Radio Industry Conflicted Over Subcaps
Radio station owners are conflicted over how the FCC should proceed on AM/FM subcaps, and it’s not clear what position NAB will take or which way the agency will go, broadcasters, brokers and industry attorneys told us. “There’s a tremendous difference of opinion,” said outgoing NAB radio board member and Eagle Communications General Manager Gary Exline. “It is more nuanced than just large versus small,” said broker Bob Heymann from the Chicago office of Media Services Group.
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NAB's radio board is likely to discuss subcaps at its June meeting, industry officials said. The association didn't comment on the board meeting. A spokesman said that after receiving guidance from the board, NAB would "file comments on the issue of reforming radio ownership rules as part of the FCC’s quadrennial ownership review."
The FCC is expected to tackle the AM/FM subcaps as part of the 2018 quadrennial review, which industry officials said they don’t expect to begin until late this year. The agency could release the quadrennial review NPRM in 2018, but likely won’t issue an order this year, the industry officials said. Relaxing the subcaps is among the most likely rule changes expected to come out of the 2018 review (see 1801080059). Commissioner Mike O’Rielly has been vocal about the need to eliminate the caps, and Chairman Ajit Pai’s office is seen as feeling similarly, industry officials said. The commission “is moving in that direction,” said radio attorney Geoffrey Bentley. The FCC didn’t comment.
A station’s market and relative position go a long way toward determining its position on deregulating subcaps, broadcasters and their lawyers said. Some small markets where there isn’t enough advertising to support multiple stations could benefit from the consolidation allowed by relaxed subcaps, said radio-operator Cromwell Group President Bayard Walters. Looser caps would benefit many smaller radio owners because they would have new chances to sell their stations, said industry lawyer Dawn Sciarrino of Sciarrino & Shubert. “They would jump at that opportunity.”
Many large radio groups and broadcasters in big markets see relaxed subcaps as a chance to grow larger and compete more successfully with other media, Exline and others said. IHeartMedia is seen as an exception, and an opponent of deregulating the subcaps, many said. The company didn't comment. Its opposition is seen as connected to its ongoing bankruptcy. Relaxing the subcaps would likely drive the value of many of iHeart’s stations up, complicating the process of valuing its assets for the bankruptcy proceeding, an industry official said.
Some broadcasters worry that changes to the subcaps could lead to too much consolidation, threatening localism and bringing the advertising prices down for the industry, said Womble Bond radio attorney John Garziglia. Growth is less of a priority for a small number of very large radio groups and a large number of very small ones, he said. Many of the smaller groups don’t see relaxing the subcaps as being important, he said.
There are concerns relaxation of the subcaps could hurt AM, minority broadcasters and small religious stations. National Association of Black Owned Broadcasters President Jim Winston believes removing the subcaps would cause an exodus from AM, effectively killing the band. Some broadcast attorneys said the recent influx of FM translators would likely sustain AM broadcasters if the subcaps were relaxed, but Sciarrino questioned whether that's truly saving the band. An AM station that is largely dependent on its FM translator is effectively an FM station, Sciarrino said. That’s one reason the subcaps should be relaxed, she said. A policy that caps the number of stations but doesn’t distinguish between bands would be politically feasible, she said: It’s already “too late” to save the AM band.
With so many different views on caps, NAB is in a “very difficult position,” Exline said. “At this time, I have more confidence in predicting the NBA playoffs,” Heymann said of guessing NAB’s final stance on the caps.