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  • Jerianne Timmerman 12:49 pm on November 1, 2016 Permalink  

    Let’s Do the Time Warp Again – The FCC’s Ownership Rules Remain Stuck in 1975 

    During the past year, a number of industry trade associations have changed their long-standing names. First, the Consumer Electronics Association became the Consumer Technology Association (CTA), as the “hardware” term “electronics” no longer reflected the breadth of its membership. The National Cable & Telecommunications Association then dropped “cable” from its name, becoming “NCTA – The Internet & Television Association,” to better describe its members and the consumer services they deliver. And perhaps most notably, the Newspaper Association of America (NAA) removed from its name what had defined it since the 19th century – the word “newspaper” – and became the News Media Alliance. The change was reportedly made because the word “newspaper” had become meaningless for many of the group’s existing members, and because the group did not want to exclude purely digital news organizations that had no print editions.

    Clearly, something matters in these new names. They reflect remarkable changes in technology, in consumer preferences and in the creation and distribution of news and entertainment. NAA’s new name reflects a digital marketplace so challenging that a website called Newspaper Death Watch was created in 2007 to chronicle the decline of that industry. NCTA’s new name reflects the creation of new words, such as “cord-cutters” and “cord-nevers.” All three name changes reflect consumers’ desire to communicate and to access information and entertainment any time, any place, and over any and all types of devices. They reflect the transformative power of the internet. In short, they reflect the 21st century marketplace.

    Notably, however, the Federal Communications Commission’s (FCC) broadcast ownership rules reflect none of these fundamental changes. In its long-delayed 2010 and 2014 ownership review order, which was finally published in the Federal Register today, the FCC again asserted that “non-broadcast video programming distributors” are not meaningful competitors in local TV markets, virtually ignoring a host of 20th and 21st century technologies (including cable, satellite, mobile devices and the internet) to retain its local TV ownership restriction. In an even more impressive imitation of an ostrich with its head in the sand, the FCC yet again retained the prohibition on the common ownership or operation of a daily newspaper and a radio or TV station in the same market. In maintaining a ban adopted in 1975, the FCC essentially concluded that little or nothing of import has changed in the news industry and the marketplace position of print newspapers and broadcast stations for the past 41 years – a nonsensical position on its face.

    In fact, the FCC appears stuck in a time warp, as merely stating the terms of the print newspaper rule reveals its arbitrariness in 2016. It prohibits common ownership of a broadcast outlet and a newspaper published four or more days per week in the dominant language in the market and circulated generally in the community of publication. The very notion of a rule hinging on a newspaper being printed and circulated shows its analog-era ancestry. It borders on the absurd to contend that the viewpoint diversity concerns supposedly sufficient to ban the common ownership of a station and a newspaper publishing a print edition four days a week magically disappear when the newspaper publishes online every day but publishes in print only three days a week. And this rule is still maintained by the agency that spent millions of taxpayer dollars and countless person hours on producing the National Broadband Plan.

    While the FCC saw no need to consider updating its local TV rule, it at least pretended in its quadrennial ownership order to “loosen” the “overly broad” ban on newspaper/broadcast cross-ownership. It’s hard to take that claim seriously, however, when the prohibition on owning a newspaper and a single radio station, even in the largest media markets in the country, remains in place. The FCC’s new “exception” and its vague promise of waivers to the rule are only cosmetic changes intended to disguise its back-tracking from previous quadrennial review decisions that a complete ban on cross-ownership was unjustified.

    Under its so-called exception for proposed combinations involving a “failed” or “failing” newspaper or broadcast outlet, the FCC merely adapted the existing (and deficient) standards for failed/failing stations under the local TV ownership rule. These standards, for example, require an outlet to have ceased operation for at least four months, or have had negative cash flow for at least three years. Requiring either a broadcast station or a newspaper to reach such dire straits makes it much less likely that an exception to the FCC’s cross-ownership rule would save the outlet from its downward spiral (even assuming that another same market outlet would want to invest in a station or newspaper near financial oblivion). That outcome would not serve local consumers. And where is the logic in a rule that permits stations or newspapers in involuntary bankruptcy proceedings to qualify as “failed,” but not outlets in voluntary bankruptcy proceedings?

