FCC Restores UHF Discount

The FCC has voted to reinstate the commission's UHF discount pending a more holistic look at media ownership regs, saying it was erroneously repealed without considering whether the 39% national audience reach cap should also be adjusted.

That vote could allow more station consolidation, say critics, including Sinclair reportedly eyeing Tribune stations, which Sinclair could not buy if it had to count all of the viewership to its UHF stations against the FCC's 39% cap, rather than the 50% of that audience under the UHF discount.

Though the FCC's earlier vote to repeal the discount did grandfather existing groups that would have exceeded the cap, it did not allow those to be sold with the grandfathered percentage intact.

FCC chairman Ajit Pai has said the discount may indeed be an anachronism—it dates from analog TV days when the UHF signal was the less desirable one, which is not the case in digital—but has said that should likely not happen without raising the 39% cap or perhaps applying the discount to VHFs.

"Welcome once again to Industry Consolidation Month," said Democratic commissioner Mignon Clyburn in a stinging dissent.

She said that the discount was "snatched from a regulatory crypt" due to a willingness to ignore the realities of the marketplace. She said the FCC is firmly embracing the past and reinstating a relic for the benefit of a few media companies.

She pointed out that Sinclair had told the SEC that if regs were loosened, it would be able to expand, and CBS' Les Moonves's comments about the benefits of TV station expansion having Pai atop the FCC. 

Commissioner Michael O'Rielly said he does not believe the FCC has the authority to alter the UHF discount and said he appreciated the return of the discount.

Pai said the UHF discount was inextricably linked to the 39% cap and was eliminated on a party line vote, which effectively tightened the rules with insufficient analysis of its impact.

"Today the FCC is wiping the slate clean," and Pai said later this year he will start reviewing both the discount and the cap.

"NAB supports today's FCC action reinstating the UHF TV station ownership discount and commends Chairman Pai for his leadership on this issue," said National Association of Broadcasters president Gordon Smith. "This represents a rational first step in media ownership reform policy allowing free and local broadcasters to remain competitive with multi-national pay TV giants and broadband providers."

"Today's vote is a reality check on the growing competition for viewers," said Adonis Hoffman, chairman of Business in the Public Interest and a former staffer to FCC commissioner Mignon Clyburn. "In a marketplace where scale is important, allowing free, over-the-air broadcasters to expand their footprint to more closely resemble pay television providers is a move in favor of competition. At the end of the day, consumers benefit."

But others saw it more along the lines of Clyburn's dressing-down.

"If the public had any doubt as to whether Federal Communications Commission Chairman Ajit Pai was going to follow his own regulatory philosophy consistently during his term, one of the votes today confirms that he chooses to follow his own principles only when it suits the powerful companies and political interests that back him," blogged Cheryl Leanza, policy advisor to the United Church of Christ Office of Communication, of the decision. "Chairman Pai is ensuring we will have 'media conglomerate oligopolies' for years to come."

"No one, including Chairman Pai and Commissioner O'Rielly - disputes that there is any remaining policy justification for UHF Discount, " said Andrew Jay Schwartzman of Georgetown's Institute for Public Representation. "Today's disgraceful vote is a cynical political ploy to help large broadcast companies become larger, notwithstanding the lack of any sustainable legal rationale for doing so."

“Once upon a time, counting a UHF signal to a lesser effect against the media ownership cap made sense because it was technically inferior with more limited reach," said Carmen Scurato, director of policy and legal affairs for the National Hispanic Media Coalition. "Today, given the digital television transformation, that is no longer the case and the reasoning behind the FCC’s vote today on the outdated ‘UHF discount’ no longer exists. The FCC’s decision to reinstate the discount will cause irreversible harm to diverse owners of small to mid-sized companies trying to access their audience in a crowded field of giant corporations dominating the airwaves."

Tribune was understandably pleased with the decision.

“Today’s action by the Federal Communications Commission is a welcome step towards creating a more level playing field for all local broadcasters in their relationships with television networks, satellite operators, cable providers, and streaming video services. Ultimately, the FCC’s decision will serve the important interest of localism by enabling broadcasters to better serve their communities," the company said.

Ion Media, a group with a number of UHF stations, was also well pleased.

"This action allows small entrepreneurial and consumer -oriented companies like ION Media to continue to succeed in a consolidating media world,' Ion Chairman Brandon Burgess wrote in a letter to Pai Thursday (http://ionmedia.com/ION-Media-Letter-to-FCC.pdf.. "Why anyone would want to micro-regulate tiny pro-consumer companies like ION Media (while simultaneously approving the media consolidation deals you reminded everyone of today) shall remain a mystery to both of us. But onward."

John Eggerton

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.