UPDATE 1-U.S. FCC may limit TV stations banding on ad sales, retransmission

Thu Mar 6, 2014 3:08pm EST

WASHINGTON, March 6 (Reuters) - U.S. Federal Communications Commission on March 31 will vote on new rules that would prohibit broadcast companies from controlling more than two TV stations in a market by sharing advertising sales staff, FCC officials said on Thursday.

FCC Chairman Tom Wheeler is now proposing new rules that would count a broadcaster as having an ownership interest in any station where that owner sells 15 percent or more of advertising time.

Another proposed rule would also ban two or more broadcasters that technically compete against each other in the same market from banding together and jointly negotiating retransmission agreements with cable and satellite companies.

Current FCC rules typically prohibit one broadcaster from owning two TV stations in one local market. But some companies have relied on workarounds, sometimes known as sidecar arrangements, that the FCC says often give one broadcaster de facto control over another station's programming and finances.

For instance, some stations in the same market strike so-called joint services agreements under which one of them sells some or all advertising for the other. Some stations also reach what are known as shared services agreements on assets such as news helicopters.

Broadcasters have argued that such arrangements are necessary to help stations better cover local news and stay financially strong. They say pay-TV providers are targeting them to diminish local TV stations' power.

Public interest groups, however, have pushed for the FCC to do away with sidecar agreements, which they see as helping corporations consolidate ownership of local media.

If adopted, the FCC rules could prompt divestitures from large TV station owners such as Sinclair Broadcast Group Inc. . The FCC said it would give broadcasters two years to divest or apply for waivers, which the FCC would consider on a case-by-case basis to see if they are in the public interest.

Dwindling advertising revenue and audience numbers have pushed broadcasters to acquire more TV stations that have multiple revenue streams, including retransmission fees from cable operators who pay to carry channels.

Last year, Gannett Co Inc bought television company Belo Corp for $1.5 billion, Tribune Co bought Local TV Holdings LLC for $2.7 billion, and Sinclair agreed to buy eight TV stations from the Allbritton family for $985 million.

The Justice Department in a filing in February urged the FCC to count ad sales-sharing stations as owned by one entity and to better scrutinize all sharing agreements.

"Failure to account for the effects of such arrangements can create opportunities to circumvent FCC ownership limits and the goals those limits are intended to advance," the Justice Department said.

The new rules would change current media ownership regulations, which the FCC is required to review every four years. As the five-member FCC votes on the rules, it will also vote to launch the 2014 quadrennial media ownership review, merging the unfinished 2010 review into the new one.

The review would seek comment on whether broadcasters should disclose some shared services agreements.

It would also keep the current limit on one owner's controlling a major newspaper and TV station in one market and seek comment on possibly relaxing those restrictions.

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