Will the FCC Tighten a Key TV Station Ownership Rule?

Dec 12, 2023

By Ted Hearn, Editor of Policyband 

Washington, D.C., Dec. 12, 2023 – TV station owners have their fingers crossed as they await a big regulatory decision out of the Federal Communications Commission. Agency action is expected within days based on a court order requiring an FCC decision by Dec. 27.

Before the agency is a proposal to tighten a key TV station ownership regulation. A negative outcome for broadcasters could upend established business practices that support their market value. Even if the FCC exempts existing TV station deals otherwise disallowed under the new rules, many broadcasters fear that even an accommodation like that could hurt their ability to exit the business at a healthy price.

Meanwhile, the cable TV industry wants to see the FCC crack down on TV stations by putting tough rules on the books, saying the agency needs to curb stations’ local market power that cable operators think results in higher fees they pay to stations for retransmission consent and in higher cable TV bills.

In recent filings with the FCC, cable and broadcasters have been exchanging barbs. The National Association of Broadcasters accused cable of “hallmark opportunism” before the FCC, while cable’s biggest lobbying arm – NCTA - The Internet & Television Association – bashed broadcasters for “circumventing” FCC rules to achieve dominance over local cable systems.

At issue is the FCC’s Top Four rule. In existence for many years, the rule stipulates that a single entity may own only one of the top-four rated stations in a local market, which usually means the ABC, CBS, NBC and Fox outlets. FCC Chair Jessica Rosenworcel circulated her proposed rules to the other four Commissioners on Nov. 16.

Although Top Four ownership combinations may not occur by law without an FCC waiver, they are effectively happening in dozens of markets across the country in a manner that neither the FCC nor Congress has attempted to block.

One way for a local TV station to control more than one Big Four network in a single local market is to own or partner with low-power TV stations. LPTV  stations are exempt under the Top Four rule, which applies to full-power stations.

A second method is for a local station to broadcast Big Four programming on a multicast channel. TV stations’ digital capacity allows for the broadcast of multiple programming services, and digital subchannels are legally not individual full-power TV stations.

Taking advantage of what cable calls “loopholes” in the Top Four rule, Gray TV in Harrisonburg, Va., for example, controls all Big Four networks via a combination of full power and low power stations and digital multicast/subchannel streams. In a carriage dispute with Gray, Harrisonburg-area cable companies could lose access to ABC, NBC, CBS and Fox in an instant.

Still, broadcasters say consolidation is necessary for their economic viability and their ability to serve their communities with local news and emergency alerts, especially in rural markets that in some cases can’t support four full-power TV stations.

“Those sorts of dual or multiple affiliation arrangements benefit the public, allowing broadcasters to reach more (and more diverse) viewers,” TV stations owners affiliated with the Big Four told the FCC earlier in the month. “These arrangements also generate important economic and operational efficiencies for broadcasters, ultimately allowing stations to increase the amount of local news programming they provide …”

Although independent TV station owners have been at odds with the Big Four networks on the appropriate regulation of streaming services, ABC, CBS, and Fox have locked arms with NAB members in attempting to fend off cable.

“… To preserve the benefits of free, over-the-air access to network programming, the Commission should not change its policies in ways that would have the effect of applying the Top Four restriction to multicast channels and/or LPTV stations,” the three networks told the FCC last week. NBC is owned by Comcast, the largest U.S. cable company.

NCTA is a pushing to disallow LTPV and multicast combinations, saying their use is prevalent and fuels increases in retransmission consent fees.

According to NCTA, one broadcaster controls the programming of two or more Top Four stations in 114 cases involving 92 markets using an LPTV station or multicast digital subchannel, “even though the Top Four rules would bar the same broadcaster from outright owning two full-power top-four stations in those markets.” The U.S. has 210 TV markets.

“Broadcasters’ continued ability to exploit these loopholes in the Commission’s rules will result in more harm to consumers in the form of ever higher prices. The Commission should therefore extend its Top-Four Prohibition to low power stations and multicast streams,” NCTA told the FCC last week, adding that retransmission consent fees have skyrocketed “1,084% since 2010 and 85% over the last six years.”

In seeking greater ownership flexibility, NAB has urged the FCC to relax the Top Four rule itself so that more of the most popular stations can combine in a market. NAB told the FCC that adoption of NCTA’s proposal “would be devasting to broadcasters in smaller markets that air a second major network affiliation on a multicast stream or on a commonly owned LPTV station …”