Wheeler Seen Having Votes to Pass JSA Order

FCC Chairman Tom Wheeler likely has the votes to get approved the draft order to tighten restrictions on sharing arrangements and limit joint negotiation of retransmission consent agreements, said several communications attorneys and industry observers in interviews Friday. It’s unlikely that Wheeler would have rolled out the planned regulation on Thursday (CD March 6 p7), several days before the required “white copy” date, without believing he had the Democratic commissioners’ votes needed to pass the rules, the industry observers said. Republican commissioners Mike O'Rielly and Ajit Pai have both indicated that they oppose rule changes to make sharing arrangements attributable, and industry officials said they expect no votes.

If JSAs are made attributable, broadcasters involved in such arrangements are likely to look for an alternative arrangement rather than divest themselves of stations (CD Feb 3 p11). One likely venue for that could be shared services agreements (SSAs), broadcast attorneys have said. Wheeler’s draft order will require greater disclosure of SSAs and a draft FNPRM would request comment on future SSA regulations. The order doesn’t set attribution rules for JSAs, which could lead to a “wave of transactions” involving the arrangements, said public interest attorney Andy Schwartzman, of Free Press and the Georgetown University Institute for Public Representation. It wouldn’t be surprising for broadcasters to seek a way around new rules on JSAs, said Public Knowledge Senior Staff Attorney John Bergmayer in an interview. “JSAs themselves are already a workaround."

A switch from JSAs may not be a big stretch for many broadcasters, said a broadcast attorney who represents clients involved in sharing arrangements. Since JSAs govern only advertising sales, hiring the additional staff required to create a sales department for a sidecar company wouldn’t necessarily drain the economic value from a station relationship or proposed transaction, the attorney said. Since proposals to attribute JSAs have been in front of the commission for years, many broadcast attorneys have long included clauses in transactions that make room for changed rules, the attorney said. Tribune’s recent purchase of Local TV doesn’t involve any JSAs, said Schwartzman. The draft rule changes for JSAs aren’t expected to strongly affect broadcaster stock prices, because the regulatory change has already been “priced in” to their value, Guggenheim Partners analyst Paul Gallant told us. It was a point echoed by Wells Fargo analyst Marci Ryvicker in an email to investors Friday.

Broadcasters are likely to also attempt to challenge new JSA and retrans rules in court, several communications attorneys said. Since JSAs and retran have open proceedings going back many years, much of the information in the record is old and any evidence of new facts or circumstances could be used as the basis for a challenge, said a broadcast attorney who represents clients involved in sharing arrangements. Opponents may also challenge the proposed rules by saying that proper notice of the rule changes wasn’t provided, since the FCC has a history of approving such deals, said industry officials. A notice argument is unlikely to fly with respect to the draft retrans rules, said Cinnamon Mueller cable attorney Barbara Esbin.

It’s also possible that the draft order could change between going on circulation Monday and the March 31 FCC meeting where it’s likely to come up for vote, several attorneys and analysts pointed out. Though Wheeler is seen as having the votes to pass the item, he may still be negotiating with fellow commissioners on the particulars of the rule changes, attorneys said. Commissioner Mignon Clyburn is seen as the swing vote on the matter, and parts of the rules could change to get her support or possibly mollify broadcasters, said an industry attorney. Wheeler seems to feel “pretty confident -- that doesn’t mean he’s got the votes on every part of the decision,” said another industry attorney, Fletcher Heald’s Frank Jazzo.