The commercial radio and television industry’s largest lobbying group has renewed its call for federal regulators to eliminate ownership caps that prevent monopolies among large broadcast groups.
In a letter sent to the Secretary of the Federal Communications Commission (FCC) this week, the National Association of Broadcasters (NAB) wrote that the agency’s continued use of a formula to determine on a quadrennial basis whether the federal ownership restrictions are still necessary is largely outdated in the era of “Big Tech.”
The NAB has long complained that broadcasters like Nexstar, Sinclair, TEGNA, Gray Media, iHeart Media and Audacy are restricted from consolidating and scaling their operations because the FCC limits how many licensed TV and radio stations one company may directly own at a given time.
Presently, broadcasters are prohibited from owning local TV stations that reach more than 39 percent of the American viewing audience, and cannot own more than two “top four” stations in a given market without a waiver. Similar restrictions are imposed on the radio broadcasting industry.
Some companies, including Sinclair and Nexstar, have circumvented this restriction by bankrolling shell companies that acquire stations and associated FCC licenses, but cede operational control through “shared services agreements” or “local marketing agreements.” The loophole has been recognized by the FCC, but the agency has done little to restrict the practice. Additionally, TV stations that broadcast on UHF channels are counted as one-half of a station through a practice known as the “UHF Discount.” Most local TV stations that broadcast a digital signal transmit on UHF.
At the same time, broadcasters face increased competition from Google, Netflix, Amazon, Spotify and Apple, which have launched Internet-connected video and audio services and acquired smaller players in the space, with virtually no restriction on how they scale their operations. Google, Facebook and other tech firms have also pushed further into the digital advertising landscape — an area long ignored by commercial broadcasters and print publishers, until it became obvious that connected ad revenue was more lucrative.
Those trends put broadcasters at a competitive disadvantage, the NAB asserts, because “Big Tech” companies can grow as large as they like, while commercial broadcasters are limited by ownership caps.
“Continued marketplace trends over the past seven years make clear there is simply no good reason to keep any artificial limits on TV station groups’ audience reach,” the NAB wrote in its letter. “With Google and Facebook gobbling up local advertising revenues and stations competing with unconstrained streaming platforms for viewers’ time and attention, the FCC must end this limitation and allow broadcasters to better serve the public interest.”
The NAB and other industry groups have leveraged a few common elements to justify the need to eliminate ownership caps and effectuate other regulatory matters.
Local news continues to be at the top of that list: Industry advocates say commercial broadcasters — particularly those that own local TV and radio stations — continue to make sizable investments in local newsrooms at a time when the newspaper industry has constricted, particularly in underserved areas like small communities and rural towns.
While some broadcasters have increased their investments in local news resources over the past few years, those investments have been concentrated in areas where returns can be justified. In other parts of the country, journalists have faced layoffs, and newsrooms at radio and TV stations have shrunk or shut down entirely, with news and weather reports outsourced to centralized editorial hubs.
Some broadcasters contend the shutting down of smaller newsrooms and associated layoffs within the industry are the byproduct of unfair competition, and the only way to remedy this is to grow larger.
But Tim Hanlon, a media strategist with The Vertere Group who contributes to the website TV Rev, threw ice on that idea last week when he warned that other industry players have justified media consolidation along similar lines in the past, with few results to show for it.
“The 1996 Telecommunications Act, which relaxed media ownership rules, was supposed to increase competition and diversity,” Hanlon wrote. “Instead, it led to massive media consolidation, with companies like iHeartMedia swallowing up hundreds of radio stations. Localism suffered, independent voices were drowned out, and programming became more homogenized — all the things the law was supposed to prevent.”
If the FCC acts on a plan to deregulate the broadcast industry — by removing federal ownership caps, among other initiatives — it will benefit just a few companies that can afford to consolidate their operations through mergers and acquisitions, and that will lead to less investment in local programming, not more, Hanlon argues.
“When ownership is concentrated in the hands of a few, content inevitably becomes more uniform,” Hanlon said. “Local programming gets cut, minority and independent voices get pushed aside, and the media landscape becomes even more monotonous. If broadcasters genuinely value diversity in programming, they should think twice before cheering for rules that allow mega-mergers and monopolistic control.”
At this point, the likelihood that the ownership cap will be eliminated seems pretty inevitable, with FCC Chairman Brendan Carr indicating his willingness to invoke swift regulatory reform that appears to favor the desires of the commercial broadcasting industry.
In March, Carr issued a public notice that sought guidance on the specific rules the agency should modify or eliminate to modernize the agency’s approach to regulation.
“Rules do not exist in isolation, but operate against a backdrop of other FCC rules, other federal rules and requirements, relevant state and local laws, and industry self-regulatory efforts including the adoption of technical standards or best practices,” Carr wrote. “We seek comment on whether changes in the broader regulatory context demonstrate that particular Commission rules are unnecessary or inappropriate.”
