In the last few weeks, I’ve spoken to meetings of several broadcast organizations about important pending issues at the FCC and, unfortunately, had to cancel my planned appearance at the TVOT (TV of Tomorrow) conference in New York City where I was to have talked about the same issues. In any such conversation, probably the most talked about issue is the potential change in the broadcast ownership rules. Comments are due to be filed in the FCC’s Quadrennial Review of media ownership on Wednesday (December 17). We recently explored the radio issues to be considered, and they are relatively straightforward – should the FCC retain or significantly modify the local radio ownership rules? But I am finding that there is some confusion about the TV rules. The comments due on Wednesday address only the local TV ownership rules, but potential changes in the national rules are also being considered in a separate proceeding, and changes in both are needed to allow some of the pending transactions to go forward (like the Nexstar-TEGNA deal). We thought that we would explore the TV issues in this article.
The national ownership caps were set by Congress and prohibit broadcast owners from holding an interest in TV stations reaching more than 39% of the national television audience (though, in practice, the real limit is much higher as the audience of UHF television stations, which are now the majority of stations, still count as half that of VHF stations, the dominant transmission standard in 2004 when the 39% cap was adopted by Congress – see our article here on the UHF discount). The local TV ownership rules which currently limit any owner from having attributable interests in more than 2 TV stations in any market, are considered by the FCC in Congressionally mandated Quadrennial Reviews of the local ownership rules. A waiver of both of these mandates, or a change in the rules themselves, is necessary before a deal like that proposed by Nexstar can be approved. Is that likely to happen? There are many issues to consider.
One would think that the road to television ownership deregulation would be an easy one. Chairman Carr is on record stating that the current ownership rules are outdated due to the plethora of new media competitors that have come to prominence in the last decade. Carr wrote the section of the Heritage Foundation’s Project 2025 Report’s dealing with the FCC (starting on page 845). His only mention of broadcasting in that report was to say that the ownership rules should be repealed (see page 857). In the last Quadrennial Review, when he was in the minority, he dissented from the decision to leave ownership caps unchanged from the rules that have been in place for decades. In media appearances and on social media, he has also questioned the continuing need for the current rules. Certainly, the television acquisitions that have been announced (like Nexstar-TEGNA) and those that appear to be in the works have counted on that change.
But there are issues. One stems from questions about TV networks. The FCC has a formal proceeding open to review the relationship between networks and their affiliates and that may tie into the question raised in the FCC’s request to refresh the record on whether it can and should repeal the 39% cap, where it asked whether any such relaxation should apply to the networks.
A recent post by President Trump on Truth Social raised concerns that efforts to relax the rules for TV stations generally are in trouble. This post was initially seen as indicating his opposition to changes in the rules. After causing some initial ripples of concern in the investor community that his statement was meant as a broad condemnation of any relaxation in the television ownership rules, that concern seems to have been lessened as many commentators (see, e.g., the commentary here and here ) noted that the only companies specifically mentioned by the President were two TV network owners, leading to conclusions that his comments, like the FCC’s questions, were directed solely at questions as to whether TV network owners should get the benefit of any relaxation in the rules.
If correct, then the analysis turns to the merits of the two proceedings. The proceeding on whether to change the 39% cap is already ripe for FCC action, the Commission having received comments to refresh the record several months ago (see our article here). The issue had first been raised in the Pai administration at the FCC (see our article here), but after comments were received, the issue was left unresolved during his term and not seriously considered during the Biden administration. The biggest question raised in both the initial proceeding and this year’s updated comments is whether the FCC has the authority to make changes in the 39% cap. Opponents of changes contend that, as the rule was adopted by Congress, only Congress can change the limit. Those favoring change argue that the Congressional action directed the FCC to make the 39% change in 2004 based on the circumstances at the time but, in doing so, Congress did not limit the power that the FCC always was deemed to have, to modify the national ownership caps when appropriate. That question is subject to vigorous debate, and it may well be resolved by the courts.
Changing the local TV ownership rules is, by contrast, clearly within the FCC’s power. In fact, the Quadrennial Review of the local ownership rules is a Congressional mandate to, every four years, review the rules to determine if they should be retained or modified as a result of competition. Like radio, TV viewing has been dramatically affected by the increasing viewership of streaming services, both subscription and free. YouTube and Netflix by far command the largest share of TV viewing in the current environment – and both can reach every viewer in every market with effectively unlimited program viewing options.
By contrast, TV stations can only offer linear streams of programming that can be squeezed into the 6 MHz on each of the two TV channels to which they are now limited. While court action this past summer removed the restriction on TV owners being able to own only one of the two top 4 TV stations in any market (see our article here), relaxation advocates would argue that change is insufficient in light of digital competition. When the digital giants, who not only provide programming but also now sell local advertising in greater amounts than all local media combined, have audience and advertising market shares that exceed those of local TV stations, plus larger market capitalizations than the entire broadcast TV industry combined, how can the current rules be justified?
More than 20 years ago, the FCC decided to allow TV companies to acquire a third station in some of the largest TV markets. While that rule was appealed and ultimately repealed, the fact that the two-station limit has been questioned for over two decades, and a relaxation was actually enacted at a time when competition was nowhere as heated as it is today, shows that the two-station limit is not sacrosanct. If the FCC finds that the public interest would be served by a relaxation of the rules, the FCC can order it.
We will be watching as these two proceedings play out over the next few months. With Reply Comments due January 16 in the Quadrennial Review, FCC action on both the local ownership cap and the national cap would be ripe early in 2026. There are many questions about the timing of any changes, and how potential appeals of any FCC actions would play out. All will be explored when these proceedings are finally addressed by the FCC.
