Pay-TV firms cheer FCC’s proposed rule changes; broadcasters balk

Pay-TV distributors and public interest groups cheered news that the Federal Communications Commission is considering new regulations for local television stations.

Specifically, the FCC is expected to vote on March 31 to prohibit separately owned television stations from teaming up to negotiate distribution deals with pay-TV companies.

The practice has become commonplace in the last several years because of an increase the number of operating partnerships between local television stations known as joint sales agreements or shared service agreements.

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Under such partnerships, the stronger of the two TV stations typically negotiates distribution deals for itself and the other station. Pay-TV companies say such arrangements have given broadcasters an unfair advantage and resulted in higher pay-TV bills for consumers.

The American Cable Assn. called the practice “collusion” and a “scheme designed to drive up the fees paid by cable-TV providers.” The National Cable & Telecommunications Assn. said, “This type of coordinated behavior has resulted in increased prices which are ultimately borne by consumers.” Both groups praised the FCC and Chairman Tom Wheeler for the proposed changes.

The FCC said it also will vote on a rule under which a broadcaster would be considered to hold an ownership stake in any station for which it sells 15% or more of its advertising time. If enacted, that rule could force some broadcasters to unwind their joint-sales agreements to avoid running afoul of the agency’s caps on ownership of television stations.

The National Assn. of Broadcasters criticized the proposed changes.

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“The real loser will be local TV viewers, because this proposal will kill jobs, chill investment in broadcasting and reduce meaningful minority programming and ownership opportunities,” said NAB President Gordon Smith. He added that the changes would benefit “big cable companies who want less competition for advertising in local markets.”

FCC Commissioner Ajit Pai also signaled he is not on board with the commission’s plans.

“This JSA proposal is a dagger aimed at the heart of small-town broadcasters. It’s a job killer that would result in less news programming, less diversity and more stations going dark,” Pai warned.

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Follow Joe Flint on Twitter @JBFlint.