NCTA-The Internet & Television Association said the FCC will need to put conditions on the merger of Nexstar and Tribune, otherwise the deal runs a " material risk of consumer and competitive harm."

That came in comments on the proposed deal filed with the FCC this week. Nexstar made a bid for the stations, in the process positioning itself to become the nation's largest broadcast group, after Sinclair's deal cratered spectacularly in an FCC hearing designation order and a crossfire of lawsuits.

NCTA is primarily concerned about the impact of the merged broadcast group on retrans rates, particularly if the FCC allows the company to own two of the top four stations in Indianapolis, as they have sought permission to do, or to retain its numerous joint agreements with other stations.

Related: Without Conditions, ACA Says Nextstar-Tribune Should be Nixed.

The FCC still presumptively prevents ownership of those two top stations in a market, but under FCC chair Ajit Pai and his Republican majority, loosened late last year by saying the FCC would consider allowing it on a case-by-case basis.

As to the combined company's size and reach (owning or providing services to 216 stations in 118 markets), NCTA says: "The increased concentration of station ownership, far from benefiting multi-channel video programming distributors (“MVPDs”) as Applicants implausibly suggest, will in fact increase Applicants’ leverage in retransmission consent negotiations and lead to higher consumer prices as a result of the unreasonable retransmission consent demands that this transaction makes more likely."

Related: Tribune Media Shareholders Approve Nexstar Deal

NCTA said that if the FCC does approve the deal, it should at least prevent the Indianapolis combo of two of the top four--it says the broadcasters have not met the burden of proving the benefits outweigh the harms in this case, so it should not be allowed anyway.

The cable trade group also says the FCC should prevent the company from having any joint sales or services or marketing agreements in markets where it will already have a duopoly. The FCC does not count such JSAs and LMAs and SSAs against local ownership limits, another change under Pai from the previous FCC, which did presume them to be essentially efforts at de facto control that skirted the rules.

NCTA called for conditions, but stopped short of calling for the merger to be blocked.

Tribune Broadcasting, a unit of Tribune Media, has reached a comprehensive retransmission consent and carriage agreement with Altice USA. Terms of the deal were not disclosed.

The deal encompasses retransmission consent for Tribune stations across the country, including WPIX in New York, as well as carriage of Tribune’s cable channel, WGN America. Altice USA has about 4.6 million video customers in the New York metro area and in the Midwest. Its services are branded under the Optimum and Suddenlink names.

This is the third large carriage deal Altice USA has made in the past few months. In October it reached a carriage deal with 21st Century Fox for its broadcast stations and FX, and NatGeo cable channels. Also that month it inked a multi-year deal with Spanish language broadcaster Univision for its TV stations and expanded carriage of some of its cable networks. 

Tribune has 42 owned or operated local television stations reaching approximately 50 million households across the country. WGN America reaches more than 77 million households.

The U.S. Court of Appeals for the D.C. Circuit Friday (April 20) heard oral argument in the Free Press v. FCC challenge to the FCC's reinstatement of the UHF discount.

While the judges appeared to favor Free Press' arguments, which would not bode well for Sinclair, an attorney familiar with the oral argument, speaking on background, said he was not so sure. He suggested the judges had a lot of issues with the standing of the challengers to bring the suit, though added if the court gets past that bar, he liked Free Press' chances. 

According to audio from the argument, the judges clearly had concerns about not having statements from individual members of the associations challenging the rule establishing particular harms, though one judge suggested Free Press et. al could still submit them. But the judges also clearly had issues with the FCC's restoration of a discount that seemed to have clearly outlived its usefulness.

A politically divided FCC under chair Ajit Pai voted back in April 2017 to reverse the previous Democratic majority's decision to eliminate the discount. That discount meant TV station group owners only had to count half of the audience to their UHF stations towards the 39% national audience reach cap. It dated from the days of analog TV when UHFs were weaker than VHFs, and its restoration paved the way for Sinclair to try and buy the Tribune stations.

