PITTSBURGH, September 16, 2013 - The American Cable Association called on the Federal Communications Commission to block or condition Sinclair Broadcast Group's acquisition of TV stations from Allbritton Communications in two television markets, claiming that Sinclair's "side car" deals and coordination agreements were purposefully designed to side step the agency's local TV station ownership limits and enable price-gouging collusion at the retransmission consent bargaining table with ACA Members.
"The FCC should deny this TV station deal because it will reduce competition and harm consumers. Sinclair has clearly made plans to negotiate retransmission consent for two Big Four stations in the Harrisburg, Pa., and Charleston, S.C., markets. Sinclair's intent is as clear as it is anti-competitive -- to gain insurmountable bargaining leverage over ACA Members and stage, when needed, massive and strategically timed blackouts to enhance the receipt of windfall profits," ACA President and CEO Matthew M. Polka said.
ACA set forth its views in a September 13 Petition to Deny or, in the Alternative, Condition license transfers in two markets that was filed with the FCC, arguing that Sinclair's virtual control of two network affiliates each in the Harrisburg and Charleston markets would reduce local television competition. In reviewing such license transfer applications, the FCC is charged with determining whether the transaction meets the public interest, convenience and necessity legal standard. In this case, because of the unmistakable anti-competitive impact of the transaction in the affected markets, ACA is calling upon the FCC to deny or condition the license transfers involving the Harrisburg and Charleston stations.
In July, Sinclair announced it was buying seven TV stations from Allbritton for nearly $1 billion. The deal calls for Sinclair to create, though "side car" deals and existing and newly created coordination agreements, "virtual" Big Four TV station duopolies in Harrisburg and Charleston. In Harrisburg, Sinclair intends to negotiate retransmission consent for the ABC and CBS affiliates and on behalf of the ABC and Fox affiliates in Charleston.
Under FCC rules, the duopoly ownership of more than one of the four most highly rated stations in a local market - typically, the affiliates of ABC, CBS, NBC and Fox - is prohibited. Virtual duopolies are formed through contracts or agreements entered into by separately owned stations that wish to combine forces without formally merging and thereby triggering the duopoly prohibition, and without undergoing the FCC's license-transfer approval process.
In February, more than two dozen ACA Member company executives urged the FCC to recognize that coordinated retransmission consent negotiations on the part of separately owned, same market TV stations create an attributable ownership interest under the local TV ownership rule. FCC adoption of this proposal would allow ACA Members facing retransmission consent collusion to rely on the duopoly ownership prohibition in filing an FCC action against the coordinating stations. It would also permit the FCC to bring enforcement actions on its own.
In its Sinclair-Allbritton petition, ACA said denying or conditioning the sale would allow the FCC to address the transaction-specific harms at issue while it continued to consider adoption of ACA-proposed broader reforms to address the widespread problem of coordinated negotiations. ACA has documented that separately owned, same market TV stations are coordinating retransmission consent negotiations in at least 20% of local TV markets, involving 48 instances in 43 different markets where Big Four stations have opted to collude
Because Sinclair could not otherwise acquire Allbritton's broadcast stations in Harrisburg and Charleston under the FCC's local television ownership rule, Sinclair is following the playbook of an increasing number of stations seeking to increase their market power.
Instead of buying Allbritton stations in only those markets where the FCC's ownership rule would not be implicated, Sinclair intends to rely on a series of alleged "assignments" of its own stations to "sidecar" companies that appear to have been established for the primary purpose of holding Sinclair's broadcast licenses in markets where the two companies' broadcast stations overlap. In doing so, Sinclair will effectively retain the rights in those stations pursuant to a variety of contractual arrangements.
ACA urged the FCC to deny the Sinclair-Allbritton transaction in these two markets or, in the alternative, condition approval on a requirement that Sinclair and its virtual duopoly partners refrain from coordinating negotiations for pay-TV carriage on behalf of any of their non-commonly owned stations or in any way colluding in the negotiation of retransmission consent -- which may include engaging in joint carriage negotiations, each appointing the same agent to negotiate on behalf of each of the stations, negotiating separate carriage deals but sharing details of each of their carriage negotiations, or sharing any details of their carriage negotiations at any time.
"There can be no policy justification for permitting multiple broadcast stations in the same local market that are licensed to operate as direct competitors to coordinate their retransmission consent negotiations, especially when the stations involved are affiliates of the major national networks," Polka said. "The substitution of collusion for competition will drive up the price of monthly cable bills and embolden TV stations to increase their reliance on blackouts to get their way."
If all of its pending transactions are approved, Sinclair would own, control, or negotiate retransmission consent on behalf of 149 stations, including 33 Fox affiliates; 27 ABC affiliates; 25 CBS affiliates; 14 NBC affiliates; 23 CW affiliates; 20 MyTV affiliates; 5 Univision affiliates; 1 Azteca affiliate; and 1 independent station, reaching approximately 38% of all U.S. television households. Allbritton owns eight television stations, all of which are ABC affiliates.
About the American Cable Association
Based in Pittsburgh, the American Cable Association is a trade organization representing nearly 850 smaller and medium-sized, independent cable companies who provide broadband services for more than 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/
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