FCC Releases Draft Report & Order on National TV Caps

The FCC released the adopted version of the National Television Act Report and Order. We have provided an updated alert for circulation below. For your edification, the adopted version contains non-material updates to some of its language, citations, and the relevant data underlying the Order. Additionally, of material note, the FCC provided the following “initial guidance” on its approach to case-by-case reviews:

1. Local Programming/Local News Concerns:
   1. Parties that seek to oppose a transaction based on a concern that there will be a decrease in local programming (including local news) will be expected to provide comparisons to the “likely marketplace status quo and likely trajectory absent the transaction, rather than some hypothetical ideal marketplace not grounded in practical realities.” The Commission expressly noted “the financial challenges posed by producing high-quality local news.”
   2. Parties seeking to oppose a transaction based on concerns related to “local news” will be expected to explain why local news is not expected to serve as a competitive advantage or why the broadcaster is not likely to act on that  incentive. “In conducting such an analysis, historical experience involving the parties at issue is likely to be relevant.” 
2. Retransmission Consent Concerns:
   1. Parties seeking to oppose a transaction due to increased retransmission consent concerns “could seek to justify a non-local market definition or would need to support another theory why the increased national reach at issue in a given transaction would cause the alleged harms.”
   2. The FCC “will expect allegations of transaction-specific retransmission consent harms to explain why the alleged concerns” can be addressed by the Commission.
   3. “In the case of alleged harms in future retransmission consent negotiations premised on expanded national reach, [the FCC] further will expect oppositions to identify why the relative negotiating leverage of the broadcast group would be contrary to the public interest.”
   4. “Finally, the ultimate question in [the FCC’s] public interest review remains the overall effect on the viewing public.”
3. Loss of Journalists and Communications Workers Concerns:
   1. The FCC expects oppositions to a transaction based on employment “to be premised on a proper baseline to ensure the alleged employment-related harms are transaction-specific.” “In particular, financial challenges in the broadcast television industry make it important to compare alleged post-merger harms against the pre-transaction status quo and trajectory that actually was likely absent the transaction.”
   2. The parties will also be expected to explain why the Commission can resolve the concerns. 
   3. The Commission will also focus “on the ultimate effects on viewers through the broadcasters’ continued ability to operate consistent with their public interest duties under the Communications Act and Commission rules.”

Updated  Alert for Circulation:

The FCC released the adopted version of the National Television Act Report and Order repealing the 39% national television cap, and “replac[ing] that regulation with a case-by-case approach to applications for television license transfers and assignments.” Specifically, the Report and Order:

• Finds that “a rigid cap is no longer needed to serve the ‘public interest, convenience, and necessity.’”  Specifically the FCC concludes that the National Television Cap is not necessary promote view point diversity, competition, or localism. 
• Concludes that replacing the cap with case-by-case review better promotes the Commission’s goals by “ensur[ing] that proposed transactions that otherwise would have been presumed not to be in the public interest under the national cap are reviewed on their individual merits.” The FCC anticipates that removing the national TV cap will increase local programming and promote innovation by reducing operating costs, increasing investment potential in local news rooms, and expanding the reach of local stations. In addition, to the extent that a particular transaction is likely to cause harm, the FCC notes it will be able to review those concerns in the context of the specific transaction and address them as appropriate. The FCC offers the following “initial guidance” on its approach to case-by-case reviews:

• • Local Programming/Local News Concerns:
    • Parties that seek to oppose a transaction based on a concern that there will be a decrease in local programming (including local news) will be expected to provide comparisons to the “likely marketplace status quo and likely trajectory absent the transaction, rather than some hypothetical ideal marketplace not grounded in practical realities.” The Commission expressly noted “the financial challenges posed by producing high-quality local news.”
    • Parties seeking to oppose a transaction based on concerns related to “local news” will be expected to explain why local news is not expected to serve as a competitive advantage or why the broadcaster is not likely to act on that  incentive. “In conducting such an analysis, historical experience involving the parties at issue is likely to be relevant.” 

• • Retransmission Consent Concerns:
    • Parties seeking to oppose a transaction due to increased retransmission consent concerns “could seek to justify a non-local market definition or would need to support another theory why the increased national reach at issue in a given transaction would cause the alleged harms.”
    • The FCC “will expect allegations of transaction-specific retransmission consent harms to explain why the alleged concerns” can be addressed by the Commission.
    • “In the case of alleged harms in future retransmission consent negotiations premised on expanded national reach, [the FCC] further will expect oppositions to identify why the relative negotiating leverage of the broadcast group would be contrary to the public interest.”
    • “Finally, the ultimate question in [the FCC’s] public interest review remains the overall effect on the viewing public.”

• • Loss of Journalists and Communications Workers Concerns:
    • The FCC expects oppositions to a transaction based on employment “to be premised on a proper baseline to ensure the alleged employment-related harms are transaction-specific.” “In particular, financial challenges in the broadcast television industry make it important to compare alleged post-merger harms against the pre-transaction status quo and trajectory that actually was likely absent the transaction.”
    • The parties will also be expected to explain why the Commission can resolve the concerns. 
    • The Commission will also focus “on the ultimate effects on viewers through the broadcasters’ continued ability to operate consistent with their public interest duties under the Communications Act and Commission rules.”

• Find that Commission has authority under the Communications Act to repeal the cap.

The Report and Order will be effective sixty (60) days after the date of publication in the Federal Register.