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ACA: FCC Must Block Sinclair’s Virtual TV Duopolies Included In Allbritton Deal

The American Cable Association called on the Federal Communications Commission to stop Sinclair Broadcast Group from taking effective control of two Big Four TV stations each in a pair of mid-sized markets where the broadcaster hopes to use its duopoly clout to force pay-TV providers, including ACA members, into paying excessive amounts for retransmission consent to carry those station signals.

"Approving Sinclair's merger with Allbritton Communications without changes sought by ACA and others would draw the FCC into embracing one of the most transparent evasions of its duopoly rule, which does not allow ownership of more than one of the top-four rated TV stations in a given market," ACA President and CEO Matthew M. Polka said on Oct. 28. "Sinclair's labored legal maneuverings should not be tolerated because they are blatantly inconsistent with the public interest in competitive local television markets, and approval of the deal would make a mockery of the FCC's enforcement of its own broadcast ownership rules."

As part of its $1 billion transaction with Allbritton, Sinclair will acquire the company's seven TV stations, including its Big Four stations in Charleston, S.C. and Harrisburg, Pa.  Sinclair, fully aware that the FCC's rules would not permit its outright ownership of these Charleston and Harrisburg stations, is also proposing to assign its own stations in these markets to third parties - so-called sidecar companies - while continuing to provide many "support services" to the stations through a variety of sharing agreements.  Under the agreements, Sinclair will create "virtual" duopolies that are tantamount to mergers in all respects except its name would not appear on record as the formal owner of the station.

One of the many key station functions that Sinclair would retain from the sidecar companies is the ability to act as their stations' "agent" in retransmission consent negotiations. In Harrisburg, Sinclair would be able to negotiate retransmission consent for the ABC and CBS affiliates and on behalf of the ABC and Fox affiliates in Charleston.

This arrangement would permit the nominally separately owned stations to coordinate their retransmission consent negotiations, thereby enabling them to extract higher retransmission consent prices from local multichannel video programming distributors (MVPDs) than each station could expect to secure if negotiating separately.

This practice reduces competition between broadcast stations with regard to the sale of retransmission consent, and consumers are harmed when cable operators pass through the higher fees derived from the coordinated negotiations. ACA's petition asks the FCC to deny the Sinclair-Allbritton deal or, in the alternative, to impose conditions that would prevent the stations from coordinating their negotiation of retransmission consent agreements.

Sinclair's claim that ACA is opposed to all local TV station sharing agreements is a red herring.

In fact, ACA has consistently acknowledged that such agreements can create operational efficiencies for the participants, and it has taken no issue with the agreements per se.  ACA's sole concern is, and has been, with the collusive practice of top-four ranked, same-market stations that are separately owned and coordinate their retransmission consent negotiations as if under common ownership for the purpose of extracting higher fees than the stations could obtain if negotiating independently.

Sinclair and Allbritton's request for the FCC's simultaneous approval of an acquisition and transfer of two separate stations in the same market when there is evidence that the new owners will then enter into far-ranging coordination agreements is unprecedented for a challenged transaction in recent years, if ever.

"The question before the FCC here is simple: Whether it would serve the public interest for Sinclair to acquire the Allbritton stations in the Charleston and Harrisburg DMAs given all of their contemplated agreements. This is a new, bolder license transfer scheme designed to evade the intent of the FCC's local television ownership restrictions and ought to be stopped," Polka said.

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