Processing Of Broadcast Television Applications Proposing Sharing Arrangements And Contingent Interests

In recent months, the Federal Communications Commission’s Media Bureau has reviewed an increasing number of proposed broadcast television transactions involving both agreements to share facilities, employees, and/or services of various types between stations and financing and/or contingent interest agreements involving those stations.

These arrangements have drawn substantial public scrutiny.

The FCC is issuing a public notice to provide guidance concerning the Bureau’s processing of applications seeking FCC approval of proposed transactions that involve combinations of sharing arrangements and contingent or financial interests. In the ongoing review of proposed transactions involving sharing arrangements, the FCC has identified a concern that a broadcaster that has entered into a sharing arrangement with another same- market station in which it also has a contingent financial interest, such as an option to purchase the station or as a guarantor of the other station’s financing, may obtain a degree of operational and financial influence that deprives the licensee of the second station of its economic incentive to control programming.

Also, the compensation provisions of agreements to share facilities and employees, to jointly sell advertising, and to jointly acquire programming, can be structured such that the licensee of the station bears little or none of the risks and reaps little or none of the rewards for the performance of the station. While each case must be judged on its individual facts, the FCC has determined that proposed combinations of such sharing arrangements and contingent financial interests warrant careful scrutiny in our review of applications.

In separate statements, the FCC’s two Republican commissioners -- Ajit Pai and Michael O’Rielly -- said they opposed the bureau’s notice, at least partly on procedural grounds.