September 25, 2020 - 4:25 pm
By Michael O'Rielly | Commissioner

To quote the proverbial infomercial announcer, “But wait, there’s more!” Nearly every month under the current Commission, we have considered items to improve the media regulation landscape for our nation’s treasured broadcasters. Considered on their own, many of these actions may seem limited in their significance. Taken together, however, these modernization efforts have served to alleviate real burdens imposed on broadcasters, in turn allowing them to better serve their viewers or listeners and advance the goal of localism in communities around the country. While I am hopeful that we will bring all relevant open proceedings to conclusion by year’s end, this process has also helped highlight just how backward and outdated certain aspects of our media regulation regime really are, and therefore, how much work remains to be done. 

To facilitate this process, I would humbly submit a few more ideas, in addition to those I have previously proposed, that the Commission could quickly implement to improve the plight of America’s struggling broadcasters and support local journalism. As many broadcasters seek to rebound from the double-whammy of COVID-19 and asymmetric competition from unregulated Internet-based providers, these reforms are more critical than ever.

To be clear, many of these proposals could exist within the confines of our current regulatory regime, which is governed by misguided court mandates and is at odds with the contemporary media marketplace.  I haven’t abandoned my beliefs or policy preferences in favor of dramatically altering our media rules, especially those governing common ownership, but until such an overhaul is sanctioned by the Commission, the Supreme Court, or Congress, we must focus on improving the current broken system incrementally.

Ending Freeze on License Modifications

Over a decade ago, the Commission placed a freeze on applications to make technical upgrades or modifications to stations to facilitate the Broadcast Incentive Auction and subsequent repack. For good reason, this freeze was established to avoid overwhelming the staff working on the Incentive Auction transition and to ensure the process did not become overly difficult or complex. In the long run, however, it’s kept stations that were not repacked from investing in and upgrading their physical infrastructure.  For example, certain equipment installed more than 10 years ago during the digital transition may be failing, but due to the freeze, stations are unable to modify or improve technical facilities. These stations are faced with the unpalatable choice between using scarce financial resources to make stop-gap repairs or purchasing replacement equipment that will become a stranded investment once the Commission lifts the freeze and allows them to improve or modify their stations to better serve their communities.

Now that the repack has essentially concluded, stations should be permitted to start filing applications for needed upgrades.  If the processing window for applications is opened, stations could start procuring equipment and lining up technicians to carry out the work immediately. Otherwise, we jeopardize the ability of some stations to serve their communities effectively and bounce back from the challenges of 2020.  With each passing month, it becomes increasingly critical to restart this process.

Updating Failing Station Criteria

It is past time to update the criteria for a failing broadcast station, or at minimum, adjust the presumption in favor of a failing station waiver.  By way of background, the Commission’s outdated restrictions prevent common ownership of certain broadcast stations within the same market without a waiver.  One justification for obtaining such a waiver is that a station is “failing” — i.e., the station has been struggling for “an extended period of time both in terms of its audience share and financial performance.” To justify such a waiver, criteria must be met: (1) one of the merging stations has had a low all-day audience share (i.e. 4 percent or lower); (2) the station has had negative cash flow for the previous three years; (3) the merger will produce tangible and verifiable public interest benefits; and (4) the in-market buyer is the only reasonably available candidate willing and able to acquire and operate the station, and selling the station to an out-of-market buyer would result in an artificially depressed price. By meeting each of the prongs, an application is presumed to be in the public interest. 

Unfortunately, the failing station test is incredibly outdated. Specifically, the first two prongs haven’t been updated since their creation and do not reflect the true state of a station in trouble. Consider that the pandemic has helped to exacerbate a paradox of local broadcasting: even though local news ratings have significantly increased, and local journalism has been extremely important to communities all across the country during this time, ad revenue has dramatically fallen off. Therefore, even though some stations appear to be doing well from a viewership perspective, they are hemorrhaging cash trying to keep their journalists safe and well-equipped to cover current events, both in the field and in the studios.  Further, having a negative cash flow for three years is far too long and too broad a measurement to be used as a relief trigger.  Industry experts suggest a better time frame may be 18 months and that negative cash flow should be replaced with a combination of operating losses, debt obligations, and/or inability to access capital.

