Interrupting TV’s M&A Broadcast; Proposed Rule Change on How Broadcast Stations Are Treated Could Stymie the Recent Uptick in TV Consolidation
October 1, 2013 Leave a comment
September 30, 2013, 5:11 p.m. ET
Interrupting TV’s M&A Broadcast
Proposed Rule Change on How Broadcast Stations Are Treated Could Stymie the Recent Uptick in TV Consolidation
MIRIAM GOTTFRIED
Broadcast stations may soon be sending a different signal. The Federal Communications Commission has opened a public comment period on a proposal that could make broadcast stations equal for the purpose of determining ownership caps. If adopted, it could put the brakes on the recent round of consolidation among station owners. A single company is currently prohibited from owning stations that, in aggregate, reach more than 39% of total TV households nationwide. But owners have been allowed to count only 50% of the TV households in their market areas toward the cap for stations broadcasting via ultrahigh frequency, or UHF, signals.The FCC says the so-called UHF discount was adopted 30 years ago when those signals were considered technically inferior to very high frequency, or VHF, signals. But the transition from analog to digital broadcasting means that is no longer true. UHF signals are now, if anything, superior to VHF, the FCC argues.
By making it easier to breach ownership caps, removing the discount could make it more difficult for companies to merge in order to gain heft in negotiations with TV networks and pay-TV providers. The past year has seen numerous examples of this, including Gannett’s agreement to buy Belo, Media General‘s MEG +4.70% deal to merge with Young Broadcasting and Sinclair Broadcast Group‘s SBGI -1.53%agreements to buy Fisher Communications and the Allbritton TV stations. Under the proposal, these deals would be grandfathered in.
The FCC is asking whether it should instead apply a VHF discount. But there are many more UHF stations than VHF ones. Another possibility: The FCC could issue a separate proposal to raise the overall cap, which it claims it has the power to do. Still, Congress may disagree.
What is clear: Uncertainty over the issue will likely knock deal making back down to a very low frequency.
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