ION Has Its Eye on Keeping UHF Discount

ION and Trinity, among the TV station group owners who have used the UHF discount to build their portfolios beyond what VHF owners could accumulate, are urging the FCC to reconsider eliminating the discount.

Only 50% of a UHF TV station's coverage area counts towards the 39% national ownership cap on homes reached.

The commission has been talking about dropping it ever since the DTV transition, when UHF became the more valuable channel position due to its propagation characteristics in digital, turning the tables on the previous regime, where VHF had the greater reach. The FCC has already sunset the discount for the Big Four broadcast groups but not for other groups.

But FCC chairman Tom Wheeler has turned that talk into action, circulating a Notice of Proposed Rulemaking June 28 to drop the discount.

It has yet to be voted by all the commissioners, which means, as the chairman has pointed out in other proceedings, changes could still be made.

The FCC plans to grandfather existing combos as of the time of the Notice of Proposed Rulemaking's June 28 release, as well as any deals in the works.

ION argues in its filing that the FCC should keep the discount, but if it does not, it should not only grandfather the groups, but also allow that to transfer when the group is sold.

Cable operators are opposed to keeping the discount and to allowing the grandfathering to extend to sales of the stations, arguing that it allows broadcasters the kind of untoward bulk that translates to unfair leverage in retrans negotiations.

Among ION's arguments for preserving the discount: 1) While UHF signals may be stronger in digital, the FCC tried to replicate analog coverage in the switch. "To a very large extent, the new coverage areas of the digital stations replicate the stations’ analog coverage and, thus, codify the inherent superior reach of the former VHF stations"; and 2) there is the continuing superior value of the programming on VHF, it suggests: "The former VHF stations now operating as UHF stations in the digital world hold the most valuable programming assets in the form of their big four network affiliation relationships. ION holds none of these."

Trinity associated itself with the ION filing and argues that the FCC lacks the authority to eliminate the discount because the Third Circuit Court of Appeals in the Prometheus case found that eliminating it would "conflict with the will of Congress."

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.