FCC Restricts Same Market TV Joint Sales Agreements; Begins Quadrennial Review of Broadcast Ownership and Attribution Rules

by Davis Wright Tremaine LLP

At its Open Meeting today, the Federal Communications Commission (FCC) voted to issue a Report & Order as well as a Further Notice of Proposed Rule Making (FNPRM) in its required “Quadrennial Review” of its broadcast ownership and attribution rules. The last completed Quadrennial Review was in 2007, since the 2010 Review was never completed. The FCC promised to finish this one by June 30, 2016, meaning that this could be the first Quadrennial Review completed in nearly a decade.

The Report & Order portion of this Quadrennial Review consists of one item: The FCC has decided to treat television (TV) Joint Sales Agreements (JSAs) the same way it treats radio JSAs. This would mean that if a TV station enters into a JSA with a TV station in the same market for more than 15% of that station’s advertising time, the second station would be “attributed” to the first station for purposes of the FCC’s local TV ownership rule. Thus, if the first station could not own the second station under FCC rules, it would also be prohibited from selling more than 15% of that station’s advertising.

Recognizing that there are numerous same market JSAs currently in existence, the FCC has decided to allow a two year transition period for unwinding those agreements. The FCC also said that it would entertain petitions for waiver of this rule, although it is unclear what situations would qualify for waiver. Among the potential waiver possibilities mentioned are those where a JSA would allow a college or university to own a local TV station or where the second station is a small or failing station that needs assistance. The FCC said it would be more inclined to grant waivers for JSAs that are limited in time rather than open ended.

Chances are good that this action will be subject to judicial review but it is uncertain whether that will lead to a stay of the prohibition pending such review.

The remainder of the Quadrennial Review is in the form of an FNPRM, meaning it consists of proposals but no concrete action as of yet. One of these proposals concerns Shared Services Agreements or SSAs, whereby stations share staff and/or facilities. Although TV JSAs will be prohibited by the Report & Order portion of today’s action, the FCC is proposing only to take a closer look at SSAs. Because SSAs have not previously been subject to disclosure, the FCC claims not to have enough information to make a determination on what, if anything, to do about them. Accordingly, the FCC proposes to both define SSAs and to require disclosure of SSAs so that a future determination can be made on whether or not to limit or prohibit them.

Other proposals announced in today’s FNPRM include keeping the local TV and radio ownership limits essentially the same as they are now. For TV, this means no more than two TV stations per Designated Market Area (DMA), so long as the two stations do not have overlapping contours or if no more than one of the two stations is a “top four” station in the market and there would be at least eight independently owned TV stations remaining in the market post-merger. The local radio ownership rules allow a sliding number of stations to be owned in a single DMA based on the total number of radio stations in the market.

In a highly contested part of the FNPRM, the FCC proposes to eliminate the radio/newspaper cross ownership ban, but to retain the TV/newspaper cross-ownership ban. The FCC says it will consider granting waivers of the TV/newspaper cross-ownership ban if the TV station is not one of the top four TV stations in the market and if there would be at least eight independently owned media sources following the merger. As one Commissioner remarked, it is questionable whether newspapers will become extinct before the newspaper/broadcast cross-ownership rule is eliminated.

The FCC also proposes to retain both the TV/radio cross-ownership limits as well as the dual network rule that prohibits a merger among two of the top four networks (ABC, CBS, NBC and Fox).

Despite vigorous dissents to today’s action by Commissioners Pai and O’Rielly, the FCC voted 3-2 to adopt the Report & Order and FNPRM as described above. We will keep you advised of comment dates for those who wish to file comments on any of the FNPRM proposals discussed above.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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