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FCC's Wheeler Uses Peacemaker Cover to Tell Broadcasters to Stop Whining

Stocks in this article: GCINFLXSBGIYHOOTWCCMCSANFLX

LAS VEGAS (TheStreet) -- Tom Wheeler, chairman of the Federal Communications Commission, may not be a politician in the classic sense of being elected to public office, but on Tuesday he certainly acted like one as he sought to mend fences with a displeased constituency: the country's over-the-air television broadcasters meeting at their annual convention.

Wheeler, who became FCC chief in November, has managed to spark a shooting match with television station owners led by Gannett (GCI), Tribune (TRBAA) and Sinclair Broadcast Group (SBGI) in just five months. Tensions with the country's largest TV lobby, the National Association of Broadcasters, might have been expected considering that Wheeler previously held positions as the chief of the industry groups representing cable-TV providers (National Cable Television Association, and wireless carriers (Cellular Telecommunications and Internet Association.)

Yet Wheeler has more than fulfilled the fears of TV station owners. Earlier this month, the FCC approved new rules that make it illegal for a broadcaster that controls two television stations in the same market from sharing advertising departments. By a 3-2 vote, the FCC ruled that such arrangements violate laws on ownership concentration.

Broadcasters viewed the action as another example of the commission's alleged favoritism toward cable-TV providers and Internet operators. Businesses such as Comcast (CMCSA), they argue, are allowed to own a television and film studio -- NBC Universal -- while pursuing a merger with another giant pay-TV operator, Time Warner Cable (TWC). Indeed NAB President Gordon Smith, the former Republican senator from Oregon, has left little doubt that he views the current FCC as less than equitable in its application of federal law. 

In a speech at the National Association of Broadcasters, Wheeler sought to mend fences even as he maintained his position that television broadcasters must adapt to the Internet, or perish.

"It's no secret that the NAB has been critical of some of my actions as FCC Chairman," he said in a speech to an audience at the NAB's annual convention in Las Vegas, a gathering numbering more than 94,000. "I don't know if you've noticed that."



To ease the tension, Wheeler left the speaker's podium to walk the stage for his speech, something he said that he had never done before.

"I'm going to walk out here and say 'OK, let's talk," he said. "I recognize that the broadcast industry is subject to competition, more competition in fact, than ever before. We're at an inflection point where broadcast licensees can move from being the disrupted to the disruptor."

Television operators, Wheeler said, can change their businesses to catch-up with the migration to so-called "over-the-top" services such as Netflix (NFLX), which ironically buys content from the same companies as local broadcasters. Television broadcasters can do the same with local news and information, the one piece of content which Internet operators have largely failed to deliver.

Citing a Pew Research Center study, Wheeler said that a third of all U.S. residents watch TV news video online. The potential for new sources of revenue is just a matter of innovating.

"That means broadcast licensees are in the pole position to leverage off of that trend, to deliver OTT services anchored on local news and information," he said. "You have the opportunity to leverage that content to become broader OTT competitors to become the source for local news down to the neighborhood."

At present, though, local broadcasters are mostly not getting paid for that delivery.

Tribune Broadcasting President of Local Broadcasting Larry Wert said the Chicago-based television station owner is actively exploring ways to leverage its Internet traffic. Rather than viewing online as the enemy, Wert agreed that television broadcasters find ways to use the Web site traffic to develop new revenue streams. The question for the industry, he said, is one of timing rather than taking the plunge into a pay service.

"We see ourselves working into a subscription model as our digital grows," Wert said in an interview Tuesday in Las Vegas, adding that Tribune Broadcasting recently surpassed 60 million unique monthly visitors at its web sites and on mobile devices. "That's a significant scale number. So, as we grow our ownership of original content and create audience demand on it, the answer is yes."

Wheeler warned that television operators better get busy. Yahoo! (YHOO) may spend as much as $300 million to acquire Atlanta-based News Distribution Network, an outfit that aggregates video clips from more than 200 local news providers around the country, The Wall Street Journal reported last month.

"The Open Internet is an open sesame for the expansion beyond your local license to move from the television business to the information business," he said. "But your window of opportunity won't stay open forever."

In other words, stop complaining and figure out how to live in a digital world. After the speech, and a "one-on-one" with Smith, Wheeler, the politician, shook hands with NAB officials before heading back to D.C.

--Leon Lazaroff is TheStreet's deputy managing editor.

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Leon Lazaroff is TheStreet's deputy managing editor.

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