Federal regulators took steps Thursday to ease broadcast ownership restrictions, a move seen as favorable for Sinclair Broadcast Group’s proposed $3.9 billion takeover of Tribune Media Co.
The Federal Communications Commission said the rule changes would promote ownership diversity and allow broadcasters and local newspapers to better compete in the digital age. Critics said the changes would encourage consolidation and hurt media diversity.
Under one change, the commission eliminated a rule prohibiting cross-ownership of newspapers and broadcast stations in a single market and another banning ownership of radio and television stations in a single market. The newspaper/broadcast rule dates to the pre-cable, pre-Internet world of 1975.
Other changes could have a more direct impact on Hunt Valley-based Sinclair’s deal to acquire Tribune. The FCC eliminated a rule that required at least eight independently owned TV stations to be in a market before any entity may own two stations. It also allows exceptions to a ban on an entity owning two of the top four stations in a market.
“This ruling is very, very pro-business and anti-regulation,” said Karyl Leggio, a finance professor at Loyola University Maryland. With local market stations now competing with national or international media, “the FCC believes it’s giving broadcasting companies an advantage to allow them to merge to compete.”
Patrick Hedger, director of policy for the FreedomWorks Foundation, a group that promotes smaller government and supports the FCC changes, described the changes as “marginal” as they relate to the Sinclair/Tribune deal, believing they neither help nor hurt the deal.
Still, “what happened today is a signal that [FCC] Chairman [Ajit] Pai and the FCC will look favorably upon the potential merger,” Hedger said.
Sinclair declined to comment on the FCC moves.
Tribune Media was formed in 2014 when Tribune Co., then the parent of The Baltimore Sun, split its broadcasting and publishing divisions into separate companies. The broadcast division became Tribune Media, while the publishing division, including The Sun, became Tribune Publishing, renamed tronc Inc. last year.
Consumer group Allied Progress criticized the vote, saying the commission had stripped protections against media conglomerates developing a monopoly over local news and was helping Sinclair in its bid to acquire Tribune.
“This system is rigged,” said Karl Frisch, executive director of Allied Progress, in a statement. “This was an unprecedented vote by the FCC to change the rules to benefit one company.”
The Sinclair deal has drawn criticism from an unusual coalition, including consumer advocacy groups that generally oppose media consolidation, conservative media companies that are rivals to the right-leaning Sinclair, and cable and satellite TV companies that worry that a beefed-up Sinclair will be able to get even higher fees from them.
Approval of the Sinclair deal, which would create the nation’s largest broadcaster by far, appears likely because the FCC recently relaxed other rules for broadcast station ownership.
In April, the FCC reinstated the so-called UHF discount, which allows stations broadcasting on those higher-frequency airwaves to count only half of 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.
Maryland Attorney General Brian Frosh filed comments Friday with the Federal Communications Commission saying ownership by Sinclair would decrease consumer choices and diversity in the media marketplace.
Sinclair has said it would need to sell TV station licenses in at least two markets under current ownership limits. It said it hired TV station broker Moelis & Co. in July to help it identify potential buyers.
Because Thursday’s rule change potentially allows ownership of two of the top four station sin a market, Sinclair “may not have to divest much of anything,” Leggio said.
The rule changes come as cable and phone companies have grown into industry giants through acquisitions. The newspaper and broadcasting industries say they need the changes to deal with growing competition from the web and cable companies.
The Republican-dominated FCC approved the changes in a 3-2 vote along party lines. The two Democratic commissioners and other critics say that dropping these rules encourages consolidation and hurts media diversity.
Free Press, a group that opposes media mergers, said Thursday that it will challenge the rule changes in court.
“This act will pave the way for massive broadcast conglomerates to increasingly provide local viewers with nationalized cookie-cutter news and corporate propaganda that's produced elsewhere,” said Sen. Bill Nelson, a Florida Democrat.
The FCC previously granted exceptions for companies such as News Corp. to own both a newspaper and a radio or TV station in the same market. Scrapping the rule would let more companies do so without needing to make the case for an exception.
The rule changes won't affect AT&T's pending bid for Time Warner and its cable channels because the FCC is not reviewing that and neither company owns a TV or radio station or a local paper. The Justice Department is still reviewing that $85 billion deal. Its widely expected approval has run into hurdles.
The FCC already has taken steps favorable to broadcasters and Sinclair. It scrapped a rule that required TV and radio broadcasters to maintain a local studio and withdrew a technical measure that hindered media consolidation. Sinclair would reach 72 percent of American households if the Tribune Media deal goes through.
The FCC also voted Thursday to allow a new broadcasting standard known as “next-gen TV,” which Sinclair and the broadcasting lobby has pushed for. It will allow for better-quality video and improved reception, let broadcasters beam TV programming directly to phones and, they hope, make money from advertising targeted to consumers based on data about them, like Facebook and Google do.
The two Democratic commissioners dissented, saying the agency's approach will mean higher costs for consumers if they have to buy new TV sets to get the signals, just as they had to buy digital TVs or converters when analog transmissions ceased in the past decade. The government offered $40 coupons for converter boxes to help defray costs during that transition. According to the Democrats, there are no provisions for similar subsidies this time.