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Remember when Sinclair Broadcasting Group tried to buy Tribune Media? That merger would have allowed Sinclair to reach 72 percent of U.S. households -- far, far above the Federal Communications Commission’s 39 percent audience cap. Fortunately for consumers, Tribune backed out of the deal after the FCC signaled it was unwilling to approve the transaction as structured.
Now another giant broadcaster is trying to buy Tribune Media. It’s the second largest local television owner in the country (after Sinclair): Nexstar Media. Chances are, despite Nexstar’s size and importance in the broadcasting world, you’ve never heard of them. Even though Nexstar keeps a lower profile than Sinclair, this merger poses a lot of the same problems as the abandoned Sinclair-Tribune pairing.
For starters, within days of announcing the deal, Nexstar told Wall Street that it plans to raise prices for Tribune content very shortly after the merger closes, with additional price hikes down the road as well. As a result, cable subscribers in markets with Tribune stations will pay more for television. This also may indicate to the Department of Justice, which will be analyzing the merger from an antitrust perspective, that the merged firm will have market power in a market for broadcast television.
Perhaps more importantly, competition, diversity, and local control in local television broadcasting is crucially important to the marketplace of ideas and to our democracy. This industry is already concentrated, but a merger between Nexstar and Tribune will greatly exacerbate the problem. These are concerns that the FCC should consider in its public interest merger review. However, FCC Chairman Ajit Pai usually limits the FCC review to narrow antitrust principles instead of using the broader public interest mandate from Congress.
In addition to the broad public interest standard of merger review, Congress gave the FCC another tool that they could use to block this merger: television broadcaster national ownership caps. But just like with the public interest standard, the FCC is unlikely to use the tools at its disposal. The FCC under Chairman Pai has left a huge loophole in its broadcaster ownership caps that Nexstar and Tribune plan to exploit to get their merger through. In 2003, Congress decided that television broadcasters in the U.S. would only be allowed to reach 39 percent of homes with their signal. If an acquisition would bring them above that amount, they must divest (sell off) some local stations so that they stay under the cap. In other industries, there are not clear ownership caps, and the DOJ or Federal Trade Commission make a case-by-case assessment of mergers based on market shares and other factors. But ownership caps make sense for broadcasters, because this industry is so uniquely important to our democracy. Television broadcasts, and in particular, news broadcasts, help us learn about the world around us, form political opinions, hold our elected officials accountable, and hear important information that may affect us. Having diversity of viewpoints and local control is crucially important so that we can participate in society. This priority is even more important today, when Americans’ trust in the news is so precarious.
Unfortunately, the FCC under Chairman Pai has left open a huge loophole in the agency’s ownership cap rules: the UHF discount. This rule says that stations that use a UHF signal instead of a VHF signal only count their households as half. The rule originated when most viewers watched programming over the air. VHF signals were easier to receive, and hence had a larger potential audience. But now that most people watch television signals carried by cable and satellite providers or over the internet, and even over-the-air signals themselves are digital, this distinction makes no sense. Today, broadcasters can use the UHF signal instead of the VHF signal to reach 78 percent of households (double the usual cap) while still technically complying with the FCC rules. The ownership cap could have given the FCC an easy way to block this merger, since the merged Nexstar-Tribune would reach more than 39 percent of households. With the discount in place, however, Nexstar and Tribune claim they will remain under the ownership cap.
It’s time to get rid of the UHF discount and hold all broadcasters to the true 39 percent ownership cap as intended. Even if the FCC won’t end the UHF discount loophole, it could still block the merger on public interest grounds because of the importance of diversity, competition, and local control to television broadcasting in particular. It could also block the merger on pure antitrust grounds, if it finds that the merger would substantially lessen competition.
Public Knowledge will continue to monitor the proposed merger between Nexstar and Tribune as more information becomes available. The FCC has not yet opened a docket for this merger, but when they do, you can help by submitting comments explaining your concerns. Continue to follow us for updates.