Here’s a blog post by NAB Executive Vice President of Strategic Planning Rick Kaplan in response to a filing by the Competitive Carriers Association (CCA) advocating for greater government regulation of broadcasters in order to induce greater participation in the incentive auction. At its 9/26/13 open meeting, the Commission considered a Notice of Proposed Rulemaking regarding the UHF discount to its national television multiple ownership rule. The FCC voted 2-1 (Commissioner Ajit Pai dissenting) to initiate a public comment process for the proposal, which would eliminate the UHF discount allowing TV station owners to count only 50% of a UHF’s audience toward the FCC’s 39% cap on a station group’s total audience reach.
The Commission noted that the discount is really a remnant of the analog days when UHF channels didn’t have the same reach as VHF stations. Today, since most of the nation’s TV stations are located on the UHF band, the “UHF discount” is being considered as an antiquated rule.
From the 12/16/13 CCA filing:
“Competitive Carriers Association (“CCA”) hereby submits these comments in response to the Notice of Proposed Rulemaking issued in the above-captioned proceeding, which proposes to eliminate the so-called “UHF discount” from the Commission’s national television multiple ownership rule.
CCA supports the proposal to eliminate the obsolete discount, because it has the potential to discourage robust broadcaster participation in the upcoming 600 MHz incentive auction. As the principal organization representing the interests of competitive wireless carriers, CCA has a keen interest in ensuring that broadcasters are incented to participate in the reverse auction, so that the maximum amount of licensed spectrum is made available for wireless broadband services through the forward auction. CCA believes that eliminating anachronistic rules, such as the UHF discount, is important to making the incentive auction a success. CCA therefore encourages the Commission to repeal the UHF discount. Further, the Commission should act to identify other rules that threaten to discourage broadcasters’ participation in the auction process, and eliminate or amend such rules as appropriate.
As the NPRM recognizes, the UHF discount no longer serves its intended purpose. It is the product of the analog world, in which broadcast licensees in the UHF band were at a distinct disadvantage as compared to VHF licensees, due to the “‘inherent physical limitations’ of the UHF band.” As a result, UHF licensees typically had “smaller coverage area[s] and [more limited] audience reach” than VHF licensees. These disadvantages disappeared following the
transition of full-power television stations to digital broadcasting (“DTV transition”), however. Indeed, as the NPRM notes, “UHF spectrum is now highly desirable in light of its superior propagation characteristics for digital television, and the disparity between UHF and VHF channels has if anything been reversed.”
By attributing only 50 percent of the television households in a UHF station’s designated market area for purposes of the national audience cap, the UHF discount allows UHF licensees to expand their national penetration beyond the level intended by Congress and the Commission.
In so doing, the UHF discount enables broadcasters to maximize their economic power; in turn, the discount has the potential to artificially discourage broadcasters from relinquishing their licenses in the 600 MHz incentive auction, as increased market power enables the extraction of greater rents from multichannel video programming distributors (who pay retransmission consent fees) and advertisers.
In light of these developments, the Commission should find that the UHF discount no longer serves the public interest, and should eliminate the rule. Moreover, it would be inappropriate for the Commission to adopt a new “VHF discount” as a means of compensating VHF licensees for any challenges they now face. To the extent VHF spectrum no longer is well suited to digital broadcasting, it makes no sense for the Commission to adopt new rules encouraging broadcaster retention of spectrum while simultaneously urging broadcasters to relinquish their spectrum in the incentive auction. As the Commission has recognized, the beachfront spectrum currently licensed to broadcast stations would generate far more economic and social utility if repurposed for use by wireless broadband providers.
Accordingly, to the extent the Commission adopts any new rules affecting VHF licensees, the rules should be calculated to further encourage VHF licensees (and other broadcast station owners) to participate in the incentive auction.
More broadly, the Commission should examine other rules applicable to broadcast stations and take action to eliminate remaining regulatory distortions. In particular, in reviewing the record of its pending retransmission consent and media ownership rulemakings, the Commission should carefully consider how the existing rules and proposed reforms would affect broadcast stations’ incentives to relinquish spectrum in the upcoming 600 MHz incentive auction and adopt reforms in light of that vital consideration.
CONCLUSION
The UHF discount no longer serves its intended purpose and, in fact, has the potential to discourage robust participation in the 600 MHz incentive auction. CCA therefore supports repeal of the rule. In addition, CCA encourages the Commission to identify other ways to eliminate artificial disincentives for broadcast stations to participate in the auction and to ensure that auction-related considerations are taken into account in pending proceedings regarding broadcast regulations.”
Here’s Kaplan’s response:
“Spectrum Reflections: It’s Time for A Moment of Reflection, CCA”
By Rick Kaplan, NAB executive vice president of Strategic Planning
CCA, please tell us you are kidding.
In December, the Competitive Carriers Association (CCA), a trade association that represents most wireless carriers with the exception of Verizon Wireless and AT&T, filed comments at the Federal Communications Commission (FCC) in response to the FCC’s proposed rulemaking to eliminate the so-called UHF television discount. The filing would be downright funny if it wasn’t so desperate, specious and irresponsible.
The UHF discount proceeding is a pure broadcast television issue. By way of brief background, the broadcast television ownership rule prohibits a single entity from owning stations that reach in the aggregate more than 39 percent of total television households nationwide. The “UHF discount” allows stations broadcasting in UHF to count toward that cap only half of the TV households in their markets, as opposed to all of the households for VHF stations. The FCC has proposed to eliminate that discount.
The issue has absolutely no impact on the wireless industry. So why would CCA file? Was it a mistake?
CCA’s comments prodded the FCC to “examine . . . rules applicable to broadcast stations and take action to eliminate remaining regulatory distortions. . . . [T]he Commission should carefully consider how the existing rules and proposed reforms would affect broadcast stations’ incentives to relinquish spectrum in the upcoming 600 MHz incentive auction and adopt reforms in light of that vital consideration.”
In plain English, CCA expressly asked the FCC to strong arm broadcasters into participating in the wholly unrelated voluntary broadcast spectrum incentive auction. CCA’s theory is that if the FCC takes actions that affirmatively harm broadcasters, more broadcasters will participate in the voluntary auction, and then CCA’s members will have access to more spectrum than they would have otherwise.”
Read the rest of the post here
RBR-TVBR observation: Note that Sinclair struck a deal (9/25/13) to buy eight TV stations owned by New Age Media for $90 million. Sinclair was just under the 39% cap, sans the UHF discount, before the New Age purchase was announced. Sinclair’s proposed purchase of seven Allbritton stations will also be grandfathered in. Nonetheless, by initiating the process for revising how it calculates whether a media company exceeds a cap on station ownership, this vote may slow the recent buying uptick of TV stations.
Right now, several television groups are near the cap and would go over without the UHF discount. While existing groups are grandfathered, a change in the rules would prevent further growth for the grandfathered companies and would make it more difficult for up-and-coming groups to compete with those grandfathered entities.
