The Federal Communications Commission has an array of rules that limit how many TV and radio stations a single entity can own both across the country and in individual markets. These rules are aimed at ensuring there’s competition, localism, and a diversity of voices in the broadcast industry.
The rules haven’t undergone major change for nearly two decades. Congress requires the agency to update its media rules every four years, but the U.S. Court of Appeals for the Third Circuit has struck down the agency’s changes four times since 2004 for analytical and procedural shortcomings.
That could change in 2021, when the U.S. Supreme Court considers whether the Third Circuit erred when it blocked the FCC’s most recent rule changes, including scrapping a ban on owning a TV station and newspaper in the same market.
1. Why are there ownership limits?
Broadcast airwaves are a publicly owned and finite resource. The FCC’s media ownership rules are supposed to promote viewpoint and programming diversity, competition, and minority and female ownership of broadcast stations. The goal is ensuring the public can access a wide range of viewpoints and programming in any given U.S. market.
2. What are the rules?
The FCC has a national ownership cap that prevents a single entity from owning stations that reach more than 39% of U.S. households nationwide. There is a related UHF discount that allows broadcast owners to count only half of the U.S. households they reach with their UHF stations toward the ownership cap. That discount is a throwback to days when UHF stations had much poorer transmission than their counterparts so they weren’t on equal footing.
The agency also limits how many broadcast and radio stations an entity can own in a single market. For instance, one entity can only own up to two local TV stations if one of the stations is not a top-four rated station as measured by audience share.
The FCC also prohibits mergers between the big four broadcast networks: NBC, CBS, ABC, and Fox.
3. Where do Republicans, Democrats stand?
The two parties disagree on the media ownership rules, and particularly on the national cap.
Republicans, with backing from major broadcasters, have expressed interest in loosening the national cap. They argue it’s too restrictive in today’s world where TV stations compete against tech giants like Amazon.com Inc. for viewers and advertising dollars.
Democrats and consumer advocates, however, say maintaining the existing cap is essential to prevent consolidation and an eroding of local news coverage and viewpoint diversity.
The UHF discount has also been a lightning rod. It was repealed by the Obama-era FCC, which argued it was no longer needed because UHF stations are no longer technically inferior to VHF stations.
The Trump-era agency reinstated it in 2017, a move that enabled Nexstar Media Group Inc. to purchase rival Tribune Media in a $7.2 billion deal while still remaining under the cap.
Without the UHF discount, Nexstar reaches more than 60% of U.S. households. Rivals including Sinclair Broadcast Group Inc., Tegna Inc., Fox Corp., and ViacomCBS Inc. are at, or close to, exceeding the 39% ownership cap, according to Bloomberg Intelligence data.
4. What’s being reviewed by SCOTUS?
The high court will hear an appeal by the GOP-led FCC of a Third Circuit decision that struck down the agency’s repeal of a ban on cross-ownership of TV stations and newspapers and slight relaxation of local ownership limits. The appeals court ruled that the agency failed to adequately analyze how its changes would impact minority and women ownership of stations.
If the agency prevails, broadcasters would have more leeway to purchase or swap stations in local markets. It would also ensure that Fox Corp. can permanently own both the New York Post and local broadcast station WWOR-TV. The FCC recently granted Fox a temporary waiver to maintain the combination while the high court case is pending.
A high court win for the FCC could also increase the likelihood that its future attempts to update media ownership rules will survive court challenges.
5. What’s next?
The Supreme Court will hear oral arguments on Jan. 19. The FCC and broadcasters are favored to prevail before the conservative-leaning court, even with Democrats taking control of the FCC in January with the incoming Biden administration, Matthew Schettenhelm, a Bloomberg Intelligence analyst, said in a recent note.
The Democratic-led FCC is seen as unlikely to further ease media ownership rules. It is expected to scrap the UHF discount, though the timing of such action will depend on how quickly Democrats can obtain a majority at the agency. It is also unlikely to force broadcasters to divest stations if they’d exceed the ownership cap without the discount.
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