Sinclair Buying Tribune? Not So Fast With All This TV Station Group Merger Talk
Sinclair Chairman David Smith

A lot of steps have to happen before Sinclair Broadcast Group (SGBI) could buy Tribune Media (TRCO) , as the New York Post breathlessly reported earlier this week.

Any merger of two of the country's largest owners of broadcast network affiliates would need approval from the Department of Justice's antitrust division and the Federal Communications Commission. At present, the FCC has a rule, backed by Congress, that no single owner of local TV stations can own stations that cover more than 39% of the country's households. The cap was raised from 35% in 2007.

The rule is designed to prevent any one media outlet from having too large a presence in the coverage of local news. The FCC's position remains that most people get their news from local sources and that a democracy functions best when it citizens are exposed to a cross-section of views. Needless to say, there is much debate on this issue.  

Yet while Tribune Media is clearly going through a transition and Sinclair executives are hungry to raise the 39% cap, a coming wave of TV station group consolidation would require a few arduous steps that could involve Congress and the courts even as they would begin with the FCC. 

"Local ownership rule changes take time," Barclays media analyst Kannan Venkateshwar wrote earlier this week in an investor note. "Even the Republican-led FCC, which raising the limits in the early 2000s, recognized the need to maintain a limit on ownership."

While the Post, citing unnamed sources, reported that a "rule change could come as soon as this week or next," the FCC hasn't even put the issue on its agenda for its upcoming meeting on March 23. A proposal to change the 39% rule can't be debated until it first appears on the commission's agenda.

And even then, it couldn't be voted on until after a period in which the public, which would include any number of industry and consumer groups, could submit comments. That could carry on for weeks. Most importantly, though, any debate over raising the cap would have to come as part of a larger commission review of all media ownership rules.

Congress requires the FCC to review media ownership rules every four years, including cross-ownership restrictions that prohibit a single owner for a television station and a newspaper in the same market. That the FCC moves at a snail's pace is well-documented. Its 2014 review of media ownership rules has yet to be completed.

"The FCC may need to defend itself against previous precedents," Venkateshwar added. "It may need to approach this issue with more caution."

The overriding assumption to merger speculation involving Sinclair and Tribune Media, or even smaller TV station groups such as Gray Television (GTN) or Nexstar Media Group (NXST) , is that a Republican-led FCC under Ajit Pai, a former Verizon (VZ) executive, is poised to raise the ownership cap.

That may be so, but since being promoted by Trump to commissioner, Pai hasn't made any public statements about raising the 39% cap, and he avoided TV station ownership completely Wednesday -- not surprisingly -- in his first major policy address at Carnegie Mellon's Software Engineering Institute.

As a Republican-appointed commissioner, though, Pai often argued against a Democrat-majority, asserting ownership rules should reflect current market conditions. And as Sinclair Chairman David Smith insisted shortly after Trump was elected, local TV station groups are unfairly strapped in a race for advertising spending against Facebook (FB)  and Alphabet's Google (GOOGL) . 

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