FCC Chair tells House Oversite Committee today that the Vote to Abolish Media Ownership Rule is set for November 16th, 2017

Story by Inside Radio

FCC Chair Ajit Pai told a House oversight committee Wednesday afternoon that he plans to bring to a vote at the Commission’s Nov. 16 meeting an order that would abolish the newspaper-broadcast cross-ownership rule, the radio-television cross-ownership rule, and several media ownership regulations targeting the television industry—including replacing the eight voices test with a case-by-case review and eliminating the attribution rule for TV joint sales agreements.

In testimony before the House Communications and Technology Subcommittee, Pai said the moves will “belatedly recognize” the reality of the modern media landscape.

He also announced that the FCC will vote on creating an incubator program that would “encourage greater diversity” in broadcasting. The text of the proposal will be released on Thursday.

Next month’s vote will technically be a response to a petition filed by the National Association of Broadcasters last December asking the FCC to take a second look at its most recent quadrennial review which kept nearly all the Media Ownership rules untouched. With three Republicans now on the five-member Commission, it appears there are enough votes to pass Pai’s proposal.

The NAB said in a statement that it “strongly supports” Pai’s plan for modernizing broadcast media ownership rules.

“For 40 years, policymakers and the courts have blessed countless mega-mergers among national telcomm, cable and satellite program giants, while at the same time blocking broadcast/newspaper or radio/TV combinations in single markets,” spokesman Dennis Wharton said. “This nonsensical regulatory approach has harmed the economic underpinning of newspapers, reduced local journalism jobs, and punished free and local broadcasters at the expense of our Pay TV and Radio Competitors. We look forward to rational media ownership rules that foster a bright future for broadcasters and our tens of millions of listeners and viewers.”

Plans Welcome on Wall Street

“All of this will be a welcome change for a sector that has suffered undue regulatory handcuffs, in our opinion, given the changing competitive environment,” Wells Fargo media analyst Marci Ryvicker said.

But in a note to clients Ryvicker said she also doesn’t expect the cross-ownership rule change to have that big an impact since none of the television companies she tracks are interested in buying radio stations or local newspapers. “We anticipate a much stronger industry to result from consolidation and view 2018 as the start of the next round of M&A,” she added.

Yet Ryvicker doesn’t expect a “transformative” wave of deal-making as a result of any rule changes. “What we are talking about is in-market transactions, which would involve swaps and other small-scale deals,” she said. That’s most likely to occur in the television industry although multi-billion dollar deals like Sinclair Broadcast Group’s proposed $3.9 billion deal to buy Tribune Broadcasting would be the oddity she predicts, saying it’s more likely to lead to the creation of in-market duopolies where operators can take advantage of a higher margined business. “We anticipate a stronger industry overall,” she predicted.

Regardless of what the FCC decides to do, a decision on whether those rule changes ever take effect is expected to come in the federal courts. In a tradition no one celebrates, the agency’s quadrennial media ownership proceedings have been the first act in a protracted legal battle between the FCC, broadcasters, and deregulation critics.

Ryvicker told clients that she unequivocally believes the fate of the media regulations is again destined for the courts. “We fully expect any and all lawsuits to end up with the Third Circuit court in Philadelphia given that this is where jurisdiction seems to lay specifically for media ownership rules,” she said. Although the hurdle to win a stay preventing the new rules from taking effect is high, Ryvicker points out federal courts have put FCC media rule changes on hold in the past.