For years, the Federal Communications Commission has allowed TV stations to execute joint operating agreements allowing themselves to outsource tasks such as advertising sales to group owners with more resources.
But when conservative columnist and entrepreneur Armstrong Williams recently purchased two stations, making him one of America’s few black owners of local TV affiliates, the commission unexpectedly decided to use his acquisition as a test case to review the practice.
The actions — coupled with other recent FCC decisions such as a plan to survey newsrooms that alarmed news media before it was withdrawn — have injected questions about whether a commission set up by Congress to be nonpartisan is now acting with a political litmus test under the Obama administration.
The FCC, backed by the Obama administration Justice Department, argues that broadcasters have used the shared-service, or “sidecar,” arrangements to circumvent long-standing rules against owning multiple television stations in a single market, allowing them to raise ad prices and weaken market competition. But critics say the effects of the rules — which could be taken up at the commission’s next meeting March 31 — on owners such as Mr. Williams suggest a more partisan motive.
Fox News analyst Juan Williams, a friend of Mr. Williams, raised the issue of partisanship in a Wall Street Journal op-ed published recently. “My suspicion is that liberals at the FCC who claim to be interested in promoting diverse broadcast ownership lose interest if the owner is a conservative like Armstrong Williams,” Juan Williams wrote. “They want diversity — but not of the political kind.”
Armstrong Williams, a Washington Times columnist and conservative radio and TV show host, signed a sidecar agreement with Sinclair Broadcast Group when he purchased stations in South Carolina and Michigan in the past year. The nation’s other black station owner, the historically black Tougaloo College in Jackson, Miss., has a similar sidecar deal with American Spirit Media.
Under his deal, Mr. Williams bought the stations from Sinclair and operates them separately, but allows Sinclair to sell advertising and provide other support for his small staff. Sinclair makes money by keeping a percentage of the ads it sells for Mr. Williams‘ stations.
The FCC has begun investigating the arrangement to determine whether Sinclair was having too much influence through the agreements and thus in danger of exceeding market cap ratios that the commission imposes on TV station owners. Mr. Williams met with FCC Commissioner Mignon Clyburn last week, and Mr. Williams made the case for continuing the shared-services agreements between his company, Howard Stirk Holdings, and Sinclair.
FCC officials declined to discuss why they wanted to suddenly look at the issue of joint operating agreements, with a spokesman saying only that commissioners felt it was time to review a policy that hadn’t been checked in a while. The Justice Department’s antitrust division last month weighed in on the FCC’s side, writing in a court filing that the administration “believes it is appropriate for the commission’s ownership ‘attribution’ rules to treat any two stations participating in a JSA (or agreement similar in substance to a JSA) as under common ownership.”
“The FCC needs to understand that Armstrong Williams manages and programs his stations day to day, with no outside influence,” he said. “Once they realize this, I am more than confident that Howard Stirk Holdings will continue its shared agreements with Sinclair Broadcast Group.”
“The college,” he wrote in a March 5 statement, “is no shell corporation, and [WLOO-TV General Manager Pervis] Parker is no rubber-stamp for WDBD. Tougaloo and Mr. Parker are independent innovators whose JSA gives them the breathing space to create something where nothing would exist otherwise.”
A danger to diversity
Mr. Williams pointedly warned that if the FCC negates joint sales and shared services agreements, it ultimately will destroy diversity of ownership because small minority owners of any race and background can’t afford to compete with big conglomerates that have economies of scale.