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Editorial: Rethinking Cap

According to FCC sources, the commission’s acting chairwoman, Mignon Clyburn, has circulated a notice of proposed rulemaking (NPRM) that would do away with the UHF discount on station ownership.

That is the rule that counts only one-half of the households in a market toward the FCC’s 39% national ownership cap. The regulation dates from the days when UHF stations were the red-headed stepchild of the TV band, its often-fuzzy signals tunable only with great difficulty.

All that has long since changed. With the DTV transition, UHF is now beachfront spectrum due to its propagation characteristics, and the FCC is busy trying to encourage broadcasters to give up that property for wireless.

Granted, it’s hard to make a case for preserving the discount, given that drastic shift in fortune. But speaking of drastic shifts in fortune, it would not be fair to apply the change retroactively, or use it to undo any deals in the pipeline.

According to communications attorneys, there is nothing technically stopping the FCC from voting the item and applying a new rule to the “supergroup” deals currently before it. In fact, the NPRM apparently asks whether it should be applied to the supergroup deals in the pipeline. Though getting rid of the discount would not prevent a Sinclair purchase of Allbritton, the timing would seem to send a signal that the FCC is concerned about the size of those groups and would limit Sinclair’s further expansion. That would harken back to former FCC chairman Julius Genachowski’s proposal to count some TV joint agreements as ownership under the local caps, which appeared to some to be a Sinclair-targeted move.

If the FCC votes to end the discount, it should grandfather current groups and make its decision on the deals it is currently vetting—Sinclair/ Allbritton, Gannett/Belo, Tribune/Local TV (the last of which might run into UHF discount problems)—before imposing the new limits since those agreements were predicated on the rules as they stood.

And while ending the discount appears to make sense on its face, the timing is not the best. And imposing any new limits, rather than easing others, seems to be another one of those shoves toward the tar pits by the commission.

As with joint sales and operating agreements and the UHF discount, broadcasters are using existing rules to try to provide the regulatory relief denied them by the decade of inaction on lifting the newspaper/ broadcast cross-ownership rules or loosening ownership limits. If FCC leadership means it when they say they want a vibrant broadcasting business, it sends the wrong message by picking this moment to start limiting their ability to generate revenue, create larger and more stable companies and try new business models.

Our hope is the FCC is simply signaling that it recognizes the “supergroup” phenomenon and the relevance of the UHF discount issue that has been kicking around since the 2009 DTV transition. It is an NPRM seeking comment after all, not an FCC order. The commission under Clyburn is opening dockets on those deals as well, in the interests of transparency. So long as that does not translate into hasty action the FCC will repent in court, the acting chairwoman is simply doing her job.