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American Cable Association: FCC Must Stop Sinclair's TV Station Collusion

New Age Deal Crafted To Evade FCC’s Duopoly Ban, Trade Group Says

PITTSBURGH, November 7, 2013 - The American Cable Association called on the Federal Communications Commission to block Sinclair Television Group, Inc. from creating so-called virtual TV duopolies in two Florida markets where they plan on coordinating their retransmission consent negotiations as part of the broadcaster's transaction to acquire eight TV stations in all from New Age Media.

"Sinclair bears the burden of proving this deal will yield public interest benefits in both the Tallahassee and Gainesville television markets.  It obviously can't do so because Sinclair plans to rely on shell companies to take effective control of two Big Four stations in each market and coordinate their retransmission consent negotiations," ACA President and CEO Matthew M. Polka said. "Failure to restrain Sinclair's plans to collude in the sale of retransmission consent will hammer consumers with more disruptive TV station blackouts and even higher retransmission consent fees in their cable bills."

In September, Sinclair announced the station sales with Wilkes Barre, Pa.-based New Age Media.  As part of the deal, Sinclair will own the NBC station in Tallahassee and the CBS station in Gainesville while selling its FOX affiliate in Tallahassee and its NBC affiliate in Gainesville to a firm called Cunningham Broadcasting Corp., a so-called sidecar company with which Sinclair has close and established ties. Tallahassee's Designated Market Area (DMA) includes the Thomasville, Ga. market.

To protect competition and consumers, the FCC's duopoly rules prohibit common ownership of more than one of the mostly highly rated TV stations in a local market.

Under the coordination agreements with Cunningham filed with the FCC, Sinclair will be establishing "virtual duopolies" in Tallahassee and Gainesville, consistent with the corporate shell games Sinclair has played with Cunningham and its other sidecars partners in prior transactions.  Most importantly, the coordination agreements (also known as Joint Sales Agreements (JSAs) and Shared Services Agreements (SSAs) that are part of the application allow Sinclair to negotiate retransmission consent for both the NBC and FOX stations in Tallahassee and both the CBS and NBC stations in Gainesville.  The JSAs plainly state that Cunningham must "consult and cooperate" with Sinclair in the negotiation of retransmission consent agreements, and may even direct Sinclair to act as its agent in such negotiations.

The coordination of retransmission consent negotiations of two top-four rated Big Four network affiliates in the same market will serve to eliminate the competition that now exists between these stations for retransmission consent fees from Multichannel Video Programming Distributors (MVPDs), leading to higher prices for retransmission consent and higher rates for consumers. In both of these markets, the proposed transaction would increase the disruption caused by actual blackouts because Sinclair will be able to pull two highly rated stations at the same time.

ACA set forth its views in a Nov. 4 petition filed with the FCC, which included a request to designate the Sinclair-New Age transaction for hearing, or in the alternative to place appropriate conditions upon Sinclair and its sidecar partner.  Given the novel and important questions of law, fact, and policy that these transactions pose regarding blatant evasion of FCC rules, ACA also requested referral of the matter to the five FCC Commissioners for en banc disposition, instead of the Media Bureau acting upon the applications on delegated authority.

In its petition, ACA requested the designation for hearing due to the difficulty in styling behavioral remedies that would effectively foil Sinclair and Cunningham from coordinating their retransmission consent negotiations, given the substantial degree to which the coordination agreements demonstrate the companies will be coordinating other key broadcast functions of the two stations.

ACA said no Media Bureau precedent exists that explicitly addresses how the public interest will be served by allowing two top-four rated television stations in the same market to coordinate their retransmission consent negotiations.  The trade group stressed that combined with the lack of public interest benefits, the degree to which Sinclair and Cunningham are seeking to evade the broadcast ownership rules through a creative and unique structuring of the transaction raises novel questions of policy and fact that require the Media Bureau to refer the applications to the full Commission.

In the alternative, if the FCC believes remedial conditions could be effectively enforced, ACA asked that the FCC ban coordinated negotiation for carriage on behalf of any of their non-commonly owned stations in the Tallahassee-Thomasville and Gainesville DMAs, whether that coordination arises from joint carriage negotiations, the stations each appointing the same agent to separately negotiate on its behalf, negotiating separate carriage deals but sharing details of each of their carriage negotiations, sharing any details of their carriage negotiations at any time, or in any other respect colluding in the negotiation of retransmission consent.

"There can be no policy justification for permitting multiple Big Four broadcast stations in the same market to coordinate retransmission consent negotiations when they should be competing with each other," Polka said. "Without question, collusive behavior results in significant consumer harms and is starkly anticompetitive.  There is no offsetting benefit.  This outcome does not comport with the public interest, and the time is now for the FCC decisively to put an end to it."

About the American Cable Association

Based in Pittsburgh, the American Cable Association is a trade organization representing nearly 850 smaller and medium-sized, independent cable companies who provide broadband services for more than 7 million cable subscribers primarily located in rural and smaller suburban markets across America.  Through active participation in the regulatory and legislative process in Washington, D.C., ACA's members work together to advance the interests of their customers and ensure the future competitiveness and viability of their business.  For more information, visit http://www.americancable.org/

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