May 18, 2018 - 12:20 pm
By Michael O'Rielly | Commissioner

This week, I had the opportunity to travel to Phoenix, Arizona to observe and check in on the progress of one of the ATSC 3.0 test markets. In Phoenix, twelve broadcast stations are participating in the test market, including Scripps Company’s KNXV Channel 15 (ABC), Fox Television Stations’ KSAZ Channel 10 (FOX) and KUTP Channel 26 (MyTV Network), Meredith Local Media Group’s KPHO Channel 17 (CBS) and KTVK Channel 24 (Independent), Nexstar Media Group’s KASW Channel 49 (CW Network), Telemundo Station Group’s KTAZ Channel 39 (Telemundo), Tegna’s KPNX Channel 12 (NBC), Univision’s KFPH-CD Channel 35 (UniMas) and KTVW-DT Channel 33 (Univsion), Arizona Television KAZT Channel 7, and Arizona PBS KAET Channel 8. Together, these broadcasters – along with cable and manufacturing partners – are engaging in hyper-collaboration in order to deliver enhanced audio, emergency alerting, and other pro-consumer features to the market as quickly as possible. 

Seeing this collaboration was impressive in and of itself, but it also emphasized what I already knew to be the case: that ATSC 3.0 may very well be a game changer for our nation’s broadcasters. Unfortunately, there is a false narrative in Washington, DC, that ATSC 3.0 will only benefit one particular company.  In fact, this narrative goes even further, suggesting everything the Commission has done in the media space over the last 17 months has been to benefit one company, in this case, Sinclair Broadcast Group.[1]  This misguided fantasy is perplexing to other broadcast stations across the country that have seen real benefits to our actions.  That is why I believe it is time to call these assertions for what they truly are: a rhetorical tool designed to divert attention from opponents’ lack of substantive objections to the underlying policies, combined with what seemingly appears to be an extreme personal dislike for the company itself.

It should be of no great surprise that this is occurring in the current D.C. environment, but for whatever reason, such violative charges have gone unchecked.  That’s not right.  Those spreading such false claims should be challenged to show — with some form of detailed evidence — a direct link between Commission action on media items and the alleged intent to directly benefit that one company (and, by the way, it cannot be done). 

The American people deserve to know that decisions in these matters were based on the underlying law and corresponding record — as required.  The Commission’s actions under Chairman Pai’s leadership have been designed to reduce the labyrinth of outdated and costly media rules that no longer make sense today.  This is vital in the current marketplace where television broadcasters are not competing solely amongst each other, but, also, with cable networks and major over-the-top platforms like Netflix and Amazon.    

The following is an effort to examine each major media item approved by this Commission, which should help eliminate any notion of favoritism towards Sinclair:

  • Main Studio Rule — Fundamentally, it is perplexing that people have tried to malign Chairman Pai for this item when I was the one who championed the elimination of the main studio rule.  Thus, a person would have to believe in not only a hidden Sinclair agenda but also that there was some master conspiracy between the Chairman and me to get to that outcome.  Such a theory is Area 51 territory.  And no proof exists for this purpose since it didn’t happen.

Substantively, although the elimination of the main studio rule applies to all broadcasters, it’s relief is most beneficial to small and mid-sized radio stations. For example, while in Phoenix I had the opportunity to tour a Univision station and meet with the general manager who explained how the elimination of the main studio rule will allow Univision to determine how to more efficiently allocate resources to its four radio stations in Arizona once it no longer has to pay for four separate offices. Univision has no plans to cut local news in those areas, but instead can now expand such reporting with their newfound resources. By all admissions, Sinclair is neither small nor all that interested in radio; it owns four radio stations today out of the 15,499 total licensed AM and FM stations, and hasn’t shown a desire to further invest in the medium. Moreover, just as I predicted, the elimination of the unnecessary rule hasn’t led to great studio consolidation or closures. Instead, it was and is about permitting cost efficiencies — without harm to localism — for all broadcasters, which will occur over a longer time frame.

