FCC clears way for big TV mergers, eases broadband price limits

The Federal Communications Commission on Thursday accelerated its deregulation push under Republican control, voting to ease limits on broadcast TV ownership and prices that large telecom companies can charge businesses and governments for bulk broadband services.

Revisions to how the agency calculates the audience reached by broadcasters would clear the way for Sinclair Broadcast Group Inc. to purchase Tribune Media Co., which owns KTLA-TV Channel 5 in Los Angeles and 41 other stations.

Thursday’s changes, advocated by the agency’s new chairman, Ajit Pai, and approved on party-line votes, reverse initiatives the FCC pursued under Democratic leadership during the Obama administration. Consumer groups and some lawmakers warned that the deregulation steps would trigger more media consolidation and higher prices for consumers.

The moves came as Pai is expected to soon try to roll back the controversial net neutrality rules for online traffic that were pushed through by former chairman Tom Wheeler.

A small group of protesters disrupted the meeting briefly, singing a song indicating they would fight any attempt to water down those rules, which are designed to ensure the free flow of Internet content.

The FCC’s sole Democrat, Mignon Clyburn, said it was “abhorrent that the policy goal is deregulation at all costs.” She opposed both regulatory changes Thursday.

Pai said he was “not acting from ideological zeal” but just trying to promote more competition.

“The overall approach is pretty simple -- it’s not to deregulate or over-regulate,” Pai told reporters after the meeting.

Sinclair and Tribune Media are two of the largest owners of broadcast stations. Their reported desire to combine would create a company whose total audience would have exceeded a statutory cap under the FCC’s former rules that limit reach to 39% of the nation’s television households.

Tribune Media was formerly Tribune Co., which owned The Times before spinning off its newspapers into a separate company in 2014.

The FCC on Thursday reinstated the so-called UHF discount, which allows stations broadcasting on those higher-frequency airwaves — channels 14 to 83 — to count only half of their audience against the cap.

The FCC voted 3-2 in the summer to eliminate the discount, arguing the 2009 federally mandated switch to digital TV ended the technical inferiority of the weaker UHF signals. The FCC grandfathered in existing station groups that exceeded the cap but said the exception could not be transfered in a sale.

Pai and the FCC’s other Republican, Michael O’Rielly, opposed the 2016 change, arguing it was unlawful to alter the way the cap limits were calculated. With Republicans now holding a 2-1 majority, they were able to reverse the change on Thursday.

Pai said the UHF discount and the cap were “inextricably linked” and it made no sense to change one without considering a change to the other. He promised the FCC would launch such a review later this year.

But Clyburn said the UHF discount “had outlived its purpose” and reinstating it would allow a broadcast station group to reach up to 78% of the nation’s TV households.

The FCC’s action will reduce competition, ownership diversity and local content and “is a huge gift for large broadcasters with ambitious dreams of more consolidation,” she said.

Two top congressional Democrats, House Minority Leader Nancy Pelosi of San Francisco and Rep. Frank Pallone of New Jersey, wrote to Pai this week opposing the change.

“The UHF Loophole is unfair to the public because it treats UHF stations differently only for one purpose — to let big station conglomerates own more stations across the country,” they wrote.

A Sinclair/Tribune deal “would be bad news for consumers” because it would reduce independent voices in some markets and could lead to higher pay-TV bills because Sinclair charges more than Tribune for cable companies to carry their stations, Pelosi and Pallone wrote.

The FCC’s decision to reduce price controls on bulk broadband access — known as business data services — came after Wheeler had proposed to tighten them last year. He gave up on the attempt to stiffen regulations on the $45-billion market after the November election when Republican lawmakers urged him not to push controversial measures in the weeks before party control of the FCC switched.

Large telecom companies such as AT&T Inc. and Verizon Communications Inc. provide special connections to heavy data users such as banks, retailers, schools and hospitals for services such as ATMs, credit-card authorizations and general Internet access.

Pai said FCC price controls were preventing existing providers from expanding their networks and discouraging new entrants, such as cable companies.

“Price regulation is seductive,” he said. “In reality, price regulation threatens competition and investment.”

The FCC voted to eliminate price regulations in competitive markets and reduce the rules in noncompetitive ones to try to lure new entrants. The changes will be phased in over three years.

Clyburn complained that the new rules define a market as competitive even if it has only one bulk broadband provider, as long as a competitor has access lines within half a mile.

Consumer groups said the elimination of price controls would lead to higher costs for businesses.

“Ultimately, these price hikes will be passed on to consumers, and American families and businesses will pay dearly for the green light the FCC has given to the unfettered exercise of market power by dominant telecommunications providers,” said Phillip Berenbroick, senior policy counsel at Public Knowledge, a digital rights group.

The federal Small Business Administration’s Office of Advocacy urged the FCC to delay a vote, as did the European Union, which said it was worried the changes could affect the global business-to-business data services market.

Twitter: @JimPuzzanghera

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