FCC says it will fine Gray Television over duopoly rules

(Graphic courtesy Gray Television)

The Federal Communications Commission (FCC) says it will push forward with a large fine against Gray Television for purportedly violating ownership rules with respect to a pair of Alaska television stations.

The fine stems from an FCC investigating dating back to 2020 when the regulatory agency started to look into Gray’s purchase of Anchorage CBS affiliate KTVA (Channel 11). The purchase included everything except the KTVA license, which remained with cable operate GCI through their parent company, Denali Media Holdings.

As a consequence of the acquisition, KTVA went off the air in September 2020, and the CBS affiliation transferred to KYES (Channel 5), a low-power television station. The KYES call letters were changed to KAUU, and the newsroom employees and assets of the former KTVA were integrated into Gray’s other Anchorage TV station, NBC affiliate KTUU (Channel 2).

The asset purchase and affiliation swap was an interesting move by Gray, in that it seemed to exploit a loophole in federal ownership rules that prohibit one broadcast company from owning two of the top four stations in any given market without a waiver from the FCC. Officials at the federal agency say Gray never applied for such a waiver, and they proposed a $518,000 fine against the broadcaster for violating ownership rules.

Gray appealed, arguing that the FCC never notified the company about its purported rule-breaking, and arguing that the issue should be moot anyway since the regulation restricts its ability to pick and choose the content that airs on its TV stations.

The broadcaster claims the merger of KTUU and what would become KAUU “advanced the public interest by saving jobs in an economy that was in recession long before the pandemic crippled local businesses, by expanding local news hours and resources in Anchorage…by providing more and higher quality advertising opportunities for advertisers, and by permitting the state’s dominant cable operator to enter into a novel retransmission arrangement to expand access to local broadcast stations to local households.”

Gray also said the FCC previously approved the purchase of KTVA, though it wasn’t immediately clear if regulators knew of Gray’s plan to move the CBS affiliation.

“No finding of liability and no fine is appropriate in this case,” Gray said in its appeal.

On Tuesday, the FCC said it disagreed, arguing that Gray had not said anything of substance to prove why a fine was not the appropriate course of action for violating its ownership rules.

A spokesperson for Gray said the FCC’s decision to uphold the fine was wrong, and that the broadcaster intends to sue in federal court.

“Federal law, including U.S. Supreme Court precedent, simply
does not allow the FCC to rewrite its rules to prohibit a transaction structure that it previously approved,” the spokesperson said. “Nor does federal law permit the FCC to impose penalties on those who followed the rules as they were written at the time.”

Gray said its forthcoming legal challenge will be the first time in two decades that a court will scrutinize the FCC’s ownership rules.

“Gray anticipates that its challenge of today’s Forfeiture Order will likewise end in another strong judicial vindication of its position and another strong judicial repudiation of a federal agency overstepping its authority and failing to adhere to the rule of law and protect the public interest,” the company said.