FCC Chairman Wheeler's Just Wrong On Duopolies

[Commentary] The Federal Communications Commission rule barring common ownership of two TV stations in the same market is 40 years old. Now, disregarding all the extraordinary changes that have roiled the television industry over those four decades, from HBO to Netflix, FCC Chairman Tom Wheeler believes that it is absolutely imperative that the FCC buck up the old local ownership rule by closing loopholes that broadcasters have been using to get around it.

In essence, he is saying that the ban against duopolies in small markets is as vital to the nation today as it was in 1974 when most Americans had a choice of just four or five channels. That's quite a position for a man who is supposed to be focused on the future of telecommunications in this country. Chairman Wheeler intends to bring his proposal to a vote on March 31 and he apparently has the two other Democratic votes lined up to win approval. The vote will be a real blow to broadcasters who have been building businesses around the sharing agreements. Just the prospect of the FCC action has battered broadcast stocks.

Since the beginning of 2014, Nexstar is down 26%, Sinclair is down 21% and LIN is down 19%. I understand Wheeler's desire to tidy up FCC's rules and regulations. But in this case he could just as easily do that by getting rid of the underlying 40-year-old ownership rule. The sharing agreements have been a boon to the broadcasters that have taken advantage of them. The efficiencies of running two stations in a market are obvious.

But I cannot sit here and tell you whether they have been a net positive or net negative for the American public. And neither can the FCC. It hasn't investigated the sidecar deals to see if they, on the whole, have increased the level of service to the public and advertisers or diminished it. Right now, I'm inclined to believe that Chairman Wheeler is working primarily for the wireless companies by devaluing TV stations. As President of the National Association of Broadcasters President Gordon Smith suggests, the tougher the broadcasting business becomes, the more likely broadcasters will be to participate in the incentive auction, by which the FCC intends to buy broadcast spectrum and sell it to wireless companies.

[March 7]