Draft Order Would Allow Deals with Grandfathered JSAs Until 2025
The FCC draft media ownership order contains a grandfathering policy on joint sales agreements that's more in line with statements from Congress on the issue and is less restrictive to broadcasters than the previous version of the rules, FCC officials said in interviews. Under the draft (see 1606270083) JSAs wouldn't have to be unwound until 2025, and companies wouldn't be required to dissolve existing JSAs to get transactions approved that take place before that deadline, they said. The draft order also will allow some dissolved JSAs to be reinstated, FCC officials said. In a fact sheet released by the FCC on the media ownership rules, it said the new JSA grandfathering policy would be “consistent with Congress’s guidance.”
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Broadcast attorneys told us they saw the proposed policy as an improvement over the previous JSA rules, yet it doesn't go far enough. “This doesn't address what Congress actually told the FCC to do, which was to reform its rules,” said broadcast attorney Jack Goodman. A draft item on the UHF discount contains grandfathering rules that largely are unchanged from those proposed in a 2013 NPRM, the officials said. The grandfathering is seen as an important point in the circulating quadrennial review media ownership order (see 1607070060). The FCC declined comment.
The draft media ownership item would adopt the grandfathering deadline of 2025 that was set by Congress in an appropriations rider last year, FCC officials told us. Since that rider targeted the specific JSA attribution rule that was later vacated by the 3rd U.S. Circuit Court of Appeals, it's no longer in effect, broadcast attorneys told us. Under the draft order, no new JSAs over 15 percent can be created without being attributable, but existing ones don't have to be unwound until 2025.
The 2025 deadline is consistent with the way the original JSA attribution rule worked when it was vacated, but the draft order would extend the scope of the grandfathering provisions. Under the draft, existing JSAs won't need to be unwound to obtain transaction approval from the Media Bureau for deals that occur before the deadline to unwind all JSAs, FCC officials told us. A bureau policy against transactions that included JSAs previously caused broadcasters such as Gray Television, Granite Broadcasting, and Tegna to dissolve such agreements to get bureau approval, broadcast industry officials told us. Gray's dissolution of a JSA involving Media General as part of Gray's buying Schurz stations led to court proceedings and an FCC consent decree (see 1607130064). Nexstar's filings on the proposed Nexstar/Media General also opposed the bureau policy (see 1606130052). Under the draft order, transaction approval won't require the unwinding of existing JSAs, the FCC officials told us.
The draft order also would let broadcasters resurrect JSAs that were dissolved under the previous policy, FCC officials told us. Though this applies only to a small number of JSAs, it likely applies to several dissolved under deals that have been approved since the FCC changed its JSA policies, a broadcast industry official told us. The rules would be “a welcome development for companies like Gray that terminated JSAs at the FCC's direction without complaint,” said Executive Vice President-Chief Legal and Development Officer Kevin Latek in an interview.
A draft order that would eliminate the UHF discount has grandfathering rules that resemble its 2013 NPRM, FCC officials told us. The draft doesn't allow permanent grandfathering and will require grandfathered ownership combinations that change owners to divest stations to come under the ownership cap, they said. The draft order pegs grandfathering to the date of its release rather than the release of an order, meaning only combinations that were in existence or had applications in to the FCC by September 2013 would be allowed to keep counting their UHF stations as contributing half as much to the 39 percent ownership cap.
Though broadcasters will likely look favorably on the grandfathering policies, they're necessary only because the FCC isn't rolling back ownership restrictions for broadcasters, several broadcast attorneys told us. The JSA grandfathering rules will apply only to existing JSAs, meaning relatively few broadcasters benefit from them, Goodman said. The rules make it largely impossible to create new JSAs, which were helping broadcasters get the scale they need to remain competitive in the current video market. Broadcast ownership restrictions are decades old and based on a market that no longer exists, Goodman said.
Though it was announced last week that three of the five FCC commissioners have voted for the media ownership rules, they aren't expected to be issued soon, FCC officials have said (see 1607140069).