How Trump’s FCC aided Sinclair’s expansion

Sinclair Broadcast Group is expanding its conservative-leaning television empire into nearly three-quarters of American households — but its aggressive takeover of the airwaves wouldn’t have been possible without help from President Donald Trump’s chief at the Federal Communications Commission.

Sinclair, already the nation’s largest TV broadcaster, plans to buy 42 stations from Tribune Media in cities like New York, Chicago and Los Angeles, on top of the more than 170 stations it already owns. It got a critical assist this spring from Republican FCC Chairman Ajit Pai, who revived a decades-old regulatory loophole that will keep Sinclair from vastly exceeding federal limits on media ownership.

The change will allow Sinclair — a company known for injecting "must run" conservative segments into its local programming — to reach 72 percent of U.S. households after buying Tribune’s stations. That’s nearly double the congressionally imposed nationwide audience cap of 39 percent.

The FCC and the company both say the agency wasn’t giving Sinclair any special favors by reviving the loophole, known as the “UHF discount,” which has long been considered technologically obsolete. But the Tribune deal would not have been viable if not for Pai’s intervention: Sinclair already reaches an estimated 38 percent of U.S. households without the discount, leaving it almost no room for growth.

The loophole is a throwback to the days when the ultra-high-frequency TV spectrum — the part higher than Channel 13 — was filled with low-budget stations with often-scratchy reception over analog rabbit ears. That quality gap no longer exists in today’s world of digital television, but under the policy that Pai revived, the commission does not fully count those stations’ market size when tallying a broadcaster’s national reach.

Critics including the FCC’s most recent former chairman, Tom Wheeler, say the change amounts to a regulatory sleight-of-hand.

"Congress was explicit in black letter saying 39 percent viewership would be the maximum," said Wheeler, a Democrat who got rid of the discount last year. But instead, he said, “There was funny math created to allow the count to come up to still be below 39 percent, wink wink."

The FCC and Sinclair say a wide array of broadcasters — not just Sinclair — pushed for the return of the UHF discount, and they say Pai has been consistent in arguing that the agency shouldn’t scrap the discount without first undertaking a broader review of media ownership limits.

Pai, whom Trump elevated to chairman early this year, told House Democrats at a July 25 hearing that the commission didn’t single out Sinclair for special treatment. “If you look at any of our regulatory actions, they’re not designed to benefit any company or segment of the industry," he said.

Still, the FCC action removed the most serious obstacle for Sinclair, which has been a target for Democrats and liberal groups disturbed by reports that the company favored Trump in its election coverage. While Sinclair doesn’t spend much on traditional lobbying, it has donated generously over the years to congressional Republicans, who have shown little inclination to throw up any roadblocks to the deal.

The Washington Post in December reported that Sinclair "gave a disproportionate amount of neutral or favorable coverage to Trump during the campaign" while airing negative stories on Hillary Clinton. That followed POLITICO’s reporting on a boast by Trump son-in-law Jared Kushner that the president’s campaign had struck a deal with the broadcast group for better media coverage. (Sinclair disputed the characterization, saying it was an arrangement for extended sit-down interviews that was offered to both candidates.) In April, Sinclair hired former White House aide Boris Epshteyn, who had organized Trump’s TV surrogates, as an on-air political analyst.

Controversy over Sinclair’s politics predates Trump. The broadcaster came under fire in 2004 over reports it planned to air a documentary critical of then-Democratic presidential nominee John Kerry’s Vietnam-era antiwar activism, though the company instead aired a news special on some stations rather than the full documentary. But the company’s bid to get bigger via the Tribune deal has focused new attention on the company.

The broadcaster cultivated its ties with the FCC’s Pai in the weeks after Trump’s election, when the Republican commissioner was viewed as a top contender to lead the agency. Pai addressed Sinclair’s Nov. 16 general manager summit in Baltimore, where he also met with the company’s then-CEO, David Smith, according to a copy of Pai’s calendar obtained through a Freedom of Information Act request. Pai held a second meeting with Smith and newly named Sinclair CEO Chris Ripley in Arlington, Va., on the day before Trump’s inauguration, the records show.

A Sinclair spokeswoman said Pai was invited to speak at the general manager summit before the election, and noted that FCC Commissioner Mignon Clyburn, a Democrat, addressed a similar gathering in the past.

On Pai’s first week on the job as chairman in late January, Sinclair urged the agency to reinstate the UHF discount, which allows ultra-high-frequency stations to count for only half their actual audience when calculating their national reach. Pai had dissented when the FCC’s then-Democratic majority abolished the discount in 2016, arguing that the commission should also review and adjust the national ownership cap.

Once installed as head of the agency, Pai brought back the discount in a 2-1 party-line vote in April over the objections of Clyburn, who pointed out the irony that a chairman who has emphasized slashing outmoded regulations was reviving a "relic of a bygone era." A little over two weeks after the FCC vote, Sinclair announced its acquisition of Tribune Media.

The FCC said multiple broadcasters including CBS, NBC and Univision supported the move, and said Pai was simply acting on his long-held position. "Had the Commission teed up both the UHF discount and the national cap in 2013 as he had requested, then this entire situation could have been avoided," an FCC spokesperson said in a statement.

Echoing that stance, Sinclair said Pai’s call for a broad review of the entire ownership cap was well established.

"The majority Commissioners’ positions that media ownership reform is needed has been widely known for many years," Sinclair Senior Vice President of Strategy and Policy Rebecca Hanson said in a statement. "Therefore, any suggestion that the reinstatement was done on Sinclair’s behalf is false."