    More fundamentally, the FCC has done nothing substantive here. The exception for failed/failing outlets, and the new waiver standard for newspaper/broadcast combinations not “unduly harm[ing] viewpoint diversity,” fail to go beyond pre-existing waiver opportunities for broadcasters and newspaper owners. The FCC’s ownership order specifically says that waiver requests for “good cause” under its general rules (Section 1.3 for those interested) are broader than its new “undue harm” standard and could include any variety of public interest considerations that the applicant believes warrants a waiver. So, if considerations of viewpoint diversity can already be addressed under the FCC’s general waiver rule, it’s unclear what, if anything, the new “undue harm” waiver standard really adds.

    This “undue harm to diversity” standard, moreover, only replaces the waiver standard originally established in 1975 to specifically address cases where application of the cross-ownership rule would be unduly harsh. Under its 1975 standard, the FCC has granted a small number of long-term and permanent waivers of the rule, generally due to the poor financial condition of either the newspaper or station involved but also on occasion based on diversity considerations. Replacing its original waiver standard with a new, narrower one cannot credibly be seen as “loosening” the cross-ownership ban. It is only the appearance of action, designed to distract from the FCC’s failure to bring its ownership rules into the internet age.

    The FCC’s inaction in the face of the profound changes recognized by the News Media Alliance and the rebranded NCTA and CTA could lead one to paraphrase a famous newspaper column from the 19th century: “Yes, FCC, there is an internet” – and it’s not as fictional as Santa Claus. Or, perhaps the FCC’s recent response to the struggles of newspapers and traditional journalism is more akin to President Gerald Ford’s response to a near-bankrupt New York City, as a memorable 1975 headline said: “Drop Dead.” And while the Ford Administration may seem like ancient history in this presidential election year, it’s no older than the FCC’s print newspaper rule.

     
  • Jerianne Timmerman 10:15 am on August 20, 2015 Permalink
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    The Mandatory “Upgrade” the FCC Forgot 

    In a blog last week claiming credit for “upgrading” the FCC’s “media rules” to reflect today’s marketplace, FCC Chairman Tom Wheeler neglected to even mention the mother of all media rules, the broadcast ownership restrictions. Unfortunately, this conspicuous omission should come as no surprise. Despite Congress expressly requiring the FCC to regularly update its ownership rules, the Commission has repeatedly – even serially – failed to modernize those restrictions.

    The FCC has strictly regulated the multiple ownership of broadcast outlets since the World War II era. The Commission prohibited in 1941 the licensing of a TV station under the same ownership as another station broadcasting in substantially the same area – and nearly 75 years later, the Commission still prohibits the common ownership of two TV stations in most markets. By comparison, other FCC ownership restrictions – such as the disco-era ban on common ownership of a newspaper and a single radio or TV station in the same market – are merely middle-aged, rather than senior citizens. If the FCC’s criteria for determining whether its rules should be eliminated depends primarily on their age – as the Chairman’s blog implied with regard to the “50-year old” program exclusivity rules – then the almost octogenarian ownership rules should be long gone from the FCC’s books.

    Much more importantly, the FCC’s failure to update its ownership rules flies in the face of Congress’ directive that the Commission must every four years “determine” whether its rules remain “necessary in the public interest as the result of competition” and “repeal or modify” those that are not. While the Commission may be fulfilling its obligations under the 2014 Satellite Television Extension and Localism Reauthorization Act, as the Chairman specifically noted, the FCC at the same time has cavalierly disregarded its obligation under the Telecommunications Act of 1996 to complete the 2010 quadrennial ownership review.

    As the D.C. Circuit Court of Appeals suggested in an earlier ownership case, the Commission’s failure to make the determinations required by statute for retaining its ownership rules indicates its inability to do so. Retaining the current newspaper/broadcast cross-ownership ban, for example, would require the Commission to show that competition and diversity in the media marketplace have not changed since 1975. Obviously, that is impossible to show, as the owners of newspapers, TV stations and radio stations have made clear starting in 1996 when the Commission first requested comment on reforming the cross-ownership ban. Despite last week’s story about updating FCC rules to “better reflect today’s media marketplace,” the cross-ownership prohibition stands unchanged, nearly two decades since the Commission began reexamining it.