The bigger problem with the failing station structure is that it functions as the only objective, practical means to get a waiver.  In other words, while the Commission could waive its ownership rules for other reasons, passing the bright-line test is the only clear path to relief. Yet, there are other situations worthy of similar treatment.  Consider those cases in which the merger of two or more stations in a market would dramatically improve desired local programming.  While this could arguably satisfy prong 3, it would not necessarily be sufficient to fulfill the rest of the failing station test. 

Instead, we should establish separate criteria, perhaps even a new process that is separate from the failing station test, for presuming certain mergers that improve local and/or live programming are in the public interest. There should be a clear path for transactions that would improve such programming, as well as those that would preserve station employment levels and result in more resources being invested in the purchased station. 

As with other presumptions built into our regulations, this change would not equate to automatic approval of applications.  But, what it would do is open the door to allow for creative solutions in today’s market to keep stations on the air and protect local journalists’ jobs. Take, for example, the combination of stations within the Sioux Falls television market, which I’ve written about elsewhere, and which was part of a recent study that quantified the benefits of such arrangements. Sioux Falls is a story of relative success, where local news has blossomed despite the pandemic. Unfortunately, we have also seen how existing approaches have decimated local newsrooms in places such as Casper, Wyoming. The latter is a painful example of how myopic limitations can significantly harm local journalism, and in turn create huge losses for communities, both in terms of jobs and local news. If a failing station waiver helps to avoid such outcomes, then perhaps now is a good time to bring the presumption into line with today’s needs. 

If, for some reason even these reasonable, modest changes are deemed too much — which would be disappointing and hard to fathom — the Commission absolutely can and must clarify that the failing station presumption is just that, a presumption, and that nothing prevents applicants from applying for a waiver, and ultimately receiving approval, by way of other approaches or under other circumstances. In other words, the existence of one type of presumption does not preclude consideration and approval of transactions that would be justified for separate reasons.

Low Power Station Relocations

The Commission could further limit unnecessary regulatory burdens by allowing waivers of our LPTV processing rules for in-market station moves that would otherwise be approved. Current rules bar LPTV moves that are more than 30 miles, even if they are moving within their existing market. This has sometimes led to the absurd result of stations having to file applications repeatedly when moving within their existing DMA, “inching” along 30 miles at a time. I know of at least one LPTV station that is seeking to move within an Alaska DMA, and one can only imagine the difficulties that this caterpillar-like process would pose in that geography and over that distance. I am not suggesting that waivers be automatically granted, but simply that waivers of the 30-mile limit can and should be granted, and that it shouldn’t be necessary to file multiple applications for moves entirely within the DMA. This common-sense change would go a long way in helping to avoid the current, overly-burdensome process facing some stations.

VHF to UHF & Communities of License Changes

Two further ideas worthy of action would be updating the rules related to VHF stations seeking to upgrade to UHF channels and easing the process for television stations to change their community of license in certain cases. For some reason, nothing seems to strike fear into some hearts as the prospect of stations changing channels or changing communities. And, that’s despite the fact that our staff did extremely well managing the Incentive Auction repack – and deserves sincere praise. Since these fears are often unfounded, it’s time to also consider updating the regulations for these types of applications. 

In the case of moving VHF channels to the UHF band, it’s important to note that existing technical rules were crafted in the 1960s, back when color television sets were cutting edge and sometimes even the size of small cars.  While there are some VHF stations that are within the top two in their markets among MVPD viewers, these stations can barely maintain a top-4 position with over-the-air viewers due to reception problems caused by environmental noise and horrendous VHF propagation characteristics.  Meanwhile, with the increased pace of cord-cutting, it is more important than ever that viewers – especially low-income viewers that may disproportionately receive their news and information from an over-the-air-signal – have access to robust, quality signals. These stations could likely make a strong case for a channel change, but they are hamstrung due to problematic analog-era precedent remaining on the books, making for an unnecessarily difficult process. 

Similarly, for some stations seeking to make a community of license change that would only shift the station contour very slightly, 1970s-era precedent prevents service improvements that would substantially benefit local viewers.  While these changes should only be permitted to the extent that they don’t frustrate other Commission priorities, maintaining outdated, artificial limitations that impede the mere consideration of such applications is the wrong approach, and worthy of change.

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Harmonizing our broadcast regulations with market realities is a Commission obligation. While holistic change is unlikely in the near-term, the changes I’m proposing today could be pursued within the bounds of our current rules while significantly improving the overall regulatory regime.