FCC Votes To Close Loophole In Local TV Ownership

Federal Communications Commission Washington, D.C. – Today, the Federal Communications Commission (FCC) took steps to close a loophole in its TV ownership rules, making sure that a party’s interests in a market are properly counted. Removal of the loophole helps ensure competition, localism, and diversity in local broadcast markets by preventing a practice that previously resulted in consolidation in excess of what is permitted under the Commission’s rules.

A joint sales agreement (JSA) is between two stations in the same market in which one station is authorized to sell advertising time on the other station. The Commission’s radio rules have long recognized that these agreements create an ownership interest when the JSA allows for the sale of 15% or more of the advertising time on a competing local station. Today’s Report and Order applies this same standard to broadcast television. Parties to existing TV JSAs will have two years to come into compliance with the applicable local ownership limits. Waiver requests, considered on a case-by-case basis, must show that strict compliance with the rule is inconsistent with the public interest.

Also adopted today was a Further Notice of Proposed Rule making (FNPRM) that initiates the Commission’s 2014 Media Ownership Quadrennial Review and incorporates the ongoing 2010 Quadrennial Review record.

The FNPRM asks for new and additional information on current market conditions to ensure comprehensive and refreshed record. The current ownership rules remain in place while the review is pending.

The FNPRM additionally asks for comment on whether commercial television stations should be required to disclose shared service agreements and how best to achieve disclosure. An SSA allows same market stations to share resources, such as employees, administrative services, or hard assets, such as a news

The FNPRM also recommends reinstatement of the Commission’s revenue-based “eligible entity” standard, finding that the program would support new entry into the broadcast industry by small businesses.

Action by the Commission March 31, 2014, by Further Notice of Proposed Rulemaking and Report and Order (FCC 14-28). Chairman Wheeler, Commissioners Clyburn and Rosenworcel with Commissioners Pai and O’Rielly dissenting. Chairman Wheeler, Commissioners Clyburn, Rosenworcel, Pai and O’Rielly issuing statements. MB Docket No. 14-50.

The FCC voted on Monday to make changes to its broadcast ownership attribution rules that advocates say will help curb a wave of corporate media consolidation in local TV markets.

FCC commissioners approved the changes by a 3-2 vote along party lines at their monthly meeting. The new rules are designed to curb “joint sales agreements” by closing a legal loophole exploited by broadcasting companies that circumvent local TV ownership rules by sharing advertising revenues with companies they are supposed to be competing against.

The FCC’s move will make it harder for big telecom conglomerates to effectively control more than their fair share of TV stations in any given local market by setting up outsourcing agreements with smaller companies that remain effectively under the conglomerate’s control.

Federal ownership limits, for example, are designed to prevent broadcasters from controlling two or more TV stations in a local market where there are fewer than eight unique TV station owners or controlling two or more of the top four stations in a local TV market. To circumvent these rules, some broadcasting companies create shell companies or take over small independent companies and arrange joint sales agreements and “shared services agreements.”