The National Association of Broadcasters, a trade organization that represents local broadcasters, has asked the Federal Communications Commission to stop considering the proposed merger of Charter Communications (NASDAQ:CHTR) and Time Warner Cable (NYSE:TWC).
In a petition filed with the government organization earlier this month, the NAB asked the FCC to stop the clock on the merger -- or any other big cable consolidation -- until it reforms its broadcast ownership rules. The NAB is referring to rules that prevent one company from owning multiple television stations in a market. Those rules are supposed to be reviewed every four years, but that has not happened.
Essentially, the NAB is arguing that it's absurd to allow cable companies to control more and more market share while restricting channel ownership in local markets. The association spelled out its objection in the petition:
NAB requests the Commission to hold its consideration of the proposed merger in abeyance until it complies with its obligation under Section 202(h) of the Telecommunications Act of 1996 to complete the long-delayed 2010 and 2014 quadrennial reviews of all the broadcast ownership rules, and repeals or modifies those rules no longer "necessary" in the public interest as the result of "competition." By ignoring both its duty to "determine" whether its rules remain necessary and the competitive transformation of the video marketplace, the Commission has unlawfully retained its industrywide broadcast TV ownership restrictions, including a local television rule originating in the World War II era.
It's a case of the trade group crying foul because the FCC is allowing one kind of media consolidation while not allowing another. Call that an opportunistic play by the broadcasters, but it does seem reasonable to ask why the FCC can allow -- or even have time to consider -- cable mergers when it can't complete a legally mandated review of its rules for local broadcasters.
Are these two separate points?
While the NAB clearly wants to link the two issues, Randolph May, president of free market think tank The Free State Foundation, doesn't see how the two issues are linked. He does not dispute the association's claims that it deserves deregulation, but he does not think it's a case of one versus the other.
"The NAB's call to suspend the review of the Charter-TWC-Brighthouse proposed merger should be quickly dismissed," he told Broadcasting & Cable. "I've long been supportive of reforming the outdated broadcast ownership rules, but the Commission's failure to do so thus far is no reason to argue that the agency should not fulfill its responsibilities to review proposed transactions on a timely basis in what nearly everyone concedes is a dynamic marketplace."
It's about competition
The NAB believes the FCC's actions are giving major cable companies an advantage when it comes to selling ad space.
"While essentially forbidding the joint sale of advertising time by two TV stations in the same market, the Commission has permitted all major pay-TV providers -- large cable operators including TWC, satellite TV operators and the telcos -- to join forces to create a single platform for local and national advertisers," the petition said.
Basically, NAB is arguing that if they can do it, why can't we? That may be an argument usually used by children fighting with their parents, but in this case, it's a valid one.
Separate but equal
The NAB likely knows that its opposition to the merger won't play much, if any, of a factor in the FCC's decision. The group is, however, being smart in taking advantage of the media attention garnered by the big cable hookup to bring public attention to an issue that's otherwise easy to ignore.
The FCC has an obligation to examine its local broadcast ownership rules, and it should at least consider changing them to allow local media players the same ability to consolidate as it does big cable players. Of course, the federal agency could level the playing field in another way. It could deny the merger and keep local ownership rules as they are now.
Whatever it does, the two issues may not be directly linked, but both should be decided quickly. FCC Chairman Tom Wheeler "has signaled the overdue review would be completed sometime in 2016," according to B&C, and that's not good enough.
Broadcasters and cable companies face a rapidly changing world. Both deserve timely decisions, and both deserve a level playing field. These decisions don't need to happen at exactly the same time, but local broadcasters deserve an answer just as much as Charter and Time Warner Cable do.
Daniel Kline has no position in any stocks mentioned. He once worked as a producer for a news outlet which covered the annual NAB convention. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.