Wheeler’s Office Didn’t Bring Republicans in on JSA Rule Change Plans

A plan for proposed changes to the rules governing joint service agreements (JSAs) by FCC Chairman Tom Wheeler’s office has been shared only with the offices of his fellow Democratic commissioners, Jessica Rosenworcel and Mignon Clyburn, said several FCC officials. Republican commissioners Mike O'Rielly and Ajit Pai were “kept out of the loop,” one FCC official said. It’s not uncommon for a chairman’s office to work on items without giving a heads-up to commissioners of the opposing party, several former FCC officials said. It can breed animosity, one former eighth-floor official said. Such partisan inclusion in the drafting process was said to have happened under then-Chairman Julius Genachowski, as staff developed conditions to allow Comcast to buy control of NBCUniversal (CD Jan 18/11 p1).

The FCC is a “collegial body” and shouldn’t just be “a one-party situation,” said a former eighth-floor FCC official. Sharing information equally with other commission offices and keeping the atmosphere “as collaborative as possible” can create goodwill among commissioners, said another former eighth-floor official. However, drafting an item without involving other offices leaves less room for changes to be suggested once it does go before other commissioners, another former FCC official said, allowing the chairman’s office to lock the item down in the form he or she wants. That can be advantageous when a proposal is expected to meet dissents by opposing commissioners, said the former FCC official. A Media Bureau spokeswoman declined to comment.

It’s not surprising that the Republican commissioners wouldn’t be involved in an item to change JSAs, said public interest attorney Andy Schwartzman, who has long advocated against such arrangements. “There are some items where you know you're going to have a consensus and some where you know you won’t.” It’s widely believed that both Pai and O'Rielly would vote against a proposal to change the rules on sharing agreements, and Pai said he doesn’t support such a rule change at the commission’s Jan. 30 public commissioner meeting (CD Feb 3 p11). JSAs allow separately owned TV stations to share resources without the broadcasters exceeding media ownership rules, and Wheeler’s staff has been said to be preparing an item to require the pacts be attributed when a station brokers more than 15 percent of another’s ads (CD Jan 30 p1).

"Chairman Wheeler probably will need the support of Democratic Commissioners Clyburn and Rosenworcel to change the rules,” wrote Guggenheim Partners analyst Paul Gallant in an email to investors. “Republican Commissioners Pai and O'Rielly are likely to have concerns with restricting sidecar arrangements."

Though public interest groups have said they would like the commission to go further than making JSAs attributable, Free Press Policy Counsel Lauren Wilson said she wants this proposed rule change to pass even if it’s not a unanimous decision. If Rosenworcel and Clyburn support the measure but Wheeler’s office can’t get Pai and O'Rielly on board, the commission should “just go ahead without them,” similar to the commission vote over the summer on prison phone rates, Wilson said.

Restricting sharing arrangements “could resurrect the kind of high-profile partisanship that surrounded past FCC battles over media ownership limits,” said Gallant. The commission may not stop with JSAs, Gallant said. “We suspect the agency will seek public comment on whether to cut back or eliminate SSAs as well,” he said of shared services agreements. Any tentative position from the commission would likely be “to limit or eliminate SSAs as well,” wrote Gallant.

Industry observers have told us that companies affected by a change in JSA rules will likely deal with the issue by restructuring their deals rather than through divestitures (CD Feb 3 p11). “Station groups would NOT have to necessarily unwind current JSA partnerships under the potential new rule, but rather limit the ownership structure to simply selling no more than 15 percent of the partner’s advertising inventory,” said Wells Fargo analyst Marci Ryvicker in an email to investors Monday. Broadcast owners are likely to have two years to come into compliance with such a rule, Ryvicker said. That two-year window is the same that was used for JSAs in radio, and agency officials have said the 15 percent attribution threshold Wheeler may pursue is similar to that on the books for radio. If TV stations have to restructure to sell less ad inventory for their JSA partners, it may reduce expenses and be “relatively immaterial overall,” Ryvicker said.