According to Wells Fargo analyst Marci Ryvicker, the FCC has been more accommodating than not when it comes to broadcast regulation, and anticipates more of the same going into 2013, even if there’s a change at the top.
Ryvicker noted that some in the analyst community believe that broadcasters may suffer from new FCC regulations, but she says Wells Fargo believes the opposite. “For one,” she wrote, “the current administration has actually been quite accommodating, having approved a number of significant transactions (CMCSA-NBCU being one of the more controversial) as well as loosening a number of requirements (cable ownership caps, cable-CLEC M&A, newspaper-TV cross ownership rules).”
According to Ryvicker, Wells Fargo also believes the effort to free up spectrum for mobile broadband will impede any desire of the FCC to impose new restrictions, and broadcasters will likely be the leading beneficiaries.
The broadcasters that will reap the greatest benefit are expected to be CBS, Sinclair and Nexstar.
Ryvicker listed nine predictions on regulatory matters for 2013, and here they are:
* PREDICTION 1: We do not anticipate much change in tone at the FCC even IF we get a new Chair(wo)man.
* PREDICTION 2: HSD does NOT get Title 2 reclassification.
* PREDICTION 3: The definition of MVPD might be broadened to include Over the Top (OTT). Should OTT providers gain MVPD status, we think retransmission consent “trumps” program access rules, which should benefit all broadcasters – CBS, NXST and SBGI in particular.
* PREDICTION 4: Aereo ultimately loses. Based on the FilmON case in California and the fact that the Federal Court of Appeals does not seem very sympathetic to Aereo thus far, we think broadcasters win here. If they don’t, at least they will eventually get compensated (see Prediction 3).
* PREDICTION 5: Clarity on spectrum policy is likely to come more from M&A than from rulemaking. We don’t think the regulatory agencies are as anti-consolidation as investors may fear – a positive for DISH, in our view.
* PREDICTION 6: Retransmission consent is likely to remain a “market mechanism.” We don’t see retrans rules changing – which should continue to benefit ALL broadcast stocks – OP-rated CBS, SBGI and NXST in particular.
* PREDICTION 7: Media ownership rules WILL eventually be relaxed. We view this as a positive for broadcast (i.e. SBGI and NXST), but we also point out that lack of relaxation hasn’t stopped accretive M&A in the last 12-18 months.
* PREDICTION 8: We think CMCSA could win the Tennis Channel case.
* PREDICTION 9: There will be no change to programming exclusivity clauses for RSNs. This is not necessarily a positive for CMCSA, TWC or CVC, but it isn’t really a negative – it’s the status quo, in our view.
RBR-TVBR observation: There is certainly an opposite reaction to proposed easement of ownership regulation, but it doesn’t seem equal to the previous reactions that greeted the 2003 attempt of Michael Powell, or even the reaction to the more modest 2007 attempt by Kevin Martin, which was similar to the current attempt.
Before each of those events, Democratic commissioners Michael Copps and Jonathan Adelstein criss-crossed the nation drumming up opposition, while former Sen. Byron Dorgan (D-ND) did the same on Capitol Hill.
This time around there is no anti-consolidation road show, and there is little noise on the Hill either, with the possible exception of Bernie Sanders (I-VT); and Sanders certainly not drawing support from across the aisle as Dorgan was able to do when he roped in such surprising anti-consolidation allies as Trent Lott (R-MS).
Perhaps the Senate will surprise us and instantly repudiate a rerun of the Martin cross-ownership dereg proposal being suggested now by Chairman Julius Genachowski. We should find out soon.