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ACA To FCC: Deny Unlawful Sinclair-Tribune TV Station Megamerger

Approval Would Send Retransmission Consent Fees, TV Signal Blackouts Soaring

PITTSBURGH, August 8, 2017 - The American Cable Association is urging the Federal Communications Commission to reject Sinclair's proposed megamerger with Tribune Media Co. to protect competition and consumers from being forced to pay higher fees to receive local broadcast stations that are owned by the combined company.

"ACA believes the Sinclair-Tribune merger, as proposed, is unlawful and not in the public interest, and should be rejected. This proposed transaction -- with its unprecedented colossal scale and increased local presence -- would result in severe harm to competition and to customers through demands for increased retransmission consent fees. Imposing behavioral conditions on the proposed deal is insufficient to address the rule violations and harms. It must be denied," ACA President and CEO Matthew M. Polka said.

ACA is not proposing any conditions. ACA seeks to deny the Sinclair-Tribune merger.

ACA expressed its views in comments (attached) filed with the FCC last night just hours after joining an alliance of media representatives assembled to highlight for the press the most troubling aspects of the Sinclair-Tribune combination, which would create a TV station ownership group of unprecedented scale and power to the detriment of competition and consumers. Participants in this press conference call included: Common Cause, One American News Network, the Computer and Communications Industry Association, and the Competitive Carriers Association.

As a result of the transaction, Sinclair-Tribune:

  • Would own more than 200 full power stations nationwide, reaching 72% of the national audience (or 45.5% when applying the FCC's technically flawed UHF discount); and
  • Would own two Top 4 affiliates in ten of the 14 markets where Sinclair and Tribune operate, and own additional stations in three local markets, adding to the more than 20 markets where Sinclair already owns multiple stations.

ACA explained in its Petition that the FCC must reject the merger as a matter of law for three reasons:

  • Federal law prohibits a TV station owner like Sinclair from reaching more than 39% of TV households (TVHHs). Sinclair-Tribune, as proposed, would violate the FCC's National Cap Rule by 6.5 percentage points. Because the cap is statutorily imposed, it may not be modified by the FCC though waiver or rule change to permit this deal as proposed.
  • In 10 markets, Sinclair-Tribune would also violate the FCC's Local Television Ownership Rule, which prohibits the ownership of two, Top 4-rated TV stations in a local market. The top-four rated stations in a local market are typically the ABC, CBS, NBC and Fox stations. Applicants have sought no waiver of this rule in their application.
  • Sinclair and Tribune provided only three pages of putative public interest benefits. What they provided is insufficient to meet their burden to establish that the proposed transaction is in the public interest. Even if the transaction did not violate the FCC's rules, it would still fail the public interest component of the FCC's review.

ACA also explained in its Petition to Deny that even if the legal impediments were resolved (and they cannot be), the FCC must reject the merger because the harms of the deal would outweigh the benefits. Sinclair-Tribune would use its market power to extract higher retransmission consent fees from cable operators.

These retransmission consent harms will come from the fact that Sinclair will own two, Top 4 network affiliate stations in 10 different markets where it will be able to charge higher fees than could be charged if the stations were separately owned. Action to prevent this harm has been taken in the past by FCC, Congress, and the Department of Justice.

Harms will also come from the fact that Sinclair will own more stations nationwide and be able to charge higher fees. Larger station groups can charge higher fees because they can cause more impactful blackouts. Moreover, they can demand carriage of programming or stations to be named later that consumers don't know of or desire.

Sinclair-Tribune can also take advantage of the existence of so-called after-acquired clauses in Tribune retransmission consent contracts to require multichannel video programming distributors (MVPDs) to pay the higher rates received by Sinclair instead of the lower rates in Tribune contracts that have yet to expire. These after-acquired clauses create instant, unanticipated rate shocks for consumers.

"Allowing the creation of such a massive conglomerate would snuff out any hope that small and rural providers could negotiate on a level playing field to slow further steep increases in retransmission consent fees and is therefore contrary to the public interest," ACA's Polka said.

Partly as a result of this industry sea change, retransmission fees - which are ultimately passed on to customers - have risen by tens of thousands of percent in the last decade. Broadcasters like Sinclair have benefited from their market power for more than a decade by extracting skyrocketing retransmission consent fees, which have seen 40% annual increases over the last three years.

About the American Cable Association: Based in Pittsburgh, the American Cable Association is a trade organization representing about 850 smaller and medium-sized, independent cable companies who provide broadband services for nearly 7 million cable subscribers primarily located in rural and smaller suburban markets across America. Through active participation in the regulatory and legislative process in Washington, D.C., ACA's members work together to advance the interests of their customers and ensure the future competitiveness and viability of their business. For more information, visit http://www.americancable.org/