By Grant Spellmeyer, ACA Connects President and CEO
The FCC’s Media Bureau recently designated for hearing Standard General’s proposed purchase of TEGNA. I want to tell you what happened and why it’s a big win for ACA Connects Members concerned about retransmission consent.
Last year, Standard General (a private equity fund that owns a handful of television stations) proposed to buy TEGNA, a very large broadcaster with 64 stations in 51 markets. That, in and of itself, wasn’t all that complicated. What was complicated was Standard General’s financing plan: Cox Media, another large broadcaster, proposed to finance the deal in exchange for non-voting equity in TEGNA. It proposed to do so, moreover, through a complicated series of station swaps among the three parties (Standard General, TEGNA, and Cox Media).
ACA Connects—through the American Television Alliance—told the FCC that this complicated structure raised two concerns. First, it would raise retransmission consent prices immediately due to the way the parties engineered the deal to take advantage of “after acquired station clauses.” Briefly, the parties arranged the station swaps so that, for many cable operators, less expensive TEGNA rates would “reset” to more expensive Cox Media rates. Second, the structure would permit TEGNA and Cox Media—who are supposed to compete with one another—to collude on future retransmission consent rates.
The Media Bureau agreed. Or, more precisely, it directed an Administrative Law Judge to hold a hearing to determine the facts related to retransmission consent (among other issues).
The Media Bureau’s decision and Standard General’s ongoing attempts to overturn it have gotten a lot of press for a variety of reasons. To me, however, two things stand out.
First, the FCC, at long last, is taking a hard look at after-acquired station clauses, how broadcasters engineer transactions to raise prices via such clauses, and how broadcasters obtain the information to engage in such engineering in the first place. ACA Connects first sounded the alarm about this in 2015, and we’re gratified that the FCC has agreed with us.
Perhaps more importantly, the FCC has acknowledged once and for all that retransmission consent remains an important part of its merger analysis. Some—including the broadcast industry—have suggested that this is new and unprecedented. This is wrong.
The FCC, like the antitrust regulators, has always looked to see if a proposed merger would cause higher consumer prices. This goes for retransmission consent fees as much as for any other kind of price increases. In a few prior cases, to be sure, the FCC has (wrongly, in my view) found that a particular transaction did not cause consumer price increases. But there has never been a “retransmission consent exception” to the basic rule that, if a merger causes higher prices, that’s a bad thing.
On this point, then, the Media Bureau did nothing exotic or unusual. Its order was, if you’ll forgive a Spring Training metaphor, a fastball right down the middle.
So let’s celebrate. It’s been a little while since the FCC has taken a stand on retransmission consent issues. Now it has. And it should be commended for having done so.