Jessell at Large

Wheeler Needs A Lesson From U.S. Grant

And that is the importance of focusing on one's most crucial task, something the Union general did exceptionally well. In the FCC chairman's case, that focus should be on making sure the upcoming incentive spectrum auction is a success. For that to happen he needs broadcaster participation. So why is he risking antagonizing them with a totally discretionary attack on joint sales and shared services agreements that broadcasters have been using for the past nine years?
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In his business-management book Leadership Lessons from the Civil War, FCC Chairman Tom Wheeler credits General Grant for tenacity and conviction. Rightly so. Those two qualities contributed to Grant's ultimate success in saving the Union. But I think Wheeler may have missed another of Grant's winning attributes, although it may just be an aspect of tenacity. That would be single-mindedness or focus. When Grant locked onto a military objective, he never allowed himself to be distracted.

In the spring of 1864, Grant locked on to destroying General Lee's army — and he did, even though it took nearly a year. When Richmond fell (the ostensible goal), Grant ignored it so that he could relentlessly pursue Lee and force his surrender. It was that still-potent army, he knew, not Richmond, that was the heart of the rebellion.

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(My own research in this area has uncovered the fact that Grant had posters printed and distributed to his staff and top commanders: "It's the Army of Northern Virginia, Stupid.")

To focus is a lesson the FCC chairman, author and Civil War buff needs to learn.

I assume that Wheeler knows that his entire FCC administration will be judged on its ability to conduct a successful incentive auction next year. If it flops, he'll be to telecommunications what Kathleen Sebelius is to health care.

For the incentive auction to be deemed a success, the FCC has to buy a great swatch of TV spectrum (the goal is 120 MHz) from broadcasters in a reverse auction and then sell it in a forward auction to wireless broadband carriers.

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The proceeds from the second auction have to be enough to compensate the broadcasters who gave up spectrum, reimburse broadcasters who have to move their channels, fund the development of a congressionally mandated first responder network and contribute a few bucks to the general treasury.

It will not be easy. Wheeler has often described it as a Rubik's cube with many moving parts. Billions of dollars are at stake, and great industries crucial to the U.S. economy are in play.

If Wheeler is to have any hope of pulling it off, he has to avoid any unnecessary distractions, especially those that could damage prospects for the incentive auction.

Which brings us to Wheeler's crackdown on joint sales agreements and shared services agreements that broadcasters have been using for the past nine years to set up duopolies in markets where they would otherwise be prohibited.

According to our story by Doug Halonen this week, if Wheeler gets his way, he will bar new JSAs and require broadcasters to unwind existing ones within 18-24 months. Wheeler would also launch a rulemaking to consider banning SSAs as well. The moves could come next month.

Broadcasters attribute the initiative to Wheeler's desire to placate liberal foes of media consolidation and MVPDs who say JSAs and SSAs give broadcasters too much clout in retrans negotiations. They also suggest that it may be driven by a misguided belief that duopolies discourage broadcaster interest in the incentive auction.

I can't tell you what exactly is motivating Wheeler’s interest in local broadcast ownership rules at this point, but I can say it seems at odds with what should be his prime mission: running a successful incentive auction.

At the same time that FCC officials are planning to visit broadcaster individually to encourage them to participate in the auction, Wheeler has launched a proceeding that is antagonizing broadcasters and increasing the level of mistrust between the FCC and the industry that has been building since Wheeler's predecessor and fellow Obama-appointee Julius Genachowski took office in 2009.

Remember Stuart Benjamin? He was the Duke law professor that Genachowski brought in to be part of his brain trust in 2009. Benjamin was the author of a paper that suggested that the FCC use regulations to burden broadcasters and speed their demise so that their spectrum could be freed up for wireless broadband.

"Every dollar of additional costs for broadcasters is one less dollar of profit, and thus reduces the attractiveness of over-the-air broadcasting as a business model," he wrote.

I'm not sure how much influence Benjamin had on FCC policymaking then (little, I suspect), but many broadcasters are convinced that Benjamin's way of thinking has now taken hold at the FCC and that the agency is now out to get them. They need reassurance, not an assault on a business model that confirms their fears.

Wheeler may think that in going after SSAs and JSAs, he is going after the Sinclair Broadcast Group, a particular target of liberal groups because of its willingness to use its airwave to espouse conservative views and attack Democrats. But sharing arrangements are pervasive now.

Tribune, Gannett, Raycom, Gray, Granite, LIN, Schurz, Cox and Nexstar make use of them. The NAB would not be trying to save SSAs and JSAs if they were not important to a good portion of its TV membership.

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Comments (4) -

SalesGrrl Nickname posted over 3 years ago
I couldn't agree with you more Mr. Jessell!
Roger Thornhill Nickname posted over 3 years ago
It doesn't seem to me that Tom the Cable Guy has lost sight of the successful auction objective or isn't sticking with the U.S. Grant playbook. He appears to be on track there. But the strategy is different. He isn't sweet-talking broadcasters into participating, that comes later. The first step is to weaken the industry by constricting the cash flow and burdening it with more regulation. If Tom can eliminate the JSAs/SSAs and UHF discount, devalue stations and stock prices of broadcast groups and can make the acquiring and holding on to stations unattractive, then he can negotiate from a position of strength. That would be the time to start making personal visitations, hailing the incentive auction as a golden "opportunity" and getting verbal assurances of participation from browbeaten and beleaguered owners, if not actually getting them to sign on the dotted line. If Wheeler can dis-incentivize owners from holding to their stations or acquiring more of them then he's pretty much on his way to a successful incentive auction. That, I believe, is the Wheeler strategy. The thing that is frustrating is that we can see his game plan unfolding but can do precious little to stop it.
Ronald Nickname posted over 3 years ago
Well said. He is proving to be ruthless. Meanwhile in the face of all this the two largest cable companies (TWC/CMCSA) announce a merger. He is using the playbook of change the rules to create a crisis. Dirty
Roger Thornhill Nickname posted over 3 years ago
Harry is definitely right about the Stuart Benjamin influence. You can see it in everything the FCC does and says in regards to television broadcasting.
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Ratings

Overnights, adults 18-49 for September 27, 2016
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    3.0/11
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    1.8/6
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    1.2/4
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    0.9/3
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    0.6/2
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    0.2/1
Source: Nielsen

Reviews

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