highly sought after by consumers.  Some television broadcasters, especially in small and mid-sized markets, have employed contractual relationships called Joint Sales Agreements (JSAs) and Shared Service Agreements (SSAs) to streamline certain overlapping functions in order to increase efficiencies and reduce costs.  While critics voice concern that that JSAs and SSAs are “covert consolidation” amounting to an end run around the media ownership limits that are designed to protect diversity and localism, there is evidence of significant benefits from these arrangements, including saving stations from going dark, adding diverse voices to a market, and enabling local news where it would otherwise be cost prohibitive.

JSAs and SSAs have never been officially codified in FCC rules, but over the years, the Commission has not only allowed these contractual relationships to go forward, it has sanctioned them in various transactions.  Yet, recent press reports indicate that an item may circulate to Commissioners to curtail the use of JSAs, seek comment on eliminating SSAs in the near future, and even force those JSAs in existence to unwind these arrangements over a certain period of time.

Based on all available data, I think it is fair to say that the media marketplace is far more competitive than it was decades ago when the FCC’s media ownership rules were established, or in 2002 (completed in 2003) or 2006 when they were last reviewed.  That is why I would be perplexed and deeply concerned by a push to abruptly switch gears and tighten the rules as part of a media ownership proceeding.  Such a move would conflict with the spirit, intent and wording of the statute.  It would also likely harm the public interest if fewer stations could offer local news, especially in smaller communities.

Instead of tinkering around the edges in a questionable manner, the Commission should comply with the law and move forward to holistically update its media ownership rules across the board so that they are justified against the backdrop of today’s media landscape.  I believe we will find that localism, diversity and competition will advance as a result.”

RBR-TVBR observation: We’ve heard the 3/31 FCC vote will be close—3 for Yes and 2 for No, following party lines at the Commission. So, it looks like O’Rielly knows how the cards are stacked. Indeed, the proposal should be altered, it’s too disruptive as it stands. As Heartland Media CEO/former Gray TV President Bob Prather told RBR-TVBR the other day, “I’m not sure it will get fully passed or implemented. There are just too many of these arrangements out there that have been doing this (JSAs, SSAs) for a long time. I think it would be very disruptive to the broadcast industry. I think it would be hard for something like this to get actually through the FCC and get enacted into a regulation. I think Congress might even step in. It’s like unscrambling the egg at this point. I think there are just too many stations that would go dark or have serious issues if they carried this out.”

If it isn’t corrected in Congress, what other measures could we see? Legal action?

“I assume there could be lawsuits. I’m not sure all of the legalities involved, but I assume the groups wouldn’t take it lying down–I wouldn’t think,” Prather said.

 


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Carl has been with RBR-TVBR since 1997 and is currently Managing Director/Senior Editor. Residing in Northern Virginia, he covers the business of broadcasting, advertising, programming, new media and engineering. He’s also done a great deal of interviews for the company and handles our ever-growing stable of bylined columnists.