FCC chairman moves to end TV-newspaper ownership ban

The chairman of the Federal Communications Commission said he’ll move to weaken or kill local media ownership restrictions next month, potentially clearing the way for more consolidation among companies that own TV and radio stations.

Chairman Ajit Pai told Congress he’ll ask the FCC, where he leads a Republican majority, to eliminate the rule barring common ownership of a newspaper and nearby broadcast station, and to revise restrictions on owning multiple broadcast outlets in a single market.

"If you believe, as I do, that the federal government has no business intervening in the news, then we must stop the federal government from intervening in the news business,” Pai said in a hearing of the House communications subcommittee. He said that’s why he offered his rules revision to "help pull the government once and for all out of the newsroom.”

Republicans have been calling, without success, to weaken or kill those rules for more than a decade, and Pai’s ascension to FCC chair as President Donald Trump’s choice gives the party a chance to accomplish that goal. He set a vote for Nov. 16.

Relaxed rules could help Sinclair Broadcast Group Inc., which earlier told the FCC that its proposed $3.9 billion purchase of Tribune Media Inc. would violate local-market ownership strictures in 10 cities.

Pai cast his ownership proposals as part of his commitment to the First Amendment that guarantees free speech—a live topic since Trump threatened broadcast licenses over news reports.

Democrats announced opposition even before Pai spoke.

“The already consolidated broadcast media market will become even more so, offering little to no discernible benefit for consumers,” Commissioner Mignon Clyburn, a Democrat, said in testimony prepared for the hearing where Pai and the other commissioners appeared.

Broadcasters eager to consider merger deals have chafed under the ownership restrictions. The rules were written to guarantee a diversity of voices for local communities, and broadcasters say they’re outdated in an era of media abundance featuring cable and internet programming.

The local rules are separate from the national audience cap that limits companies to owning stations that reach 39 percent of the U.S. audience, which Pai didn’t address. That rule could force Sinclair to sell some stations in return for approval of its proposed purchase of Tribune. The deal is before the FCC and antitrust officials for approval.

Pai’s proposed deregulation could set off local transactions, involving station swaps and other small-scale deals, Wells Fargo analyst Marci Ryvicker said in a note.

“We do NOT expect transformative M&A,” Ryvicker wrote, using a shorthand term for merger and acquisition activity. She said the broadcast industry would be strengthened because two-station sets are more profitable than stand-alone outlets.

Pai’s proposal needs to win a majority at the FCC, and will be subject to intense lobbying in the three weeks leading to the next monthly meeting when the vote is to take place.

Regulations to be revised include the local-TV rule. It allows a company to own two stations in a market if at least one of the stations is not ranked among the top four stations locally, and if the market still will have at least eight independently owned TV stations.

Pai told lawmakers he will propose to the commission that it eliminate the latter provision, known as the eight-voices test, and put in place a case-by-case review for allowing exceptions to the top-four prohibition.

Pai also said he’d seek to eliminate a rule restricting common ownership of a TV station and nearby radio station. The agency is to publish the proposed rules on Thursday, he said.

The National Association of Broadcasters said it “strongly supports” the proposal.

FCC restrictions have “punished free and local broadcasters at the expense of our pay TV and radio competitors,” said Dennis Wharton, a spokesman for the trade group. “We look forward to rational media ownership rules that foster a bright future for broadcasters and our tens of millions of listeners and viewers."

The News Media Alliance, formerly called the Newspaper Association of America, focused on the newspaper-broadcast rule, put in place in the 1970s.

“Outdated regulations preventing investment in one sector of the media market do not make sense, particularly when newspapers compete with countless sources of news and information every day,” said the trade group’s president, David Chavern.

The Free Press policy group objected.

“We need to strengthen local voices and increase viewpoint diversity, not surrender our airwaves to an ever-smaller group of giant conglomerates,” said Craig Aaron, president of the group. “Pai is clearly committed to doing the bidding of companies like Sinclair and clearing any obstacles to their voracious expansion.”

Representatives of cable and satellite-TV companies wary of the negotiating clout of combined stations have said they will be concerned if the top-four restriction is relaxed or eliminated. Broadcasters are raising fees they charge to cable and satellite companies in return for permission to carry their signals.

“Pai’s statement to end media rules is most retrograde in FCC history,” Michael Copps, a former Democratic FCC commissioner, said in a tweet. “Halloween sweets for Big Media, paves way for huge Yule for Sinclair.”