FCC unlikely to block Sinclair merger but someone must

Wading through the FCC comments relating to the Sinclair Broadcasting purchase of Tribune Media, and whether or not it should be approved, we found that every one of the 200 comments we read through, out of the 1,100 plus total comments registered, were against the merger.

Americans have a very different set of broadcasting rules to most other countries, and allocate spectrum in 210 designated market areas – in most other countries regulators allocated multiple layers of nationwide spectrum to multiple players – you can avoid one broadcast by a switch of the channel – but not so in the US.

The US method means that one company which owns a TV station may exercise considerably more control of local opinion, especially in political votes, than any other company. Which is why the US has a rule which says that no one TV broadcasting company can reach more than 39% of the population.

There are exceptions and one has been re-invigorated by the current FCC chairman, which is something called the UHF discount – meaning that TV channels in UHF spectrum only count for half the audience because the signal is supposedly weaker than the VHF band. Of course in the digital age that no longer holds true.

This means that Sinclair Broadcasting already reaches way more than 39% of the US population and after the deal, would extend this reach to 72%. Sinclair at present is seen as a conservative supporter, being in step with the Trump agenda, and the FCC Chair, Ajit Pai has been forced to come out and insist that President Trump has not communicated with him over the issue of whether or not to approve the merger.

This 39% rule is perhaps coming into an age where it is largely irrelevant. Facebook has more reach than that, and often Facebook pages have items dressed as fact that are these days seen as inaccurate, or Fake News, as do many other forms of entertainment and communication. Broadcast TV is just not as powerful as it used to be. However when the 39% rule was about to be changed in the Bush administration, the Congress voted some 400 to 20 against putting through such a change. Bush put it through slyly in an appropriations bill, but eventually a US court reversed the decision.

If President Trump feels compelled to support Sinclair because of its positive coverage in the past, the chances are that both the ruling and the merger will have to be untangled after the courts get through with it. Right now President Trump needs to stick to the battles he can win, and this isn’t one of them. The FCC Chairman may try to push through approval of this merger, but even Pai is unlikely to commit to something which may get immediately reversed or rejected by someone else. So while he may not act directly, he may have the decision taken out of his hands by a court.

Comments we read included those from T-Mobile, relating to freeing up UHF spectrum; the American Cable Association who said it was against the public interest; the Computer and Communications Industry Association which said it would dramatically alter the US media landscape and adversely affect
competition; Dish Network, which said the merger posed grave public interest harms which would raise prices for consumers.

In a nutshell Sinclair wants to merge so that it has more clout in re-transmission negotiations, so that it can hike prices with MVPDs, and that has to be against the public interest.

The truth is that this deal may not even pass muster among investors. It will place the combined company into greater debt, and right now broadcasting in the US cannot pay down debt through its normal performance, and is a threatened entity, especially so by the recent spate of skinny bundles sold online.  If you were an investor in Sinclair would you let it buy Tribune? It amounts to spending $3.9 billion on a dying distribution model.