David Oxenford

By: David Oxenford, Wilkinson Barker Knauer

The NAB last week submitted a letter asking the FCC to quickly repeal the 39% cap on national ownership of television stations.  This cap precludes the ownership by one company or individual of an attributable interest in television stations capable of reaching more than 39% of the television households in the United States.  The rule has been in place since 2004.  When adopted, over-the-air television was still analog, so the cap included a UHF discount as, at the time, UHF stations were deemed inferior to those that transmitted on VHF channels.  While the transition to digital reversed that relationship as UHF is now seen as preferable, the discount remains, counting UHF stations as reaching only half the households reached by VHF stations.  So, were an owner to have exclusively UHF stations, it could theoretically own stations reaching 78% of TV households.

Yet even 78% is not 100%, and any cable or satellite channel, or even any broadcast program provider like a network or syndicator, and any online video provider, has no limit to the number of households that it can be theoretically reach.  The NAB argues that this is fundamentally unfair and impedes competition in today’s video marketplace.  While some might argue that most of these other services are not free, requiring a subscription to an MVPD or a connection to the internet, practically speaking, in today’s world, many of these competitive channels have as much practical reach as do local broadcast TV stations.  Only the delivery method is different.

There are likely going to be those that oppose any change in the rule.  Certain MVPD interests have opposed any expansion in the ownership of broadcast companies, arguing that bigger broadcast companies lead to higher retransmission consent fees and greater expenses for consumers.  Some public interest advocates contend that these limits allow for the existence of independent television owners and fear that, without ownership limits, over-the-air television would be totally dominated by a small number of companies.  Of course, we have already seen in the market that some big television groups have decided that it is economically not advantageous to spend their time and resources in smaller markets and have begun to spin their small market stations to independent owners.  But the argument that independent owners need legal protection will likely still be made.

There are certainly questions as to the continued validity of the national ownership cap in light of today’s multiplatform digital competition, but the effect is evident.  Many of the biggest local television operators have reached the limits set by the national cap, even factoring in the discount, and their acquisition of new stations is limited.  These operators have reached the limits of their growth to achieve the scale necessary to compete with the digital giants in today’s media marketplace.

This proposal to eliminate the cap is not new – with an open proceeding to abolish the cap begun in 2017 (see our article here).  But there is one question that was raised when that proposal was first advanced that has stalled its resolution.  The 39% limit is written into statute by Congress. Thus, questions arise as to whether the FCC can on its own change that cap.  Unlike the local ownership rules governing the number of radio and TV stations that one owner can have in any local market, where Congress laid out a Quadrennial Review process for the Commission to review and modify the local ownership limits, there is no specific statutory review process for the 39% nationwide cap.

When raised in 2017, there was not the usual partisan divide over the interpretation of this ownership rule.  Then-Commissioner O’Rielly, a Republican, indicated in his statement supporting the initiation of the 2017 proceeding that he believed the FCC does not have the power to change the cap – only Congress could. In contrast, then-Commissioner Brendan Carr, now Chairman, noted that the FCC concluded in 2016 that the FCC has the authority to modify the national audience reach cap.  While Commissioner O’Rielly is no longer on the FCC, and Carr now leads the agency, questions about the FCC’s authority to act are bound to be raised by parties opposing any change.

The NAB proposal is bound to stir debate.  Watch for further FCC actions to advance this request in the coming  weeks, and watch the debate that we will likely see follow over the next several months.

David Oxenford is MAB’s Washington Legal Counsel and provides members with answers to their legal questions with the MAB Legal Hotline. Access information here. (Members only access). There are no additional costs for the call; the advice is free as part of your MAB membership.