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FCC Democrats Vote To Limit TV Station Partnerships

WASHINGTON (The Deal) -- The Democratic majority sitting on the Federal Communications Commission on Monday brushed aside a furious campaign by broadcasters and voted to restrict local television partnerships that critics say have been used to circumvent federal limits on local TV station ownership.

Monday's action, taken during the commission's monthly open meeting, affects joint sales agreements in which a typically stronger station in a market contracts to sell advertising time on another station in the market. The FCC has approved 85 such JSAs since 2008 but the practice has been long criticized by media consolidation opponents, who say JSAs allow the stronger partner to have undue influence over the brokered station's programming and operations. As a result, they say, viewers lose an opportunity for enhanced diversity of viewpoints in their communities, and minorities, women and other prospective stations have fewer chances to acquire stations.

The commission also inaugurated its 2014 review of all its broadcast ownership rules, as required by Congress. As part of that review the commission tentatively concluded that it should continue to limit cross-ownership of daily newspapers and TV stations in the same market but that a similar ban on radio station/newspaper cross-ownership be dropped. The series of moves has been expected for weeks.

The FCC staff is now charged with submitting its final recommendations on broadcast ownership rules to the commission by June 30, 2016.

Regarding JSAs, the change was made to prevent broadcasters from evading FCC rules that prohibit ownership of two stations in a market unless at least eight stations will be held by different owners. That effectively bars TV duopolies in all but the largest markets. And even in markets where duopolies are permitted, only one of the stations in the pair may be among the four top-rated ones.

Under the new rule, any station owner that sells 15% or more of the advertising time in another owner's station would have to count that station toward its tally of properties in that market. Existing JSAs that violated the new rule must be terminated in two years.

The FCC did order the staff of the agency's Media Bureau to establish a waiver process that would allow otherwise prohibited JSAs to operate if the operators can demonstrate that it serve the public interest by promoting more local programming, enhancing minority or female ownership or creating some other benefit for the local community.

The new restrictions will put a damper on a strategy used by some leading TV station groups, including Sinclair Broadcast Group Inc., Nexstar Broadcasting Group Inc., Gray Television Inc., LIN Television Corp., Gannett Co. and others that have entered JSAs or SSAs with other broadcasters in their markets.

Anticipating the FCC's move, Sinclair restructured its pending deal to acquire eight stations from Allbritton Communications Co., which originally called for Sinclair to comply with duopoly limits by spinning off stations to owners that would enter JSAs with Sinclair.

Sinclair announced March 20 that the spinoffs would be make to other parties than those originally contemplated and following the sale it would not provide any services to the divested stations.

The new restrictions on JSAs was vehemently opposed by the commission's two Republicans.

But FCC Chairman Tom Wheeler rejected their many complaints and insisted that the move was necessary to uphold the integrity of the commission's rules. He also dismissed their suggestion that JSAs delivered crucial financial support to stations owned by women and minorities.

"What we're doing is closing off what has been a growing end-run" around the FCC's local ownership limits," Wheeler said. "JSAs have been used to skirt the existing rules and to create market power that stacks the deck again small companies seeking to enter the broadcast business."

Republican FCC Commissioner Ajit Pai, in a lengthy dissent to the decision, accused his Democratic colleagues of thwarting congressional and judicial intent by refusing to take eliminate the newspaper/TV cross-ownership restriction and for reversing FCC policy on JSAs.

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