FCC pulls a scam and reinstates UHF discount

Look for more consolidation as FCC gifts media conglomerates by relaxing media ownership rules 

In all my years of following the television industry, I’ve never seen an outright scam perpetrated onto the public by a government agency.

But that’s what we have as the Federal Communications Commission announced Thursday the restoration of the UHF discount abolished a few months ago in a predictable 2-1 party-line vote with Republicans Chairman Ajit Pai and Commissioner Michael O’Rielly in favor and Democrat Mingon Clyburn against.

So why is all of this a scam? In the analog era, broadcast groups were given an “UHF Discount”, meaning the UHF station they owned would count as only half their coverage toward the ownership cap, given the frequency – channels 14 to 83 (later downsized to 69) reach less viewers and had poorer reception than their VHF counterparts (channels 2-13.) For example in the Chicago area, owning a VHF station like WBBM-TV would count toward 3.02 percent of the country; a UHF station such as WFLD-TV would be halved to 1.51 percent.

Since the dawn of the digital era, the over-the-air reception of the stations are for the most part, on equal footing as most stations are technically situated on the UHF dial since the digital reallotment. So technically, the UHF discount wasn’t needed and the FCC under Tom Wheeler eliminated it.

But since President Trump took office, Big Media has been scheming to expand their station groups, claiming their business is being harmed by Google and Facebook and streaming giants Netflix and Amazon. They found a sympathetic ear in Pai, so he reinstated the discount for UHF stations, meaning any station of a UHF dial would get discounted by half toward the cap.

Currently, the cap is at 39 percent. Later this year, the FCC is expected to revisit the idea of ownership cap and may do away with it altogether.

Thursday’s action means a company like Sinclair, which was bumping up against the cap around 38 percent, sees its coverage drastically reduced. Sinclair has made a lot of noise about acquiring Tribune in recent weeks, revealing it would buy the company at above $30 a share. When Wheeler cut off the UHF discount, Tribune’s coverage ballooned to 44 percent, meaning even though it would keep those stations it bought, the company’s couldn’t buy anymore.

With the UHF discount now in place, a Sinclair-Tribune deal could be finalized in a few weeks.

Restoring the UHF discount is really nothing but a scam intended to give groups like Sinclair and others to buy up more stations and control more of a given market’s advertising revenues. Moreover, if the rules are completely abolished, local ad rates are certain to skyrocket.

The moves comes at a time when the Writer’s Guild of America are authorizing a strike vote this week as the studios – many of them who own television stations in the nation’s top markets – recorded record profits. Three of them – CBS, Comcast, and 21st Century Fox – are open to expanding their coverage footprint. If no deal is reached by May 1, writers would walkout.

The endgame is, the action likely speeds up the demise of Tribune Media, a company having roots in television dating back to 1948 when it launched WGN-TV and Chicago would lose another company whose headquarters are here (if Sinclair buys Tribune, it is unlikely they would relocate to Chicago from suburban Baltimore, where they are based.)

It’s likely an end of an era.