Virtual Duopolies Coming Under Fire
So-called virtual duopolies are a fact of life in TV broadcasting.
For more than 20 years, broadcasters, through various contractual arrangements, have enjoyed the efficiencies of running multiple stations in a market, even where FCC rules limit broadcasters to owning just one.
But such duopolies may now be in jeopardy.
Advocacy groups concerned about media consolidation and the American Cable Association, concerned about broadcasters' leverage in retransmission consent negotiations, want the FCC to tighten up its rules to break up virtual duopolies or, at the very least, prevent the formation of new ones.
"Some of these agreements are clear violations of the rules," says Angela Campbell, who represents the Communications Workers of America and Media Council of Hawaii in their effort to block Raycom Media from controlling three stations in Honolulu. "What's the point of having rules if you're not going to enforce them?"
The ACA railed against virtual duopolies last month in an FCC inquiry into whether new rules or procedures are needed to protect small cable operators from being gouged by stations in retrans negotiations.
Through the various duopoly arrangements, "one entity is allowed to conduct retransmission consent negotiations on behalf of two ‘must-have' affiliates, resulting in small cable operators paying substantially more for retransmission consent than if the two affiliates had to negotiate separate deals," says the coalition of small operators.
"These broadcaster negotiating alliances drive up the cost of retransmission consent by about 21%," it claims.
Although ACA's principal interest is reform of the retrans regulations, it may also support limits on virtual duopolies. "Nobody should be surprised to see ACA weigh in on this issue as part of the media ownership review," says Ross Lieberman, ACA's VP of government affairs.
The extent to which virtual duopolies are to be allowed is likely to be revisited in the FCC's quadrennial review of all its broadcast ownership rules, which the agency kicked off last month by inviting comments on them.
In that proceeding, broadcasters will urge the commission to relax its duopoly rule so that they can own multiple stations in small markets and convert virtual duopolies into real duopolies.
Opponents of media consolidation will oppose any relaxation of the rule and ask to close "loopholes" now allowing broadcasters to control multiple stations in smaller markets.
As part of its review, the FCC is commissioning several studies. Among them may be one that will gauge the scope and nature of the many virtual duopolies now in place, according to commission sources.
Virtual duopolies emerged in the late 1980s when the FCC began allowing stations to engage in local marketing agreements under which one station would, for all practical purposes, run another in the same market.
In 1999, the FCC revised its local TV ownership rules to permit common ownership of two stations in larger markets where there are at least eight competing television owners as long as one of the two stations was not rated among the top four.
Significantly, the FCC also OK'd virtual duopolies created through the local marketing agreements, but limited them. The controlling station could not program more than 15% of the programming day of the other station, it said.
The agency also adopted a "failed station" policy to allow common ownership of two stations in a small market if it could be demonstrated that one of the stations might go dark without help.
The deregulatory moves triggered a wave of local consolidation in the larger markets with major station groups like CBS, Fox, Tribune and NBC doubling up.
At the same time, other broadcasters pushed ahead with virtual duopolies in smaller markets (those with fewer than eight owners) through a variety of contractual arrangements -- local marketing agreements, shared services agreements and joint operating agreements.
By whatever name, they enabled broadcasters to operate multiple stations in small markets and enjoy the operational efficiencies, even where they cannot own multiple stations.
The virtual duopolies take a variety of forms. In some cases, the arrangements are between two completely independent and established broadcasters.
Just last week, LIN TV said it would be taking over the management of stations owned by Acme Communications in three markets: Albuquerque-Santa Fe, N.M.; Dayton, Ohio; and Green Bay-Appleton, Wis.
But, in many other cases, duopoly broadcasters have taken control of second stations in markets by creating and financing ownership entities to acquire them and then enter into duopoly agreements.
Sinclair Broadcast Group and Nexstar Broadcasting are masters of these types of virtual duopolies. They have put together entire station groups -- Cunningham and Mission, respectively -- to own second stations that they may operate under current rules.
The FCC does not have a good handle on how many duopolies -- real or virtual -- there are today among the approximately 1,800 full-power TV stations or where they are. In one proceeding, it said there were 175 duopolies based on data supplied by BIA/Kelsey, but offered no details.