  • UHF Discount — As I have stated on numerous occasions, the Commission didn’t have the authority to eliminate the UHF discount, as it did in 2016 because it was part of the larger compromise in Congress to set the national ownership cap at 39 percent.  When this Commission reinstated the discount, it was merely reverting back to the proper status quo and undoing the illegal actions of the previous Commission.  Thus, whether the discount is helpful for Sinclair is irrelevant, as we have the obligation to comply with what the law is, instead of what some people would like it to be. 
  • Newspaper/Broadcast Cross-Ownership — Sinclair owns no “newspapers” of the kind that are captured by the FCC’s prior prohibition and, like most broadcasters, has shown no interest in investing in the medium.  The elimination of the rule provides little to no benefit to the company.  Moreover, elimination of the newspaper/broadcast cross-ownership ban has been attempted by the FCC under different leadership in 2002 and 2006.  Unfortunately, previous efforts were stymied by the U.S. Third Circuit Court of Appeals on procedural and unrelated grounds.  All to say, this has been a burden the Commission has been grappling with – and trying to do away with – for more than 15 years. 
  • Radio/Television Cross-Ownership — As mentioned, Sinclair owns four radio stations already permitted under Commission rules and like most television broadcasters has shown little interest in investing further in the medium.  The elimination of the rule provides little to no benefit to the company.
  • Waiver of Duopolies of Top Four Stations in a Market — The Commission’s 2017 reconsideration of the 2010/2014 Quadrennial debacle adopted a waiver process to allow duopolies in a market, even if both stations are among the top four in terms of audience share.  Anti-Sinclair activists argue that the Commission opened a special path to approve potential Sinclair duopolies.  For anyone who followed my views, they would know that I favored greater relief than just a waiver process, which can be completely subjective and abused (see previous Commissions).  Given the limited procedures available under reconsideration, I was willing to delay a larger examination until the 2018 Quadrennial.  Accordingly, the Commission will likely be able to holistically examine our top four duopoly policy later this year.  And, this was not a position I recently developed.  In August 2016, I admonished the Commission for not addressing this issue then.  Specifically, I stated: “To say [the duopoly rule] is still needed in an era of literally hundreds of competitive pay TV channels and essentially unlimited competitive Internet content defies belief.”  My position has not changed, and I will continue to work to ensure that in our next review we adequately define the media marketplace to reflect this reality.  In the meantime, I have no doubt that Chairman Pai will run a transparent waiver process open for all applicants — not targeted for Sinclair.  
  • National Ownership Cap — I have been abundantly clear that I don’t believe the Commission has been authorized by Congress via statute to change the so-called national ownership cap.  Ironically, my position aligns with the view previously expressed by Sinclair, which has since changed.  While the Commission has teed-up an NPRM on the subject and may eventually adopt a new level or modify the formula for its calculation, such an action will likely be challenged in court.  Because I am supportive of getting to court review, I will back changes to the existing cap, which I don’t think is substantively defensible any longer.  Despite lending my support to get to court review, I suspect my words and position will be used to undermine the Commission’s future case.  Accordingly, it should be impossible for anyone to suggest with a straight face that this item represents some pro-Sinclair agenda.
  • Television JSA Attribution Rule — Joint Sales Agreements (JSAs), the practice of one station selling ad spots for another in exchange for a portion of the proceeds, are legal, legitimate, and proper ways to generate efficiencies for local broadcasters, especially for smaller ones that may not have the capacity or the expertise to run a full ad shop.  Trying to attribute ownership to the larger station for JSAs was a backdoor mechanism to cease JSAs and ignored the reality that JSAs likely would be less necessary if the Commission, with court approval, removed or further relaxed its byzantine media ownership rules.  This notwithstanding, Congress recently spoke to this issue requiring the Commission to delay its attribution rules and include transferability for all existing JSAs until September 30, 2025.  Thus, the Commission’s elimination of its attribution rule in 2017 had little practical effect, including for Sinclair.        
  • Sinclair Enforcement Action — In a recent Notice of Apparent Liability issued against Sinclair, the Commission proposed a record fine of $13.4 million for failing to include required sponsorship identifications for broadcast station advertisements.  In doing so, the Commission rejected mitigating factors, such as the ads were for a legitimate cancer institute, that could have justified reducing the fine.  Notwithstanding, critics argue that Sinclair was let off easy as the fine could have been higher.  And yet, the fine matched our existing precedent.  That is, we took the base forfeiture amount, multiplied it by the number of violating ads, and then adjusted it upwards to an even higher level.  To ignore precedent by imposing a higher fine would significantly increase the likelihood that the courts would overturn the decision.  Overall, it’s hard to fathom that the strong proposed enforcement action against Sinclair, in this case, can be viewed as favoritism.   
  • ATSC 3.0 Standard — As outlined above, critics have argued that the Commission’s actions to adopt a new television standard was done to aid Sinclair’s profitability via its portfolio of patents that it holds applicable to the new standard.  Anyone who followed the Commission’s deliberations regarding ATSC 3.0 would know that I advocated against including any portion of the standards in our rules.  Instead, I made the case that we should have just eliminated rules prohibiting broadcasters from moving to ATSC 3.0.  Moreover, it should be noted that the adoption of a compilation of twenty standards making up ATSC 3.0 by the private sector went through extensive debate and voting procedures.  The Commission merely adopted what the standard setting body agreed to.  It is also noteworthy to emphasize that ATSC 3.0, as designed by this Commission, will be a voluntary, consumer-driven transition.  The new standard promises real benefits for consumers – such as ultra-high definition pictures and enhanced emergency alerting.  But, if consumers are uninterested in these features, they will not be forced to adopt them.  Again, while in Phoenix, I got to witness twelve broadcast stations – none of which were Sinclair – collaborate on how best to launch ATSC 3.0 in the Arizona test market based on focus groups and studies showing what consumers most responded to.  Typically, outside of today’s anti-Sinclair doctrine, this would be considered a major victory for the consumer.  
  • Broadcast Incubator Program — The creation of an incubator program, being led by Chairman Pai, is intended to increase broadcast ownership by small entities, often including women and minority groups.  While the program is likely to need some type of benefit to entice participation, the end goal is to further diversify ownership, thereby decreasing larger station group ownership, such as that by Sinclair.  Yet, desperate to see this Commission’s media ownership reforms struck down or remanded by the Third Circuit, advocacy groups have actually opposed this program.  It may be more prudent to question their agenda, not mine.     

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Examining each of the items above should show to the unprejudiced reader that the action either didn’t help Sinclair in any capacity or was done to relieve the entire broadcast industry of a burden.  Any benefit to Sinclair was residual and non-intentional.  At the same time, the entire debate misses the bigger picture that I witnessed firsthand in Arizona this week: that the changing marketplace is causing tremendous challenges to legacy broadcasters forced to abide by outdated and irrelevant ownership limitations and Commission rules.  My priority has been to remove these outdated burdens imposed by the Commission that no longer serve the public interest or make sense, so that broadcasters are able to survive and thrive in the current competitive landscape.  I will continue down this path as long as I have the privilege to serve as a Commissioner of this agency.      


[1] I maintain a strict policy of not commenting on any pending or prospective transaction.  Correcting the record here does not violate that position as it does not attempt to engage in any discussion involving Sinclair’s pending merger application.