'Zombie' Stations Waiting for FCC Clarity
“Zombie” stations that sold their spectrum in the incentive auction and now want to sell their stations to their channel sharing partners are still waiting for a clear signal from the FCC, numerous attorneys told us. After the FCC indicated that it considers such deals new and novel, many were restructured in a way believed to be more acceptable to the commission, but it’s not clear how such deals will be treated. Lawyers said the FCC still may see a licensee selling its spectrum in the auction and then selling its license as “double dipping.”
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A possible trial balloon for how the FCC will treat zombie deals is a transaction involving WBIN-TV Derry, New Hampshire, which has a sharing deal with a Univision-owned station. Attorneys and licensees in similar circumstances are watching to see what happens to WBIN. A deal to sell KBEH Garden Grove, California, to sharing partner Meruelo Television was seen as the precedent setter for such stations, but the application was withdrawn after the agency put it out for public comment (see 1705090067). KBEH and Meruelo had sought to have their transaction approved before the channel sharing arrangement was completed, and their treatment was widely seen as an indication that the agency wanted similar deals to have completed their sharing arrangements.
The Media Bureau has approved WBIN’s sharing arrangement, but not the sales transaction, and broadcast legal representatives believe the FCC wants approved channel sharing arrangements to be actually implemented before it rules on such deals. Since many station owners involved in these deals are looking to exit the industry, they see being required to implement channel sharing with a partner who is about to become the owner of the station anyway as an unnecessary cost burden, attorneys noted. The agency is seen as preferring that agreed-upon sharing arrangements be implemented as a way to avoid the appearance of double dipping. WBIN, Univision and the FCC didn’t comment.
In the wake of the auction, licensees that sold their spectrum should be able to separately sell their license, said broadcast attorney Jack Goodman. “The incentive auction made it clear that a station’s license is separate from its spectrum.” Revision of channel sharing rules for the auction "unequivocally separated spectrum and licenses -- two separate rights," said broadcast consultant Preston Padden, who advocated for channel sharing rules for the Expanding Opportunities for Broadcasters Coalition. "There is no reason to restrict the sale of spectrum-less licenses."
The regulator also may be concerned about the must-carry implications of such deals. NCTA commented on WBIN’s transaction that must-carry rights don’t “attach to the transfer of a license where the sharee has not constructed shared facilities and commenced operations at the shared location.” Must-carry rights are retained in channel sharing arrangements to let broadcasters relinquishing spectrum continue providing service, NCTA said. “Allowing a channel sharee to assign its authorization without first commencing operation at the shared location does not serve this purpose.”
WBIN's fate may be an imperfect test of policy, because the approved channel sharing agreement included an option to buy the station, attorneys said. Not all possible zombie deals include this wrinkle, and many of the prospective ones have their own specific circumstances, they said. Rather than treating them all like WBIN, the agency may focus on each individual transaction, lawyers said.
Deals involving stations that have sold their spectrum are attractive to broadcasters that right now are flush with cash from the auction, an attorney familiar with such deals said. Spending money from the incentive auction on a broadcast license can put a broadcaster in a favorable tax position, because of rules governing like-kind exchanges, the expert said. On the seller side, it represents a way for license holders who sold their spectrum to increase their earnings. The FCC’s position on the matter remains unclear.