The Federal Communications Commission should hold its review of the proposed merger between Charter Communications, Time Warner Cable and Bright House Networks in abeyance until it completes the long-delayed 2010 and 2014 quadrennial reviews of broadcast ownership rules, the National Association of Broadcasters (NAB) – the premier advocacy association for America’s broadcasters – has said in a petition filed with the Commission. If the Commission fails to reform broadcast ownership rules, some of which are over 70 years old, better to reflect current competitive realities, then the FCC should deny the proposed merger, said the petition.
“The FCC’s has repeatedly failed its congressional mandate to review and update broadcast ownership rules while, on the other hand, approving massive consolidation amongst pay-TV providers,” said NAB President and CEO Gordon Smith. “The Commission should fulfil its statutory obligation so it can better factor in the effect another combination of behemoth cable companies will have on local broadcast stations and the millions of viewers who rely on our service.”
Under the Telecommunications Act of 1996, the FCC is obligated to complete a review of its broadcast ownership rules every four years, and repeal or modify those rules that are no longer necessary in the public interest as the result of competition. The Commission failed to complete its 2010 quadrennial review on time and announced it was combining that review with its 2014 quadrennial review, which the FCC has scheduled to complete in 2016.
“While failing to meet its statutory requirements with regard to ownership of broadcast outlets, the Commission at the same time has approved a series of mergers resulting in a multichannel video programming distribution (MVPD) industry highly consolidated at the local, regional and national levels,” said the petition. “That industry will only become more concentrated through the proposed merger to combine the fourth, seventh and tenth largest MVPDs in the country. For example, if the pending merger is approved, then the top four MVPDs will control 79 per cent of the nationwide MVPD market, measured in terms of subscribers, and the top three alone, according to SNL Kagan, “will control two-thirds of the video delivery universe”.
According to the NAB, the consolidation of the pay-TV industry has put local TV stations at a competitive disadvantage and outdated ownership rules have prevented broadcasters from achieving the economies of scale and scope that MVPDs enjoy.
“The gross regulatory disparities between the pay-TV and the free-TV industries are illustrated in any number of ways, including the sheer size of MVPDs compared to TV broadcasters,” said the petition. “The market capitalization of the combined AT&T/DIRECTV, for example, is more than 200 times larger than the market cap of several of the most sizeable broadcast TV companies. New Charter – which the merging parties describe as “modest” in size – will have a market capitalisation 72 times larger than some of the biggest broadcast TV station groups.”
The NAB contends that the FCC’s “egregious” regulatory double standard has put local broadcasters at a notable disadvantage in negotiating retransmission consent agreements with pay-TV providers who control a sizeable percentage of subscribers on a local and national stage. Broadcasters also face an unfair field when competing with a massively consolidated pay-TV industry for advertising revenue, which is the lifeblood of over-the-air broadcasting.
“While essentially forbidding the joint sale of advertising time by two TV stations in the same market, the Commission has permitted all major pay-TV providers – large cable operators including TWC, satellite TV operators and the telcos – to join forces to create a single platform for local and national advertisers,” said the petition. “The proposed merger will create a larger, regionally consolidated MPVD participating in interconnects with multiple other MVPDs, and which clearly will be able to compete more vigorously for advertising than a broadcast TV station prohibited from entering into even a single joint agreement for the sale of advertising. Approval of the merger will therefore further undermine economic support for the public’s free TV option.”
In its petition, the NAB urged the FCC to not consider another pay-TV merger until it completes its 2010 and 2014 quadrennial reviews. If the Commission continues to fail in updating its broadcast ownership rules to reflect the current video marketplace, the FCC should deny the proposed merger.