FCC NAL Against Gray Could Be 'Warning Shot'
The $518,000 proposed fine against Gray Television for a top-four rule violation (see 2107070066) might be a message for the industry or a hint of what direction ownership rules under this FCC could take, said a broadcast attorney, media consolidation opponents and academics in interviews Thursday. “We are hopeful that once the FCC is up to full capacity, it will act to close all of these shell company loopholes that enable broadcast giants to control stations they aren't legally allowed to own,” said Free Press Research Director Derek Turner.
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The fine proposal said Gray violated FCC rules by acquiring the CBS affiliation of Denali Media's KTVA Anchorage in 2020 in a sale of “non-license assets,” and then broadcasting the programming on its KYES-TV Anchorage -- now KAUU -- while continuing to own NBC affiliate KTUU-TV Anchorage. The Notice of Apparent Liability, which was approved unanimously, is an “aggressive” stance, said broadcast attorney Jack Goodman.
By proposing the maximum fine amount for a violation the agency previously hadn't enforced, the NAL could be seen as a “warning shot,” said University of Minnesota School of Journalism assistant professor-media law Christopher Terry. Holland and Knight broadcast attorney Charles Naftalin said the item could “maybe” indicate a tougher stance, but that’s hard to know without more information. The FCC’s stance can change quickly, as could the composition of the commission, with no permanent chair appointed, he said.
The NAL argued that language in ownership rules barring broadcasters from coming into ownership of two top-four network stations through affiliate swaps also pertains to sales, which some broadcast attorneys said is a new position. “We emphasize that, while the Commission’s Second Report and Order makes several references to ‘swap’ transactions, the rule adopted by the Commission clearly encompasses the ‘sale’ transaction that Gray executed to acquire the CBS affiliation from KTVA(TV),” said the NAL. The FCC declined to comment Thursday. Gray “thought the FCC would be OK with this,” said Terry. “The Raycom Hawaii 'swap' case was a widely-discussed example of a loophole in the commission’s Top-Four Prohibition,” said a footnote.
Lawyers noted the agency approved Gray’s purchase of KYES conditioned on the broadcaster not pursuing an affiliation swap for two years, a condition that expired well before Gray’s 2020 purchase of GCI’s CBS affiliation. Even with the condition expired, Gray’s actions are “a clear end-run around the current ownership rules,” which “require an affirmative showing that such combinations are in the public interest,” Turner emailed. The FCC under then-Chairman Ajit Pai “gave powerful broadcasters a huge basket of deregulatory gifts,” Turner said. “They still continue to blatantly evade the remaining rules that prevent them from creating local media monopolies.”
The American Television Alliance said it hopes the action is “only the beginning of a much closer look at these issues -- including consideration of closing all the other loopholes that broadcasters use to evade the rules.” ATVA had a problem with Gray’s remedy to move CBS programming from the full-power station that's the subject of the NAL to a low-power station and a multicast feed on its NBC affiliate. That's “another workaround broadcasters employ to exploit the system,” ATVA said. Questions about rules on broadcasters circumventing the top-four rules using multicasting and LPTV stations are part of the resurrected 2018 quadrennial review, with comments due Aug. 2.
Broadcast lawyers expect Gray to push back on the enforcement. The company has 30 days to respond to the NAL, and wouldn’t face a fine until there's a forfeiture order. The broadcaster didn't comment. Such an order could be less likely to draw a unanimous vote, experts noted.