- The Washington Times - Monday, March 10, 2014

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— coupled with other recent FCC decisions such as a plan to survey newsrooms that alarmed news media before it was withdrawn — have injected questions about whether a commission set up by Congress to be nonpartisan is now acting with a political litmus test under the Obama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 Monday. “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.”

In an interview with The Times, Mr. Williams declined to speculate on whether race or his political views provided motivation for the recent FCC action.

“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.”

Ajit Pai, one of the two Republican appointees on the five-member FCC, defended the sidecar deal signed by Tougaloo for WDBD-TV, its station in Jackson, Miss.

“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.

“I’m ecstatic and blessed that I have a partner in [Sinclair Chairman] David Smith and Sinclair Broadcast that helps with the financial burdens through a joint sales agreement,” he said. “Without them, I would never have gotten a loan from the bank, and my stations would eventually have gone away from the public because they would have been bankrupt without these arrangements.”

The FCC tightly regulates ownership of local television to prevent a single company or individual from owning all of the broadcast stations in a town. The goal is to help preserve free speech and prevent a monopoly on outlets for a single viewpoint. Most entities aren’t allowed to own more than two stations in a single market.

The regulatory commission now is exploring whether partnerships like the Armstrong Williams-Sinclair deal are covertly allowing media conglomerates to scoop up all the broadcasting in the U.S.

Joint Sales Agreements are common in the media world to allow multiple stations to sell advertising together, making pitches to companies so they are able to buy ads on multiple stations at once instead of case by case. Shared service agreements cover a broad range of cooperation among stations to share resources such as two broadcasters using the same news helicopter or employing the same technicians to fix camera equipment.

Mr. Williams said the two TV stations he owns couldn’t survive without the agreements. “Our shared service agreements allow access to capital that would have otherwise been unavailable,” he said. “Access to capital and financing are the single biggest obstacles to new entrant and minority ownership.”

The FCC is debating rules that would count ownership of a station if someone controls 15 percent or more of the ads on that station, similar to rules governing radio broadcasters. It also would increase scrutiny on shared service agreements and look at just what exactly stations are sharing.

The issue is up for public comment.

Observers said it has been several years since the commission reviewed the rules but also noted that the movement on the regulations could be driven by recently sworn-in FCC Chairman Tom Wheeler, an Obama appointee.

Mr. Williams said he met with FCC officials last week to discuss sidecar deals and told commission leaders how critical the agreements are to the survival of his television stations.

The goal of possibly restricting the agreements is not to financially harm broadcasters, but to place greater scrutiny on the business, some media watchdogs say.

“At a certain level, all of these agreements should be attributable and subject to the FCC local rules,” said Matt Wood, the policy director at Free Press, an advocacy group focused on keeping media open and accessible. Otherwise, it can sometimes be a little difficult to tell who’s investing in what station where.”

Now, however, broadcast conglomerates are owning or operating hundreds of stations across the country, giving them as wide a reach as many of the major national broadcast companies such as Comcast. What’s more, the TV stations often share content, or work together on stories, meaning some audiences are seeing more of the same.

“We care very much about diversity of voices in local media markets,” Mr. Wood said. “You have the exact same stories and the exact same viewpoints being broadcast on two stations at once. The stations are sharing almost everything in their joint operations.”

But Mr. Williams argues that locally owned broadcast stations allow greater diversity and can more easily tailor coverage to meet local needs. The majority of people are still getting news from the local evening broadcasts.

“Sometimes you forget the role that broadcast television plays in this country,” Mr. Williams said. “Sixty-seven percent of people in all markets get their updates from these network affiliates.”

By providing the resources and support necessary to operate local television stations, the sharing agreements allow a diverse group of people to broadcast TV, said Mr. Williams, who is black.

“Shared services agreements are needed to enhance minority ownership and expand diversity, and the recognition is important in helping support their continued use,” he said, adding that the agreements aid in “development of content that reflects an increasingly diversified nation, not always in terms of race, but in terms of ideology.”

FCC leadership is required by law to be divided. Three Democrats and two Republicans are serving as commissioners.

Conservative Michael O’Reilly said he was in support of the agreements.

“Local programming, especially news, is expensive to create but highly sought after by consumers,” he said. “There is evidence of significant benefits from these arrangements, including saving stations from going dark, adding diverse voices to market, and enabling local news where it would otherwise be cost prohibitive.”

Mr. Wheeler has yet to publicly weigh in.

The Washington Times partners with Sinclair Broadcast Group, which owns more than 160 TV stations nationwide and is one of the media conglomerates that would be affected by changes to the regulations.

A representative for Sinclair could not be reached for comment, but the company said in a regulatory filing earlier this month that Sinclair officials argued to FCC officials last month that it would not be fair to require broadcasters to unwind deals previously approved by regulators, Bloomberg News reported.