Draft 2018 QR Order Would Extend Top 4 Limits to LPTV and Multicast Channels

An FCC draft order on the 2018 quadrennial review would extend the restriction on owning top-four duopolies to multicast channels and low-power TV stations but wouldn’t alter local radio ownership limits or rules barring major networks from purchasing each other, agency and industry officials said in interviews. The draft QR order, which officials told us runs some 90 pages, uses language that resembles the FCC’s arguments in an enforcement action and ongoing court case against Gray Television involving the company’s top-four combination in Anchorage, FCC and industry officials told us.

“The Commission should not make it harder to keep local news and information alive in smaller markets,” emailed former FCC Commissioner Robert McDowell, now a partner at Cooley, which represents Gray. The agency “should ensure that whatever it is contemplating does [not] undermine the economic model supporting local news. The future of democracy depends on a well-informed citizenry and for much of America local TV news is the only source of local journalism as newspapers continue to vanish.”

The draft item would treat multicast channels and LPTV stations as full-powers to restrict commonly-owned top-four duopolies in the same market, industry and FCC officials told us. Existing combinations would be grandfathered in, but that would cease to apply if any of the stations involved in the combination were sold, industry and FCC officials said. That would likely complicate any such sale, a media broker told us. The draft order discusses but doesn’t take up proposals to relax restrictions on local radio ownership, FCC and industry officials told us.

Under the current Local Television Ownership Rule, full-power station purchases that result in broadcasters owning multiple top-four network affiliates in the same market are prohibited. However, a little-used 2017 provision allows the agency to authorize such combinations on a case-by-case basis. Currently, there's no explicit restriction against broadcasting multiple top-four networks in the same market if all but one are low-power stations or multicast channels. Especially in smaller markets, it's common for broadcasters to host major network programming on multicast channels or LPTV stations because it's often the only way to reach viewers with that programming, said Wilkinson Barker broadcast attorney David Oxenford. “There just aren’t enough TV stations.”

NAB, broadcasters and networks made similar remarks in ex parte filings posted this week. “Many small markets simply cannot support four full power television stations,” said a joint filing from the Fox, CBS, NBC and ABC broadcast affiliate groups. “Among the ABC, CBS, and FOX broadcast networks, each network has at least 20 affiliates on a multicast channel or LPTV station, and one of the networks has over 45 such affiliates,” said Fox, Disney and Paramount Global in a meeting with Media Bureau Chief Holly Saurer and an aide to Chairwoman Jessica Rosenworcel, according to an ex parte filing. “The overwhelming majority of these affiliates operate outside of the largest 100 markets in the United States.”

MVPD groups such as the American Television Alliance have long urged the FCC to prevent broadcasters from evading the top four prohibition using LPTV stations and multicast streams. NAB pushed back on those calls in a filing posted this week. “These arrangements do not – and could not in today’s competitive marketplace – enable broadcasters to charge higher advertising or retransmission consent rates,” NAB said. “Evidence of public interest harms arising from such situations [is] conspicuous by its complete absence in the record,” NAB said. Said NCTA in March comments on the 2022 QR (see 2303060070): "Broadcasters in a growing number of instances have been using these means to reap the economic benefits of top-four station consolidation without running afoul of the rule."

FCC and industry officials told us that arguments in the draft QR order are similar to those raised in the agency’s legal battle with Gray in the 11th U.S. Circuit Court of Appeals over a $518,000 forfeiture order based on Gray’s purchase of a station’s top-four network affiliation in the Anchorage designated market area (DMA). In that case, the agency argued that Gray’s purchase was the functional equivalent of a license transfer and that allowing broadcasters to purchase top-four network affiliations “would leave ‘no barriers’ to a company’s ‘eventually acquiring all of the top-four network affiliations from other in-market stations through a similar combination of agreements.’”

Regulating ownership of LPTV stations and the content of multicast channel programming would depart from previous FCC policy, broadcast attorneys told us. The agency hasn’t historically limited common ownership of multiple LPTV stations in a single market. Holland & Knight broadcast attorney Charles Naftalin told us he had a client with double-digit LPTVs in the same DMA. The agency has also avoided regulating programming, he said. Gray argued in the 11th Circuit U.S. Court of Appeals that restricting a broadcaster from airing a specific network's programming because of the top-four prohibition violates the First Amendment. The FCC responded that the “Courts repeatedly have affirmed” that the agency has the authority to limit how many top-four stations are commonly owned in a market because doing so “is rationally related to the important governmental interest in promoting competition in local television markets."

Some broadcast attorneys said the agency could be challenged for not providing sufficient notice of the changes in the draft QR order. The 2018 QR NPRM sought comment on questions related to the top-four prohibition and LPTV and multicast channels, though it didn’t explicitly propose rules around them. “Should a low power station that is ranked among the top four stations in audience share in a DMA be counted as a top-four station for purposes of the Top-Four Prohibition?” asked the NPRM. “We seek comment on whether and how the Commission should evaluate multicast streams for purposes of the Local Television Ownership Rule.”