    In irresponsibly delaying reform of its ownership rules, the Commission has had to deny the existence of competition to TV and radio stations and newspapers. For example, even though the FCC, according to Chairman Wheeler, is “updat[ing] the [broadcast] Contest Rule for the Internet age,” the agency – seemingly with a straight face – previously dismissed competition in the video marketplace from pay-TV and online sources as being of “limited relevance” for its review of the local broadcast TV ownership rule. And, as newspapers continue to disappear, the Commission effectively ignored the hundreds of millions of Americans that use the Internet, and dismissed evidence showing consumers moving away from newspapers to online news sources, because the Internet is not available to all Americans. So while the Internet, according to the Commission earlier this year, “drives” the U.S. economy and serves “every day” as a “critical tool” for Americans to “conduct commerce, communicate, educate, entertain, and engage in the world,” in the alternate universe of broadcast regulation, it merits only a change in the FCC’s contest disclosure rules (which, notably, apply only to over-the-air broadcasting and no other medium).

    For decades, NAB and its members have fought to truly modernize the FCC’s media rules by reforming unfair and inequitable broadcast ownership restrictions – rules that do not apply to broadcasters’ increasingly consolidated video and audio competitors, including cable, satellite and online. Rather than indulging in misplaced self-praise over eliminating rules that are as important as ever in the video marketplace, the Commission must stop willfully and blatantly ignoring its statutory duty to, borrowing a phrase from Chairman Wheeler, promote the “public interest” and “help ensure the continued viability” of free, over-the-air broadcast service. Particularly in an era of overpriced subscription services offered by companies with rock-bottom customer service ratings, American consumers deserve a viable – indeed, a thriving – free option.

     
  • Jerianne Timmerman 10:45 am on February 19, 2015 Permalink
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    Double Standards, DISH and Designated Entities 

    The FCC should have been taking a victory lap following its $45 billion AWS-3 auction, which closed in late January. Instead, the agency was left fending off widespread criticism that “loopholes” in its auction rules effectively gave billions of dollars in subsidies to one of the largest corporations in the country.

    These criticisms arose from disclosures that two companies in which DISH Network reportedly has an 85 percent stake claimed about $3 billion total in “bidding credits” when acquiring licenses in the FCC’s AWS-3 auction. Bidding credits allow a bidder to reduce by some percentage its actual payment on its winning bids following an FCC auction. In this instance, DISH’s interests in Northstar Wireless and SNR Wireless – smaller companies with “designated entity” status under the FCC’s auction rules – will allow DISH to reduce its bill to the Treasury from around $13 billion to about $10 billion. Unsurprisingly, the headlines generated across the political spectrum decried these “government handouts” to large corporations and the “rip[ping] off” of U.S. taxpayers.

    While the public reaction focused on the massive subsidies afforded to DISH, broadcasters in particular were left scratching their heads. Less than a year ago, the FCC decided to treat a broadcast TV station that sells more than 15 percent of the advertising time of another TV station in the same market as owning that second station. As a result, stations in most markets are forbidden from selling more than 15 percent of the ad time of another station under the FCC’s decades-old broadcast ownership rules.

    How in the world does the FCC square its treatment of various forms of ownership? Why can’t a small TV station in South Dakota or South Carolina sell 20 percent of the advertising time of another station without the FCC saying it “owns” that station, when DISH can possess an 85 percent interest in a company without the FCC counting that as ownership?

    These diametrically opposed policies cannot be reconciled or justified. The FCC decided to attribute TV joint sales agreements (JSAs) under its broadcast ownership rules due to the supposedly significant influence that the joint sale of even small amounts of advertising time would provide one TV station over another. Indeed, the FCC is so convinced of the supposed harms of these JSAs that even long-established agreements expressly approved by the Commission must now be unwound, regardless of the detriment to the two stations.

    But now, remarkably, the FCC appears poised to determine that DISH’s 85 percent interest does not so significantly influence the two designated entity companies, thereby resulting in a free $3 billion to DISH in the AWS-3 auction. Even for broadcasters unfortunately inured to inconsistent, unfair and anti-competitive regulatory treatment, this outcome reaches a new low.

    NAB and its members have for decades fought the FCC’s disparate restrictions on the multiple and cross-ownership of television and radio stations – restrictions that do not apply to competing video and audio providers, including cable, satellite and online. The FCC must stop this unfair treatment if it truly cares about competition, diversity and localism. Rather than imposing uncompetitive ownership structures on broadcast stations that provide free local service, while at the same time shelling out billions in subsidies to pay-TV operators that charge consumers ever-higher subscription fees, the Commission should reform its rules to let broadcasters compete on equal footing.

     
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