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Fate of Big Broadcast Mergers Hinges on Who Calls Senate Shots

Dec. 11, 2020, 10:00 AM

Tightening rules for acquiring broadcast TV stations is high on FCC Democrats’ to-do list, but how fast they can move may depend on the political drama unfolding in Georgia.

Democrats want to undo a rule under which certain TV stations count less toward a national ownership cap which has allowed Nexstar Media Group Inc. to significantly expand its reach in markets across the country. The GOP-led agency reinstated the UHF discount in 2017, after the Democratic-controlled FCC scrapped it during the Obama administration.

Democrats will need a majority at the five-member commission to enact their agenda, and a Republican-led U.S. Senate could block confirmation of a third Democrat to tip the balance. Senate control will be determined by the results of the Georgia runoffs for that state’s two seats.

Restoring the discount for UHF stations cleared the regulatory path for Nexstar’s $7.2 billion acquisition of Tribune Media without overrunning the FCC’s cap on owning stations that reach more than 39% of U.S. households nationwide. The deal turned Nexstar into the largest station owner in the country, with 197 TV stations in 115 markets.

Abolishing the discount would scrap any deals of that magnitude for the foreseeable future.

“The odds of the UHF discount going away are high,” said John Janedis, a media industry analyst at Wolfe Research. “As soon as we go in that direction, there is certainly much less opportunity for transformational deals.”

Without the discount, Nexstar reaches more than 60% of U.S. households, and 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.

The FCC likely wouldn’t force companies already above the cap to divest stations, but abolishing the discount would prevent them from expanding their reach.

“The move would prevent future mergers and acquisitions and station sales,” Bloomberg Intelligence analysts Matthew Schettenhelm and Mike Campellone said in a recent note.

Democratic FCC Commissioners Jessica Rosenworcel and Geoffrey Starks have voiced support for undoing the discount, a step they see as essential to increasing competition and diversity in the broadcast industry.

The Senate Dec. 8 confirmed GOP nominee Nathan Simington to the commission over Democratic objections. FCC Chairman Ajit Pai plans to depart Jan. 20, leaving the commission split 2-2 as President-elect Joe Biden takes office.

If Republicans keep control of the Senate with at least one victory in Georgia, they could block a Biden FCC nominee, leaving the commission deadlocked on matters such as media ownership rules, net neutrality, and other issues with partisan splits.

“The danger is raised here by his nomination that in fact there will be a 2-2 split, the FCC will be gridlocked, which means it will fail to protect consumers,” Sen. Richard Blumenthal (D-Conn.), who opposed Simington’s confirmation, said during a Dec. 7 call with reporters.

A spokesman for Senate Majority Leader Mitch McConnell (R-Ky.) didn’t immediately comment about whether McConnell would schedule a vote on a Democratic FCC nominee in 2021 if Republicans control the Senate.

Analog-Age Rule

The UHF discount allows broadcast owners to count only half of the U.S. households they reach with their UHF stations toward the ownership cap of stations that collectively reach no more than 39% of the national audience. The agency adopted the rule in 1985 because technical limitations at the time made the signal quality of UHF channels inferior to VHF stations.

The Obama-era FCC repealed the discount in 2016, arguing that it was no longer necessary because the transition to digital broadcasting eliminated the technical inferiority of UHF channels.

The Republican-led FCC reinstated the discount in 2017, a move that was criticized by top Democrats, including House Speaker Nancy Pelosi (D-Calif.) and then-FCC Commissioner Mignon Clyburn, a Democrat who is on Biden’s FCC review team.

“The Commission just wrapped up and put a bow on a huge gift for those large broadcasters with ambitious dreams of more consolidation,” Clyburn said when the FCC voted to restore the discount.

To contact the reporter on this story: Jon Reid in Washington at

To contact the editors responsible for this story: Melissa B. Robinson at, Keith Perine at