Sinclair and ‘Big Media’: The outrage that caused the outrage

A bitter controversy has engulfed Washington over the “UHF Discount.”  But it is sound and fury over what are zombie rules governing phantom markets.

There are deep reasons to question TV regulations, which preserve airwave set-asides created prior to World War II and which now deprive wireless customers of bandwidth for their tablets, smartphones, flat panels and Fit Bits.  But those protests have curiously yet to emerge.

{mosads}Since the Federal Communications Commission’s 2003 initiative to relax limits on the number of local TV stations a broadcast network can own, “media concentration” has been a cause célèbre.  Commentators from Michael Moore to the late William Safire attacked that deregulation, decrying the power of television conglomerates. “Relaxing the rules that prohibit a single entity from controlling too large a percentage of American media,” wrote Washington Post columnist Tom Shales, “will allow corporations that are already too big to become much, much bigger.”  Pres. George W. Bush, and his FCC appointees, were blasted as toadies of Big Media.

A populist uprising led a Republican Congress to shake, rattle and roll.  It over-ruled the FCC, which wanted to allow the ABC, CBS, NBC and Fox broadcast networks to own stations in markets reaching up to 45 percent of U.S. homes — up from 35 percent.  The Congress set a cap of 39 percent.  The Republic held. And public concern over Big Media calmed.

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That is, until now, when a loophole has become hot news.  UHF stations (on channels 14 to 51) were only counted as one-half of a VHF (channels 2-13) outlet.  That stemmed from their inferior over-the-air coverage.  A UHF broadcast might reach just one million households, via roof-top antennae, where a VHF would reach 2 million.  The “UHF discount,” as the policy was dubbed, adjusted for the difference in calculating ownership caps.  

But this approach came into question with the spread of cable and satellite TV.  By the 2000s, when 90% of homes had subscriptions, all local broadcasts were clear and bright.  On this logic, the FCC during the Obama years abolished the UHF discount.  That effectively tightened the ownership cap. Only to have the Trump FCC re-instate the discount this year, loosening the cap.  A 39 percent coverage limit becomes, potentially, 78 percent.

The Big Media protest revives and this with a corporate target: Sinclair Broadcasting.  The company owns 173 TV stations, far more than ABC, Fox, NBC or CBS.  And it seeks to grow larger still, buying the Tribune Company’s 42 stations — a merger enabled by the “UHF discount.”  Critics see the expansion of Sinclair as a threat to quality journalism.

Called by Slate “a right-leaning company worth close to $40 billion,” Sinclair broadcasts its point of view.  In 2004, it refused to air Ted Koppel’s “Nightline” reading of U.S. Iraq War fatalities on its ABC-affiliated outlets, and aired a documentary sharply critical of Sen. John Kerry just before the presidential election.  An advertising boycott ensued.

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Now, the outrage is back.  Sinclair ran news vignettes targeting Hillary Clinton in 2016, and blasts out daily news blurbs from its “Terror Alert Desk.”  The company features Trump administration cast-offs in lengthy commentary segments appearing during nightly news broadcasts.  In cities like Seattle — where Sinclair is buying the ABC affiliate, KOMO – journalists at the targeted takeover are protesting.  HBO’s John Oliver unsheathed his comedy dagger to slice and dice Sinclair’s ideological slant.

Media activists heed the critique, pushing for tighter enforcement of the media ownership cap by eliminating the UHF discount.  That might put the kibosh on the Sinclair-Tribune merger but the deeper point is that the station limits do virtually nothing to stop “media concentration.”  And, ironically, the very existence of Sinclair as the country’s largest TV station group owner is a product, to a very large degree, of just these rules.

Sinclair arises in the niche carved out by the limits imposed by the FCC on broadcast networks.  Those companies fund far more quality journalism in both national and local news markets.  But with FCC rules limiting their transmissions, firms like Sinclair rush in, protected from “Big Media” competition.  

In reality, broadcast networks pump their shows all across the U.S.A.  CBS owns no broadcast outlet in Greenville, S.C., — or Seattle or Houston or Washington, D.C.  Yet its shows, from “The Big Bang Theory” to “60 Minutes,” reach TV sets everywhere.  They travel through CBS broadcast affiliates, cable, and satellite where they compete with the programs of national cable networks: CNN, Fox News, MSNBC, C-SPAN, Bloomberg, BBC America and Vice.  What matters to consumers is the variety of their program choices, not where they get it.  

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So who cares about the station cap?  Private equity funds and Wall Street deal-makers.  They create “station group owners” that fill the void when networks are barred from owning their affiliates.  Then they lobby to get the rules relaxed, inviting more bidding, pushing up station prices.  It’s an insider’s game in an intra-industry skirmish.  Taking sides with station groups against the broadcast networks is a sucker’s bet.

The free speech rights of Sinclair and its rivals should be cheered.  What should be decried are public policies that truncate competition, locking in TV license awards (and spectrum set asides) made in 1939.  These deprive customers of better wireless products in favor of protected markets and crony capitalism.  The loudest champions of stopping “media concentration” have unwittingly delivered Sinclair the goods.

The debate over media bias is a worthy one.  So are concerns over media concentration and policies that advance competition and free speech.  But the broadcast station cap rules, with or without the “UHF discount,” address none of these.  When those who champion government rules rise to denounce the results of those initiatives, it yields a very clear signal — even over UHF.

Thomas Hazlett is H.H. Macaulay Endowed Professor of Economics at Clemson University. Hazlett is a former chief economist of the FCC and his book, “The Political Spectrum: The Tumultuous Liberation of Wireless Technology, from Herbert Hoover to the Smartphone,” is newly published by Yale University Press.

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