Pai, who is viewed as friendly to broadcasters, also moved quickly to advance TV stations’ ability to offer a new transmission standard for higher-quality, over-the-air video. That’s of particular interest to Sinclair, which has invested more than $30 million in the next-generation TV technology and says its expansion via the Tribune deal will help speed the roll-out of the service.

The FCC chairman has further proposed eliminating a rule that requires each TV station to have a main studio in or near the community it serves, arguing that modern technology allows community interaction without an in-person visit to a local studio. Critics charge that’s another handout to Sinclair, with Wheeler warning in a July blog post that "Sinclair — long known for requiring their stations to carry right-wing programs produced by headquarters — will have an open field to replace local voices with national control."

With the regulatory path eased for its Tribune transaction, Sinclair is looking at relatively smooth sailing in GOP-dominated Washington. Ripley, the CEO, has expressed confidence the deal will receive regulatory approval from the FCC and the Justice Department, while acknowledging that the company might still have to drop some TV stations in select markets to fully adhere to ownership rules.

Sinclair isn’t showing signs of massively boosting its bare-bones lobbying operation in Washington, though it’s increasing its investment. The company spent roughly $60,000 on lobbying in the first half of this year, nearly the amount it spent in all of 2016, and recently brought back a second, in-house lobbyist who previously lobbied for the broadcaster. One of the lobbyists, Hanson, has mostly focused on tamping down any Democratic opposition in Congress.

In June, Sen. Maria Cantwell (D-Wash.) led seven Democratic colleagues in calling for hearings on the deal. Sinclair’s KOMO TV station in Seattle, in Cantwell’s home state, has become a focal point for local station resistance to demands from the corporate office, according to a New York Times story in May that described how KOMO journalists would rebel against "must-run" content by airing it at times of low viewership.

"We just want local content. We want the folks to be local — we don’t want this metroplex of content just coming in,” Cantwell said in an interview.

"Local television broadcasters have long served the public interest. The Sinclair-Tribune merger threatens to upend this responsibility by consolidating local news into a single voice that reaches into 70 percent of American homes," Rep. David Cicilline (D-R.I.), the top Democrat on the House Judiciary Committee’s antitrust panel, told POLITICO. "It’s no secret that Sinclair has used its large platform to push extremely conservative programming, while cutting deals with the Trump campaign to provide favorable coverage."

Sinclair, which says consolidation will allow it to invest more in local programming, has argued that TV broadcasters need to get bigger to survive. The largest TV broadcaster in the country is still the little guy when compared with the other companies in the media landscape it negotiates and competes with, including Comcast-NBCU and AT&T-DirecTV, the company says.

So far, there’s little indication Republican leadership in Congress intends to apply much scrutiny to the Tribune deal. Sinclair, which began as a family-owned TV station in Baltimore in the 1970s, has endeared itself to many Republicans with its conservative leanings — and has a long history of donating to GOP candidates over the years.

In the 2016 election cycle, Sinclair and its executives donated nearly $300,000 to Republicans, according to the Center for Responsive Politics. The company gave to the fundraising efforts of House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell. Its vice president, Frederick Smith, gave to the pro-Trump Great America PAC as well as to Montana Republican Rep. Greg Gianforte’s campaign a day after the lawmaker was charged with assaulting a journalist this year.

But the company and its executives have also given to Democrats, chipping in $120,000 to the party and its candidates during the 2016 cycle. One week after announcing the Tribune deal in May, former CEO Smith, now the executive chairman, cut a personal check of $30,000 for the Democratic Senatorial Campaign Committee.

With resistance to Sinclair’s transaction muted so far in Washington, criticism is popping up outside the Beltway.

HBO late-night host John Oliver devoted nearly 20 minutes in a July show to mocking Sinclair’s “must run” segments and warning about the potential impact of the deal. "[I]n contrast to Fox News, a conservative outlet where you basically know what you’re getting, with Sinclair, they’re injecting Fox-worthy content into the mouths of your local news anchors, the two people who you know, and who you trust, and whose on-screen chemistry can usually best be described as two people," Oliver quipped.

Sinclair has pushed back hard against such criticism. Epshteyn blasted Oliver’s segment, and Sinclair tripled the number of weekly segments featuring the former Trump aide’s commentary. A Sinclair executive sent a memo to station news directors defending the must-runs against what he said were irresponsible media reports.

More opposition could emerge during the regulatory review process. Public interest group Public Knowledge, the American Cable Association and DISH Network urged the FCC to slow down the review process and make Sinclair release more information about how the deal will benefit the public. Conservative website Newsmax — a potential competitor to Sinclair in the right-wing news business — also told the FCC that the deal raises "serious competitive concerns" in a filing supporting the request for more time and information. The FCC denied the requests.

But Sinclair has said the commission has the information it needs, and the company believes it has a chairman who understands the broadcast business leading the regulatory review.

“Thankfully, we’ve got Chairman Pai, who’s launched an action to look at these antiquated rules which we think has artificially tipped the playing field away from TV broadcast to the point of making us uncompetitive,” Ripley told attendees at a Media Institute luncheon in June. “That’s one of the reasons why we’re optimistic on the regulatory.”

Graphic by Jon McClure and Jeremy C. F. Lin.

Source: http://www.politico.com/story/2017/08/06/trump-fcc-sinclair-broadcast-expansion-241337

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