FCC Modifies TV Ownership Attribution Policy

In a move that FCC Commissioner Ajit Pai called a change in policy and an abuse of delegated authority, the Media Bureau issued a March 12^th public notice providing “guidance” on how the FCC would be processing assignment applications for TV stations.  The Notice stated that TV license assignment applications involving both a shared or joints services agreements and a contingent financial interest will now be “closely scrutinized” to determine if the arrangements should be attributable under the FCC’s multiple ownership rules.  Some proposals would not be approved if, under the new standard, they are found to be attributable.

Commissioner Pai issued a press release on the same day the notice was published, questioning the need for the Media Bureau’s new “guidance” because he had requested but not been given any instance where a TV assignment application involving the issues had been denied, such that clarification of policies would be necessary.  Instead, Pai argued, the “guidance” announced a change in policy before a vote by all FCC commissioners on the issue scheduled for March 31.  Pai minced no words, claiming “if a majority of the Commission wanted to turn the screws still further on broadcasters, the substance of today’s Public Notice easily could have been included in [the meeting].  Instead, our policy has been changed without a Commission vote.  That’s not the way we should do business.

We agree with Commissioner Pai’s characterization of the FCC’s guidance as a change in policy (thus the title of this article).  Commencing March 12, the Media Bureau will likely refuse to grant TV license assignments unless the proposed licensee continues to bear a significant amount of the economic risk and reap a significant amount of any reward in running the station.  Transactions where both parties to the sharing agreement share a financial institution, or where the services provider guarantees a loan, or where it seems that the loan is not an arms-length transaction face a strong likelihood of being denied because the proposed assignment will be seen as a “sham” arrangement instead of a divestiture, and therefore as violating the current restrictions on station ownership in a TV market.

Regardless of the action taken at the March 31 meeting, the FCC’s “guidance” has already required the substantial amendment of a then pending application for TV license assignment – one that has not yet been granted.  In the past two weeks Commissioner Pai issued additional notices, warning that making sharing agreements attributable would slam the door on minority ownership opportunities.  Pai’s office used publicly available sources to conclude that an estimated 43% of female-owned and 75% of African-American-owned full power commercial television stations were currently parties to joint sales agreements.

At its March 31^st meeting, the agenda states that the Commission will be considering a Report & Order making certain TV joint sales agreements attributable for ownership purposes.  By the time you are reading this, that vote will likely have already been made, with an order in the wings.