The Federal Communications Commission voted Monday to crack down on cooperation between broadcasters.
In a contentious vote that attracted scrutiny from Republicans in the agency and on Capitol Hill, the FCC approved an order that will keep broadcast companies from sharing resources on advertising sales.
Under current FCC rules, a single broadcast company cannot own more than one of the top four broadcast stations in a media market.
But prior to the agency’s actions on Monday, a broadcast company could use a Joint Service Agreement (JSA) to control advertising sales across multiple broadcast stations. Critics of this practice said it allowed broadcasters to control multiple stations in practice without technically violating the agency’s ownership rules.
“What we’re doing is closing off what has been a growing end-run around [the FCC’s ownership] rules,” FCC Chairman Tom Wheeler said Monday.
“JSAs have been used, skirting the existing rules, to create market power that stacks the deck against small companies seeking to enter the broadcast business,” he said.
The order allows broadcast stations using JSAs to apply for an exemption to the new ownership rules and requires the agency to reply to a station’s request within 90 days.
“We make it clear that JSAs are appropriate, when they further those statutory goals of competition, diversity and localism,” Wheeler said.
Republicans on the FCC slammed the agency’s move to constrain cooperation between broadcasters. Commissioner Ajit Pai called it “the most problematic item I’ve encountered” during his time at the agency.
Pai and Michael O’Rielly, the Commission’s other Republican, pointed to small broadcast stations that have relied on JSAs.
The sharing agreements enable “smaller stations to take advantage of economies of scale and put their cost savings toward improved programming,” O’Rielly said.
The new system sets up a waiver process aimed at addressing the concerns of Commissioner Mignon Clyburn, who feared the new limitations could prevent small and minority-owned broadcasters from efficiently sharing resources.
These sharing arrangements are “the backbone for growth and profit for many broadcasters,” Clyburn said.
While Clyburn said the order is “admittedly not perfect,” she applauded the agency’s move to allow small broadcasters to get waivers if they can prove their JSAs are in the public interest.
“If we’re going to have a viable waiver process, we need to have a definite set of rules” and a quick response time, so broadcasters’ “transactions do not become mired in FCC purgatory,” she said.
But O'Rielly said the waiver process “is not a viable option,” as “it puts all stations at the mercy of arbitrary and capricious decision-making,” he said.
Pai and O’Rielly also criticized the agency for moving forward with new rules without completing an overdue review of the media landscape.
Under a mandate from Congress, the FCC reviews its media ownership rules every four years. The agency moved forward with its 2014 review on Monday, which will include the long overdue 2010 review and is expected to be completed by June 2016.
“That’s more than eight and a half years after we finished our last quadrennial review,” Pai said, calling Monday’s vote to change ownership rules without completing the 2010 review “a thumb in the eye of Congress and an evasion of our legal obligations.”
O’Rielly said the FCC’s avoidance of the 2010 review deadline is an “enormous embarrassment and a damaging precedent.”
During Monday’s meeting, the FCC also voted to keep the large broadcast companies from jointly negotiating with cable and satellite companies over fees for broadcast programming.
“All we’re doing today is leveling the negotiating table,” Wheeler said.
Under the current “retransmission consent” system, broadcast companies are required to negotiate “in good faith” with cable and satellite companies over payment for broadcast programming.
While broadcasters say the negotiations are fair, cable and satellite companies say broadcasters have too much leverage in the negotiations. In addition to their ability to pull broadcast programming — creating a “blackout” for subscribers — broadcasters often jointly negotiate to increase pressure on the cable and satellite companies.
“When stations jointly negotiate, retransmission consent fees are higher, and those higher charges get passed on to consumers,” FCC Commissioner Jessica Rosenworcel said.
Under the order passed unanimously by the FCC on Monday, the top four broadcasters in any media market cannot team up to negotiate for retransmission fees.
When Congress decided to let broadcasters charge cable and satellite companies for broadcast programming — that consumers can get for free with a basic antenna — lawmakers “intended it to be a one-on-one negotiation,” Wheeler said.
“Today we are returning the practice to Congress’ intent by prohibiting the top four broadcasters from leveraging each other to increase fees,” he said.