Wheeler Announces Proposed Relaxed Channel Sharing Rules at NAB Show

LAS VEGAS -- Relaxed rules for broadcasters on channel sharing and foreign ownership and hints that the incentive auction may end up with a more broadcaster-friendly pricing scheme were the principal takeaways from FCC Chairman Tom Wheeler’s speech Wednesday at NAB Show, numerous broadcast industry officials told us. Shortly before his speech, Wheeler circulated draft rules designed to make it easy for broadcasters to channel share, and he’s exploring with Commissioner Michael O’Rielly an initiative to relax rules against foreign ownership, he told the NAB crowd.

Though Wheeler stopped short of saying the incentive auction’s pricing scheme would be revamped, he said the FCC has received broadcasters’ message to simplify the auction, which broadcasters and broadcast attorneys said they believe is a signal that the FCC will ease up on its unpopular proposed dynamic reserve pricing (DRP) scheme. “He signaled that he heard us,” on auction pricing, NAB President Gordon Smith told us after the speech.

The newly circulated draft channel sharing rules would allow full power and Class A stations to “select channel sharing partners both before and after the conclusion of the auction,” allow sharing deals to be set for fixed terms, and allow stations unconnected with the auction to channel share, Wheeler said. The previous channel sharing rules were completely bound up with the incentive auction and required indefinite sharing agreements, said Expanding Opportunities for Broadcasting Coalition Executive Director Preston Padden. The proposed changes to the rules would greatly liberalize them, Padden said in an email. “The resolution of this issue is a model for resolving DRP” and other auction issues, Padden said.

The channel sharing measure and foreign ownership announcements joined the recently announced proposed AM revitalization rules and concentration on pirate radio enforcement in Miami and New York as broadcaster-friendly policies touted by Wheeler in Wednesday’s speech. Wheeler highlighted the “bipartisan nature” of the AM revitalization and foreign ownership proposals, which several attendees saw as an attempt to combat assertions that the commission has become too politically polarized.

Broadcaster reaction to the speech was mainly positive, mixed with some skepticism. Wheeler’s speech was “encouraging” in that it showed “engagement” and an improvement between the NAB and Wheeler, Smith said. The chairman “made a concerted effort” to appeal to broadcasters, said Nevada Broadcasters Association President Mary Beth Sewald after the speech. Several broadcast attorneys told us they saw the speech as hinting at a better auction scheme, but others expressed doubt that DRP would be completely removed.

Wheeler called the NAB and Sinclair’s legal challenge against the incentive auction “an elephant” that can’t be ignored -- a point in his speech that several broadcast industry officials said showed a remaining gulf between Wheeler and broadcasters. After touting the opportunity of the incentive auction and the success of the AWS-3 auction, Wheeler highlighted the court challenge as a “possible bump in the road” between broadcasters and their auction profits. “The lawsuit is a big issue,” Smith said. Though he acknowledged Wheeler seemed receptive to changing the auction pricing scheme, the repacking plan remains a “daunting challenge" for broadcasters, Smith said. One broadcast attorney told us Wheeler’s speech overemphasized the court challenge as a barrier to the auction.

Wheeler defended an FCC proposal to reduce the number of FCC Enforcement Bureau field offices as an attempt to address business inefficiencies. “Keeping a person in so many field offices costs two-to-four times as much as if we had centralized field offices out of which agents worked,” Wheeler said. The move won’t diminish the FCC’s efforts against pirate radio stations because the field office plans increase the number of agents in Miami and New York where most pirate stations are located. Broadcast attorneys have told us that the FCC is seen as not taking pirate radio seriously, but broadcast attorney Jack Goodman told us Wednesday that the increased efforts in New York and Miami sound encouraging.

Broadcasters should support the FCC’s net neutrality efforts because the open Internet order is analogous to must-carry rules, Wheeler said. “The Open Internet order safeguards an increasingly important distribution channel for your most important product -- local news and information,” Wheeler said. “It assures that your use of the Internet will be free from the risk of discrimination or hold up by a gatekeeper.”

The NAB Show is the last NAB convention before the incentive auction on Wheeler’s current time line, and his last chance to appeal that they participate, he told the broadcasters. “The FCC has no other incentive auctions planned, or expected, Wheeler said. “And the special provisions for this broadcast spectrum auction are usable only once.” The auction is “risk free” because broadcasters see their opening bid before they choose to participate, and can drop out in any subsequent round. “Stations that participate and drop out or are not selected will be treated as if they had not participated. I emphasize that,” Wheeler said. “If each of us successfully addresses the opportunities inherent in the open Internet and the incentive auction, the end result will be a vibrant over-the-air broadcasting industry,” Wheeler said.