Bloomberg News

TV-Station Ownership Rule at FCC Urged to Exempt Small Companies

March 18, 2014

A U.S. regulator whose vote is needed to change television-station ownership rules that may force Sinclair Broadcast Group Inc. to sell assets is pushing to ensure smaller companies can win exceptions.

Mignon Clyburn, a member of the Federal Communications Commission’s Democratic majority, said in an interview she wants “balance” as the agency tightens regulations for controlling more than one station in a market.

Sinclair, Nexstar Broadcasting Group Inc. (NXST:US), Lin Media LLC (LIN:US) and Gray Television Inc. have dropped in trading ahead of the FCC’s vote scheduled for March 31. Marci Ryvicker, an analyst for Wells Fargo Securities LLC based in New York, in a note yesterday cut the companies to market perform from outperform, citing a “worsening” regulatory environment.

FCC Chairman Tom Wheeler, a Democrat who proposed the change, needs the votes of Clyburn and the commission’s third Democrat to prevail. Both Republican commissioners have criticized the measure.

Clyburn cited a section of law that calls for the FCC to lower barriers for entrepreneurs and small businesses and said she wants “the ability to uphold those standards and those goals.” She declined to say if she would vote for Wheeler’s proposal.

“This is an item that is still very fluid and I’m looking forward to continuing to work with my colleagues because we all in the end I believe want the same thing: to achieve balance,” Clyburn said.

‘Legal Fiction’

The FCC is targeting arrangements in which one station sells advertising time for a nearby station, setting up what Wheeler in a March 6 blog post called “a legal fiction” that circumvents agency rules. The FCC limits station ownership in order to promote diversity and competition.

Sinclair (SBGI:US), based in Hunt Valley, Maryland, owns or provides programming and services to 149 TV stations in 71 markets, according to a company filing with the Securities and Exchange Commission. It provides non-programming services such as sales and management help to 20 stations in 17 markets, according to the filing. The practice helps stations operate efficiently, and better serve their communities, Sinclair said in the filing.

Under Wheeler’s proposal, stations sharing ad sales would be considered commonly owned, and companies would have two years to come into compliance with rules against owning multiple stations in the same market.

Broadcasters could apply for waivers, Wheeler said.

Waiver Pathway

Clyburn today said there “will be a pathway for waivers if something does not neatly fit in the decision which we lay out.” The commission is trying to work out “ways that we can make that clearer and more efficient” before the vote.

Broadcasters say sharing can help fund TV coverage of local events. The arrangements “in fact, greatly foster localism and diversity,” Gordon Smith, president of the National Association of Broadcasters, told Clyburn in a March 12 meeting, according to a filing.

“The chairman is proposing to use a sledgehammer where a scalpel, if anything, is far more appropriate” to address “purported bad actors,” Clyburn was told by Smith and Rick Kaplan, executive vice president with the Washington-based trade group, according to the filing. Kaplan is a former aide to Clyburn.

The number of full-power commercial TV stations licensed to black owners has dropped in the past decade from 21 to three, of which two are operated as part of sharing arrangements, James Winston, executive director of the National Association of Black Owned Broadcasters, a Washington-based trade group, told Clyburn in a Feb. 26 meeting, according to a disclosure filing.

The FCC should consider on a case-by-case basis whether shared arrangements “have the potential to promote diversity of ownership,” Winston said.

To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net

To contact the editors responsible for this story: Bernard Kohn at bkohn2@bloomberg.net Elizabeth Wasserman, Steve Geimann


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Companies Mentioned

  • NXST
    (Nexstar Broadcasting Group Inc)
    • $48.16 USD
    • -0.80
    • -1.66%
  • LIN
    (LIN Media LLC)
    • $27.4 USD
    • -0.34
    • -1.24%
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