Television group M&A activity and the testy retransmission consent battle between CBS and TWC have created noise in Washington of late, but Wells Fargo analyst Marci Ryvicker says that despite loud calls for action, there is little reason to believe that anything of consequence will take place any time soon.
On the retrans front, Ryvicker noted that the FCC’s powers are extremely limited, consisting of evaluating whether both parties are negotiating in good faith, and said that since the parties are still talking and neither has filed a complaint, it has nothing to do.
Further, she noted that the FCC doesn’t want to get into the middle of retransmission squabbles, even if Congress were to grant it authority. She said according to Wells Fargo contacts, the FCC is fine with the free market system, and further does not have the resources to add retrans oversight chores. She added that it would be no easy feat for Congress to legislate such authority even if it wants to.
As for the UHF discount, Ryvicker said eliminating it is a proposal and nothing more and has gotten “way to much air time from the media.” She suggested that it is possible that the 50% discount could not only be taken from UHF but applied to VHF stations, but whatever a possible NPRM does, it will not be going into effect any time soon.
There is no reason, she stressed, that a possible rule would be used to weigh currently proposed transactions; added that if the rule is ever changed it is very likely that existing station ownership enabled by the discount would continue under waivers or be grandfathered; and also noted that any disruptive and sudden FCC change would almost certainly wind up in court, and thus be delayed for who knows how long.
In conclusion, Ryvicker and Wells Fargo believes there is nothing afoot at the FCC that should prevent television operators from conduction business as usual.
RBR-TVBR observation: The issues at hand demonstrate, in very different ways, the pitfalls of regulation.
In the case of retransmission consent, the pitfall is writing regulation when emotions are running high. Sure, a lot of consumers are mad right now, which in turn makes regulators mad, and turns legislators almost rabid, eager to seize the opportunity to protect the rights of millions of eligible voters.
Lost in the heat of the moment is the fact that most of these negotiations are totally lacking in drama. They are done quietly, on time, and nobody misses anything, proving that as a general rule, the market is working and no legislation is required.
In the case of the UHF discount, it made sense a one time – it was a way for new entrants into the business to gain parity with the old guard which had locked up most of the then-preferable VHF channels in the big DMAs.
The move of viewership to MVPDs took a big bite out of the disadvantage of running a UHF station, and the switch to digital broadcast stood it on its head. If the FCC was going to eliminate the discount, it should have been part of the transition to digital.
Now it is a vestigial regulation, but one which still has an impact on how television groups do business. It’s hard to blame the FCC for trying to bring the rules back to reality, but it would be entirely unfair and bad for the economy to damage existing companies that were playing entirely by the rules.
It is our hope, and also our expectation, that the FCC will take all of this into account as it moves forward in these areas.
