Members of Congress across several committees overseeing the Federal Communications Commission and investigations suggest the FCC has taken a policy of favoritism toward the Sinclair-Tribune merger.
The top Democrats on the House Energy and Commerce Committee and subcommittees on communications, technology, oversight and investigations raised speculation this week that the head of the FCC adopted several deregulatory actions to directly facilitate the merger between Sinclair Broadcast Group and Tribune Media.
“Since the beginning of the Trump administration, the FCC has taken a series of swift actions that have benefitted Sinclair,” Reps. Frank Pallone of New Jersey, Mike Doyle of Pennsylvania, and Diana DeGette wrote to Republican FCC Commissioner Ajit Pai this week. Pai was appointed by Trump in January to lead the FCC.
“We write to express our concern regarding reports that suggest favorable treatment of Sinclair since you became chairman,” the letter reads.
Chief among those was Pai’s move to reinstate the ultra-high frequency (UHF) discount, a loophole in Congress’s national broadcasting cap limiting any one company from reaching more than 39 percent of the population. The discount lets broadcasters count only half of the audience reached by stations broadcasting in UHF, a format considered weak and unreliable in the ’80s when the discount was enacted. The switch to digital TV technology has since eliminated the technological difference, hence the Obama administration’s decision to close the loophole a year ago.
Sinclair, the largest owner of broadcast stations in the country, was hovering near the cap when reports surfaced it could seek to acquire Tribune Media, the second-largest, in March. In April the FCC reinstated the UHF discount, lowering its audience reach on paper to 24 percent and paving the way for it to buy Tribune, a deal announced two weeks later. The merger would take Sinclair from 173 stations to 215 and allow it to reach 72 percent of American households.
That was after Pai himself said in 2016 the “nation’s transition from analog to digital television has eroded the basis for the UHF discount,” and that “the time probably has come for the UHF discount to take its place in the history books alongside the Fairness Doctrine, the Morse Code exam requirement, and other outdated regulations.”
But that was before Republicans claimed the White House in November and Pai became the favorite to lead the FCC. Shortly after, Pai spoke at a meeting of Sinclair station general managers and afterward met privately with then-Sinclair CEO David Smith. They met a second time in January along with Armstrong Williams, a Sinclair conservative talk show host and Christopher Ripley, who took over as CEO that same month. A Monday New York Times article details other contacts between Pai’s office and Sinclair since he joined the FCC in 2012.
After their meeting, Ripley told investors during a February earnings call Sinclair is “very optimistic about this new FCC and the leadership of Ajit Pai” and “we do expect this new FCC to tackle the ownership rules.”
Democrats also highlighted the FCC’s decision to allow only 30 days for interested parties file comments on whether the agency should approve the transaction (many in the TV, news, and wireless industries urged the FCC to deny the merger).
“Even though the proposed transaction is between the two largest owners of broadcast stations,” Democrats demurred, “the FCC set a timeline for public comment that was shorter than the pleasing cycles set for previous transactions” like AT&T’s acquisition of DirecTV and Comcast’s buyout of NBC.
Further down their list of grievances, lawmakers took issue with Pai’s decision to nix an attempt to regulate joint-sales agreements, a practice Sinclair has used in the past to skirt rules forbidding broadcasters from controlling two television stations in the same market. Sinclair’s evaded the rule in the past by having employees and even Smith’s mother buy stations in the same market as Sinclair and broadcast the same content as Sinclair while keeping them technically separate on paper.
Pai’s action on joint sales and the UHF discount helped Sinclair in April to buy Bonten Media’s 14 stations across eight markets, including stations in markets where it already has joint-sales agreements in place.
“Sharing agreements allow a company like Sinclair to manage operational aspects of other stations that it does not own,” the letter reads. “[T]he FCC’s approval of this deal raises questions about whether Sinclair has effectively circumvented the FCC’s local TV ownership rules.”
Lawmakers further questioned the timing of the deal “given that the FCC made its decision in less than two months after the filing of the $240 million dollar deal.”
They then raised Pai’s decision to approve a new transmission standard dubbed Next Gen TV, which will support mobile television, 3D television, and 4K and higher frame rates. A Sinclair subsidiary is the primary patent holder of the technology, and licensing it out to other broadcasters could eventually bring in billions for Sinclair.
“Some have raised questions about how consumers will be affected by this proposal,” Democrats continue, “such as whether consumers will lose their signal, or whether their viewer data will be monitored without government oversight.”
Next Gen TV “will likely benefit Sinclair more than any other company,” they add.
The letter goes on to cite media reports detailing a meeting between President Donald Trump and Sinclair’s CEO after the election, when “potential FCC rule changes were discussed” and at least two one-on-one meeting between Pai and Trump, the second in the Oval Office. Sinclair also hired former Trump administration official Boris Epshteyn as a political commentator, who was since seen at the White House.
White House adviser and Trump son-in-law Jared Kushner said the Trump campaign made a deal with Sinclair for better coverage of Trump during the 2016 campaign, according to Politico. Many of Sinclair’s stations broadcast in swing states like North Carolina, Ohio, and Pennsylvania. Sinclair is receiving increased criticism from the media and Congress over the hard-right news packages and editorial influence it projects over its local news stations, which could reach a primetime audience larger than Fox News should the merger get approval from the FCC and Justice Department.
While the letter casts Pai’s deregulatory actions and Sinclair’s subsequent acquisitions in a nefarious light, many including the chairman himself insist they’re the result of a likeminded, free-market approach to policymaking Pai has espoused since joining the FCC in 2012.
Both see the rise of streaming services like Netflix as a market competitor to broadcast TV, and the reason Pai voted against the UHF repeal in 2016 was over the agency’s decision not to re-evaluate the national audience cap at the same time.
“With respect to the UHF discount, it’s a pretty simple matter,” Pai told Congress in July. “To the extent the agency considers the UHF discount reforms, it also has to consider the national cap. I’m not presupposing what the UHF discount policy should be, or what the national cap should be.”
“The two go together,” he said.
TechCruch’s Devin Coldewey says “there’s no big conspiracy” and that Pai is simply doing what he “promised he would.”
“Sinclair benefits because the FCC is deregulating the broadcast and broadband industries at their request and on their terms,” Coldeway wrote. “This isn’t some big expose article — it’s all on the record. Pai has repeatedly said — for years — that the FCC has overreached in its regulations of the broadcast, cable, telecommunications and broadband industries.”
Pallone asked Pai during a hearing in July if the White House directed his actions with regard to Sinclair.
“No one in the White House or the administration generally has made any representations to me about any FCC proceeding relating to that company,” he testified. “They’ve not asked me to take any particular action or expressed views on the merits, and certainly not with respect to the UHF discount.“
If you look at any of our regulatory actions,” he continued, “they’re not designed to benefit any particular company or segment of the industry, they’re simply meant to take a view of the marketplace as it stands and the law as it has been written by Congress.”
