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FCC weighs merits of $3.9 billion Sinclair/Tribune merger

Despite opposition from competitors, consumers and media watchdogs, many observers expect the Federal Communications Commission to approve Sinclair Broadcast Group's $3.9 billion takeover of Tribune Media Co.

Approval of the deal, which would create the nation's largest broadcaster by far, appears likely because the FCC recently relaxed rules for broadcast station ownership and the political climate currently favors deregulation.

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But others believe the transaction could face increased scrutiny given what they see as an unprecedented, broad base of opposition.

"I'm worried that this may be a predetermined decision without looking at the evidence," said Charles Herring, president of One America News Network, a national cable channel that reaches 35 million homes and opposes the broadcast merger. "I'm hoping that Congress and the [Department of Justice] will put pressure on the FCC to do a fair and thorough review… Anybody who is reasonable will want to take a deep dive into this merger. It is too big."

At stake, according to Hunt Valley-based Sinclair and others in the broadcast industry, is the future of free and local over-the-air television and the effective rollout of a new broadcast transmission standard that will enable over-the-air, high-definition broadcasts to mobile devices.

Sinclair says it needs to be larger to compete with other providers of programming, including the TV networks, cable companies, satellite providers and such firms as Amazon, HBO, YouTube and Netflix, which can transmit over the Internet.

Opponents, though, fear the deal would hurt media competition and thus consumers, allowing a single company to control channels that reach 72 percent of U.S. households and prompt other broadcasters to follow suit.

Groups such as the American Cable Association, Common Cause, Dish Network LLC, Free Press and Public Knowledge have asked the government to deny the acquisition. Most opponents complained the deal fails to serve the public interest and violates a broadcast ownership cap, even under recently relaxed FCC rules.

Critics also echoed long-running criticism that Sinclair uses its news broadcasts to advocate conservative views.

Sinclair accused critics of trying to block competition to protect their own interests and ignoring the impact of cable, internet and smartphones. It has argued that the rules governing the broadcast industry are outdated and said it expects significant deregulation under the Trump administration.

Some loosening of the rules already has occurred. Headed by Ajit V. Pai, a former commissioner appointed chairman by Trump, the FCC in April reinstated the so-called UHF discount, which allows stations broadcasting on those higher-frequency airwaves to count only half their audience against a cap allowing a single owner's stations to reach no more than 39 percent of the nation's television households. The changes were expected to spur consolidation in the television industry as traditional media outlets seek to compete with online platforms and cable providers.

"The natural synergies of bringing Sinclair and Tribune together will enable the combined company to invest in unique programming that addresses the news, information, and public safety needs of local communities," Sinclair said in its filing late Tuesday. "While [opponents] make general allegations about the 'size' of the combined company, it is precisely this size that will allow Sinclair to compete with much larger companies offering competitive programming for a fee."

The deal would give the owner or operator of 173 television stations more than 40 Tribune TV stations, many in big media markets including New York, Chicago and Miami. Tribune spun off its newspapers, including The Baltimore Sun, in 2014 into a company now known as tronc.

Analysts have hailed the Sinclair purchase, announced in May, as beneficial to Sinclair and its shareholders and expected few regulatory hurdles, even though the combined company's stations would cover 44 percent of the country and exceed the UHF discount.

"We like this deal for [Sinclair]," Marci Ryvicker, a senior analyst with Wells Fargo Securities, said in a report. "It sounds like [Sinclair] will work with the FCC to figure out what needs to be done from a divestiture standpoint."

Jerry Reisman, an expert in mergers and acquisitions and a partner at New York-based law firm Reisman Peirez Reisman & Capobianco, said he believes the deal will be approved as the evolution from networks to cable TV to live streaming continues.

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"We have all these different methods of distributing media," Reisman said. "This will not in any way infringe upon competition. It will give over-the-air TV broadcasting stronger content and put them in a better position to compete with streaming… These companies have to consolidate to stay competitive."

Sinclair is getting a typical amount of criticism for a deal of its size, from competitors as well as hundreds of citizens who've spoken in opposition, said Karyl Leggio, a finance professor at Loyola University Maryland.

"Sinclair will have to address comments and criticism and make a case to the FCC," Leggio said. "The FCC is more business friendly than it was in prior administrations, and that's in Sinclair's favor. The regulations have changed to allow these deals, and that's in their favor as well."

She said she expects Sinclair will need to sell more stations than originally planned, "but I still think it will go through."

Mark Feldstein, a broadcast journalism chair at the University of Maryland's Philip Merrill College of Journalism, said he, too, believes the deal will be approved.

"I don't think these opponents are going to get anywhere in stopping this, particularly with the new FCC chair, who has been open, explicit and unapologetic in his support for deregulation," Feldstein said.

But he worries that accelerated media consolidation will lead to less diversity of opinion, in particular with expanded ownership by Sinclair "because they are so right wing, so conservative, with such defined political views, it is tilting the scale toward the right…

"They have a decided agenda and are not shy about pushing it," he said. "It's more than one company getting a monopoly on widgets. This is about ideas and information that the public needs to make wise choices as democratic citizens."

The company fired back against critics Tuesday in an FCC filing, countering that its marriage to Tribune would serve the public interest by directing more resources toward covering local news in Tribune markets and continuing to run local stations that have racked up strong ratings and awards. Opponents' allegations, the company said, are based on hearsay and raise issues of First Amendment viewpoint discrimination.

Many complaints refer to what the company called selected short commentaries and internally syndicated programming, Sinclair said, but opponents have offered no evidence that its TV stations fail to cover local news or that the coverage is biased, based on corporate directive or not in the public interest.

Todd O'Boyle, program director at Common Cause, which joined other groups in an FCC petition to stop the merger, said he was heartened by a recent justice department request for additional information, a sign, he believes, that the deal may get extra scrutiny.

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"It is telling that there's such diverse opposition to this merger, from voices on the left and right and the center," he said. "It's not every day that you see this much ideological diversity for any issue. It attests to the fact this merger is bad for everyone other than Sinclair and Tribune. I think a lot of folks assumed this merger was going to get rubber stamped."

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