Battle Over Virtual Duopolies Heats Up At FCC

As pressure mounts on the FCC to crack down on so-called “virtual duopolies,” the NAB is mobilizing to convince regulators that agreements among television stations to consolidate core operations should not be banned or subject to the duopoly rules.

Underscoring the sense of urgency, an NAB delegation led by General Counsel Jane Mago met last week with key advisers to all four FCC commissioners and Media Bureau Chief William Lake to press the association’s case.

“The agreements allow broadcast licensees to benefit from some economies of scale and scope while maintaining separate ownership and control of their respective stations,” they told the FCC officials, according to NAB's official account of the meeting.

"Depriving stations, especially smaller ones, of the ability to engage in joint agreements could have a significant impact on both the production of local news and the stations' ultimate financial viability."

Much of the pressure to do something about the virtual duopolies is coming from longtime adversaries who have set aside their differences. Free Press and the cable industry have teamed with labor unions and satellite TV providers to urge the commission to end the local TV combinations, which they say undermine competition among broadcasters, or at least establish clear rules delineating when they are permissible.

The American Television Alliance, whose members include Time Warner Cable, American Cable Association, Dish Network, DirecTV and the U.S. Telecom Association, held five meetings in mid-November with FCC officials to complain about station agreements.

Increasing the heat was fresh criticism from Congress. In a letter yesterday to FCC Chairman Julius Genachowski, 10 prominent House Democrats — including Rep. Anna Eshoo of California, the ranking member on House Communications Subcommittee — complained that consolidation among newsrooms “in some cases has led to layoffs, increased debt held by media companies and caused a decline in the diversity of viewpoints necessary to sustain a functioning democracy.”

The focus of the regulatory tussle is a congressionally mandated quadrennial review of the FCC’s media ownership rules. A new proposal from FCC Chairman Julius Genachowski to update the rules seeks feedback on whether the contractual mergers amount to outright ownership, whether they should be restricted and, if so, whether existing alliances should be grandfathered, sources close to the developments told TVNewsCheck.

The proposed rulemaking — which is subject to change — also would eliminate a rule that limits common ownership of radio and TV stations in the same market and seeks comment on elimination of the radio-TV crossownership rule, insiders said. In addition, it proposes to relax broadcast-newspaper crossownership along the lines of the FCC’s controversial 2007 decision that allowed combos in the top 20 markets, but that was overturned by a federal appeals court.

A vote to proceed with the rulemaking could come in the next couple of weeks.

Raising alarms among broadcasters that the rulemaking may be headed in a direction they would prefer it not was a Nov. 25 FCC staff order involving a flurry of contracts that resulted in Raycom Media's running three stations in Honolulu, including the CBS and NBC affiliates.

Although the FCC rejected a petition to undo the deal, it cautioned that it shared the petitioners' concerns about local broadcast concentration and said it would address them in the rulemaking. The combination is “clearly at odds with the purpose and intent of the duopoly rule," the FCC said.

As amended last in 1999, the FCC’s duopoly rule permits common ownership of two TV stations in a market if eight, independently-owned stations remain — and only one merging party is among the top four. The agency estimates there are 175 duopolies nationwide.

But in dozens of markets, stations have formed virtual duopolies through contractual agreements that allow them to share resources and even facilities without triggering the rule.

“It is an outright evasion of the TV duopoly rule,” said Andrew Schwartzman, senior VP and policy director of the Media Access Project, a public-interest law firm. The goal of these agreements “is to do what the duopoly rules prohibit."

For example, in 2009, Granite Broadcasting and Barrington Broadcasting reached an agreement to merge the operations of their stations in two markets. In Syracuse, N.Y., Barrington's NBC affiliate WSTM would run Granite's CBS affiliates WTVH, while in Peoria, Ill., Granite's NBC affiliate WEEK would take over Barrington's ABC affiliate WHOI.

Yet, the arrangement didn't cause a stir at the FCC because there were no changes in ownership — no "real" consolidation.

“You thought that NBC and CBS were competitors, right,” quipped Carrie Biggs-Adams, staff representative for NABET-CWA, labor unions concerned about layoffs that often follow such consolidation. “This is just sweeping through the industry,” she said.

A University of Delaware study issued in October concludes there are 83 markets in which TV stations collaborate in this manner.

There is no official count. “Many such agreements probably exist, but they are not required to be filed with the FCC and we have no way of determining how many there are,” an FCC official said in an email.