Free Press To FCC: Make Policy Via Gannett/Belo Review

Defends Petition to Bock Spin-offs in Proposed "Super Group" Deal

Free Press told the FCC this week that it should not hesitate to make policy via merger review, in this case that it is not in the public interest for a broadcaster to spin off a station to comply with local ownership caps if it continues to provide services to those stations through sharing agreements.

Consolidation critic Free Press, joined by National Hispanic Media Coalition, Common Cause, and the  United Church of Christ, were defending their petition to block the spin-off transfers portion of the Gannett's $2.2 billion purchase of Belo stations.

While Gannett and Belo argued that the FCC's open retransmission consent docket was the place for a referendum on coordinated retrans negotiations, Free Press suggested the place was wherever the FCC was charged with protecting the public interest.

"Petitioners disagree that the Commission can only address sharing arrangements in a rulemaking," they said in their filing. "It is a fundamental principle of administrative law that agencies may make policy by either adjudication or rulemaking. The Commission routinely uses adjudication to set policy, and the Supreme Court has upheld its ability to do so. While the Commission may ultimately decide to attribute sharing arrangements in the 2010 Quadrennial [media ownership rule] Review, that possibility does not obviate the need for the Commission to address the public interest questions raised by the sharing agreements in this transaction."

The FCC under chairman Julius Genachowski, proposed making some sharing agreements attributable under local ownership caps, as they have been for some radio sharing agreements for the past decade.

Like the American Cable Association, DirecTV and Time Warner Cable, which also filed a petition to deny, Free Press and its co-petitioners have problems with Gannett's plan to spin off stations in five markets--Phoenix; Louisville, Ky.; Tucson; Portland, Ore.; and St. Louis--where its purchase of Belo stations would put it in violation of limits on local market ownership caps. That is because Gannett would still provide services to the spun-off stations through sharing agreements, and also has said it would count those stations financial performance in Gannett's financial statements.

The stations are being spun off to companies headed by former Belo group chief Jack Sander, and Ben Tucker, former head of the Fisher station group.

The petitioners call those third-party "shell" companies that mask the "true intent" of the deal, which they say is to allow Gannett "to simultaneously influence and control multiple media outlet in the same local market in a way that is contrary to the public interest and otherwise prohibited by the Commission's rules.

Gannett and Belo have countered that the arrangements violate no current FCC rules or precedents.