Pai has long opposed repealing the discount without also considering adjusting the audience reach cap in the same proceeding. The FCC reinstated it in response to a petition to do so by Ion Media, a major UHF station group.

A coalition of nonprofit media consolidation critics including Free Press, Common Cause, the National Hispanic Media Coalition and Prometheus Radio Project, laid out the case to the D.C. appeals court in their opening brief last September for why the decision to reinstate the discount was arbitrary and capricious and not in the public interest.

Related: Prometheus: Court Should Deny Broadcaster Motions

They said the decision to reinstate the cap is arbitrary and capricious—and thus violates the Administrative Procedure Act—because it is premised on a move—reconsidering the 39% cap—that the FCC does not have the authority to make because the 39% figure was established by Congress.

The previous Democratic-led FCC had eliminated the discount as an outmoded artifact of the analog TV era. The FCC responded in its brief that it was reasonable to reinstate the UHF discount immediately while it considers adjusting the national audience reach cap, that it has the authority to adjust that cap, and that the discount and the cap have to be considered together because the UHF discount is meaningless except in relation to the cap.

The FCC’s decision to restore temporarily a settled framework that had previously been in place for three decades rests well within its discretion under the Administrative Procedure Act, other Congressional enactments, and its own rules," the FCC told the court in asking it to reject the various groups' challenges.

The case could throw a wrench into the Sinclair-Tribune deal given that without the discount a Sinclair-Tribune combo would far exceed the 39% national ownership cap. According to sources, Justice is vetting Sinclair's latest spin-off proposal, but the deal can't get a final decision until the FCC has put the latest iteration of the deal out for public comment of at least 30 days, with at least seven days more for responses to those comments, then renders its decision. Justice vets it for antitrust issues, while the FCC looks beyond competition to a deal's positive or negative impact on the public interest. 

So, if the deal did not close before the court rendered a decision, and the decision reversed the FCC and eliminated the discount, the deal could not get done. But if the deal closed before a decision eliminating the discount, it could not be unwound by a court decision vacating the FCC's reinstatement of the cap--unless the FCC had conditioned the deal on the outcome of the court case.

Oral argument was 15 minutes per side--beginning at 9:30 a.m. It was the first case on the docket for the three-judge panel of Judges Patricia Millett, Cornelia Pillard, and Gregory Katsas. 

Coincidentally, this week also marked the deadline for comments in the FCC's review of the 39% cap and UHF discount. The fact that the discount helped Sinclair was one of the talking points of MVPDs opposed to raising the 39% cap, including de facto raising it via the discount.

Rep. Tony Cárdenas (D-Calif.), no fan of the proposed merger, says the FCC should wait until the court renders a decision before it renders its decision on Sinclair-Tribune, arguing that to allow the deal if the court then eliminates the discount would create "FCC-sanctioned" dominance of the broadcast space by Sinclair.

Indicating further progress with broadcast station groups, PlayStation Vue, Sony’s OTT TV service, said it has added 17 local stations to its programming mix this week.

Availability of the following local network feeds from groups that include Tribune Broadcasting and Sinclair Broadcast Group is dependent on the market location of the PlayStation Vue subscriber:

-Baltimore - FOX 45

-Cleveland-Akron (Canton) - FOX 8

-Columbus, Ohio – FOX 28

-Denver - FOX 31

-Hartford and New Haven – FOX 61

-Indianapolis - FOX 59

-Kansas City – FOX 4

-Milwaukee – FOX 6

-Nashville – FOX 17

-Pittsburgh - FOX 53

-Portland, Ore. - FOX 12

-Sacramento-Stockton-Modesto  - FOX 40

-Salt Lake City – FOX 13

-San Antonio - FOX San Antonio

-San Diego - FOX 5

-Seattle-Tacoma - Q13 FOX

-St. Louis - FOX 2

PlayStation Vue is adding those local feeds amid increasingly heated competition from virtual MVPDs that include DirecTV Now, YouTube TV, Sling TV, fubo TV, and Hulu.

RELATED: OTT Skinny Bundles in 3.1M Homes: comScore