The FCC today officially voted to reinstate the UHF discount for TV broadcasters that was eliminated last year.
The commission determined that last year’s action had the “effect of substantially tightening the national cap for companies without any analysis of whether this tightening was warranted given current marketplace conditions.” With today’s vote, the FCC will return to the “pre-August 2016 status quo in the marketplace” for broadcasters.
Later this year, the FCC pledges to take a more holistic approach to re-examining both the UHF discount and the 39% ownership cap placed on broadcasters. Back under the rules of the discount, broadcasters using UHF spectrum are allowed to count 50% of television households in their market when gauging compliance with the national cap.
The move, not wholly unanticipated by broadcasters, could potentially kick off a wave of broadcast TV consolidation. Currently, Sinclair Broadcast is said to be nearing a potential deal to acquire Tribune Media’s 42 TV stations, and large broadcast powers like Nexstar Media and CBS have both expressed interest in expanding their broadcast TV footprints should the FCC revert back to the old ownership rules.
Jefferies’ John Janedis said in a recent research note that large broadcasters like Nexstar and Sinclair and smaller acquisition targets stand to benefit from the return of the discount.
Janedis added that, assuming that entities above the new cap are grandfathered, the “winners” will be Nexstar and Sinclair, which can grow past the cap in the near term, as well as Tribune Media and Tegna, “which could be seen as potential targets, in our view.”
“On the other hand, if the discount and cap increase do not occur in tandem, we think [Tegna, Meredith and E.W. Scripps] could benefit as broadcasters with the ability to combine/add the most reach,” Janedis wrote.
The National Association of Broadcasters was quick to applaud the move by the FCC.
"NAB supports today's FCC action reinstating the UHF TV station ownership discount and commends Chairman Pai for his leadership on this issue. This represents a rational first step in media ownership reform policy allowing free and local broadcasters to remain competitive with multinational pay TV giants and broadband providers," said NAB President and CEO Gordon Smith in a statement.
But others, including FCC Commissioner Mignon Clyburn, warned of the potential for harming competition and diversity by reinstating the rules.
The National Hispanic Media Coalition said today’s FCC decision will cause irreversible harm to diverse owners of small and mid-sized companies.
“Fewer than 10% of broadcast licenses are held by people of color at a time when over a third of Americans are people of color. That doesn’t happen by accident, that happens when policymakers bend the rules for media conglomerates to continue to amass greater power over what we see and hear,” said Carmen Scurato, director of policy and legal affairs for the National Hispanic Media Coalition, in a statement. "Our last resort is accountability and the FCC today has again chipped away at broadcast requirements that would give the public any glimpse at why platforms owned by women and people of color are disappearing. The FCC must find more ways for the public to access timely data and analysis on media diversity with a meaningful opportunity to weigh in on these distressing changes.”