Elliot Evers on NAB JSA compromise plan


Elliot-EversFollowing NAB’s ex parte filing with the FCC regarding a meeting between NAB President and CEO Gordon Smith and FCC Commissioner Mignon Clyburn regarding the draft order to attribute JSAs for the purposes of media ownership limits last week, TVNewsCheck reports the NAB has offered up a compromise plan before the upcoming 3/31 vote.

“Instead of prohibiting new JSAs and forcing current ones to unwind in two years unless they can get a waiver, the NAB said the commission should set conditions for legitimate station sharing deals, including requiring the brokered licensee to retain control over at least 85% of the station’s programming; keep at least 70% of ad sales revenue and “maintain at least 20% of station value in the license itself. Instead of putting the kibosh on all joint sales agreements, the FCC should propose the conditions the agency would require of legitimate station sharing deals — and then “prohibit only those operations that do not meet those standards,” according to a compromise being promoted at the agency by the National Association of Broadcasters,” said TV NewsCheck.

While he could not send us that compromise plan, NAB EVP Dennis Wharton did tell RBR-TVBR: “NAB is considering all options in regards to the JSA issue at the FCC. Our members are extremely concerned with the severity of the draft order. We are working hard to address what we believe are some of the Chairman’s concerns without doing serious damage to local television and the millions of viewers that we serve every day.”

Elliot Evers, Managing Director, Media Venture Partners, tells RBR-TVBR: “We’re so happy that the NAB is kind of sitting up straight and fighting the Chairman’s proposals. We consider the Chairman’s proposals overly harsh, unnecessary and a really unfortunate thing for the industry. We’re already seeing the sector being downgraded by Wells Fargo Securities solely because of the regulatory pressure. Is that the Chairman’s goal? To drive down the value of broadcast stocks? Some people are asking that question, is Wheeler trying to make over-the-air broadcasting such a miserable experience that the broadcasters are more inclined to tender in the reverse auctions? The flaw in that chain of logic is that the stations that are in JSAs and SSAs are not the stations that would be good candidates to tender in their reverse auction because they tend to be in smaller markets. But I still think there is some merit to the line of argument that says if the entire experience of being in the industry is harder because the regulatory pressure is greater and inappropriately greater, maybe people will just say ‘This OTA model is pretty tough stuff. So I might tender some of my larger market stations.’ It’s really hard for me, personally, to kind of believe that the Chairman has such a nefarious agenda—to make life miserable for the broadcasters so that they’ll tender their larger market stations. I would say getting the largest possible participation in the auctions is definitely a priority for the Chairman. He clearly doesn’t care about preserving news on the CW in DMA 120. His proposal will make it so, so hard for the smaller stations to operate. So the NAB move is helpful. I hope it gets some traction on the 8th floor because the Chairman’s proposal is really wreaking havoc on the industry and there are going to be a lot of stranded stations that aren’t anything the Commission wants to be tendered for the auction, and this kind of adrifts. I’m sure there will be litigation; I’m sure that the major players in the industry who have a business model based on multiple affiliations in the same market will find ways around this—we’ll find ways around this. We have a client who is putting the Fox on his main signal and the ABC on his D2 and he’s got full carriage on the D2, even though he doesn’t have must-carry rights. So that may become a new technical and business model that works. I think that plays nicely into Wheeler’s view of the world. So we welcome the NAB’s initiatives. We hope they’re effective. It seems like the Commission is working with a world view that is 20 years old. It doesn’t take into account the consolidation of the cable industry, the near death of the newspaper industry, the rise of the internet. They are just focusing on over-regulating local television.”

Added the TV Newscheck story: “As part of its evolving lobbying counterattack, the NAB is now arguing that the waiver policy that Wheeler is said to be considering as part of his JSA crackdown would put the burden of proof “on precisely the wrong parties — the ‘good operators’ that are promoting localism, diversity and competition,” the NAB disclosure filing says. “Waivers are inherently uncertain and likely to create obstacles to the investment needed to purchase or run a television station.”

Said a recent blog post from Jane Mago, NAB EVP and general counsel:
“Looking to the Law

As a General Counsel – now at NAB and formerly of the FCC – I tend to believe that adhering to the law is a good thing.  That is why I am very troubled by the broadcast ownership order now circulating at the Commission and the blog posts filed by senior FCC officials supporting it.

The very first line of the Chairman’s blog post makes it surprisingly clear that the agency must take a closer look at the law before moving forward on the proposed order. His post describes the FCC’s quadrennial obligation to review the broadcast ownership rules as one to “determine if they need to be modified to serve the public interest.”  That is not the law.

Section 202(h) of the 1996 Telecommunications Act which imposes the quadrennial review requirement on the FCC was adopted as part of a deregulatory framework. The statute states that the Commission “shall determine whether any [broadcast ownership] rules are necessary in the public interest as the result of competition.” And, it goes on to say that the Commission “shall repeal or modify any regulation it determines to be no longer in the public interest” (emphasis added).

Given this directive, I find it very hard to understand how one could conclude that reaching back to a docket from 2004 to increase regulation of joint sales agreements (JSAs) without any consideration of the larger picture or change in the marketplace is consistent with the directive of Section 202(h).

I am even more perplexed and troubled that the apparent basis of the decision to declare television JSAs attributable is a sweeping and inaccurate generalization that JSAs necessarily create de facto ownership and thus violate existing ownership rules.  The blogs do not reference or apparently consider the very significant database of JSAs that resides at the FCC. Instead, they draw conclusions from Securities and Exchange Commission (SEC) filings.  Those filings respond to rules and goals established by the SEC for a very different purpose than FCC licensing. SEC filings are not a part of FCC precedent or law.

Indeed it is striking that the blogs make no reference to the decades old FCC indicia of control: decision-making authority over programming, personnel and financing. Those indicia led the FCC staff to approve at least 50 JSA arrangements since 2011, making clear in their review that the licensee must control at least 85% of programming and retain at least 70% of net advertising revenue. Also, to pass muster, the terms of the deal must apply at least 20% of station value to the license value.  The FCC is not free to ignore precedent.

Similarly, as a matter of law, the FCC is not free to simply ignore the record before it. Here, basing a decision on gross generalizations that JSAs are intended to get around ownership rules is wrong.  Adhering to the law in this case requires the agency to take a hard look at the evidence in its own records and consider the presentations made by NAB and others – presentations that demonstrate the varied nature and very real public interest benefits of television JSAs.

Finally, adhering to the law in this case means taking the directive of Section 202(h) seriously. The Commission must look at the local television ownership rules in light of current competitive conditions. That cannot mean starting another never-ending quadrennial review while tightening restrictions on local broadcast stations alone.”

See the TVNewscheck story here