[Senate Report 114-426]
[From the U.S. Government Publishing Office]
Calendar No. 714
114th Congress } { Report
SENATE
2d Session } { 114-426
_______________________________________________________________________
A BILL TO EXEMPT APPLICATION OF JSA ATTRIBUTION RULE IN CASE OF
EXISTING AGREEMENTS
__________
R E P O R T
of the
COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
on
S. 1182
together with
MINORITY VIEWS
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
December 20, 2016.--Ordered to be printed
Filed, under authority of the order of the Senate of December 10
(legislative day, December 9), 2016
_________
U.S. GOVERNMENT PUBLISHING OFFICE
69-007 WASHINGTON : 2016
SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
one hundred fourteenth congress
second session
JOHN THUNE, South Dakota, Chairman
ROGER F. WICKER, Mississippi BILL NELSON, Florida
ROY BLUNT, Missouri MARIA CANTWELL, Washington
MARCO RUBIO, Florida CLAIRE McCASKILL, Missouri
KELLY AYOTTE, New Hampshire AMY KLOBUCHAR, Minnesota
TED CRUZ, Texas RICHARD BLUMENTHAL, Connecticut
DEB FISCHER, Nebraska BRIAN SCHATZ, Hawaii
JERRY MORAN, Kansas ED MARKEY, Massachusetts
DAN SULLIVAN, Alaska CORY BOOKER, New Jersey
RON JOHNSON, Wisconsin TOM UDALL, New Mexico
DEAN HELLER, Nevada JOE MANCHIN, West Virginia
CORY GARDNER, Colorado GARY PETERS, Michigan
STEVE DAINES, Montana
Nick Rossi, Staff Director
Adrian Arnakis, Deputy Staff Director
Jason Van Beek, General Counsel
Kim Lipsky, Democratic Staff Director
Christopher Day, Democratic Deputy Staff Director
Clint Odom, Democratic General Counsel
Calendar No. 714
114th Congress } { Report
SENATE
2d Session } { 114-426
======================================================================
A BILL TO EXEMPT APPLICATION OF JSA ATTRIBUTION RULE IN CASE OF
EXISTING AGREEMENTS
_______
December 20, 2016.--Ordered to be printed
Filed, under authority of the order of the Senate of December 10
(legislative day, December 9), 2016
_______
Mr. Thune, from the Committee on Commerce, Science, and Transportation,
submitted the following
R E P O R T
[To accompany S. 1182]
The Committee on Commerce, Science, and Transportation, to
which was referred the bill (S. 1182), to exempt application of
JSA attribution rule in case of existing agreements, having
considered the same, reports favorably thereon without an
amendment and recommends that the bill do pass.
Purpose of the Bill
The purpose of S. 1182 is to grandfather those same-market
television station Joint Sales Agreements (JSAs) that were in
effect as of June 19, 2014, which is the effective date of a
rule adopted by the Federal Communications Commission (FCC)
requiring the attribution of JSAs between television stations
in the same market. The bill would preclude a finding by the
FCC that parties to such agreements are in violation of the
FCC's broadcast media ownership rules.
Background and Needs
A JSA is an agreement with a licensee of a broadcast
station that authorizes a third-party broker (typically another
broadcast station owner) to sell some or all of the advertising
time for the brokered station in return for a percentage of the
advertising revenues. Both radio stations and television
stations make use of JSAs. JSAs generally allow the third-party
broker to hire a sales force for the brokered station, set
advertising prices, and make other decisions regarding the sale
of advertising time, subject to a preemptive right of refusal
for the advertisements by the licensee. JSAs primarily affect
the sale of advertising time, and do not impact a station's
programming, personnel, finances, physical facilities, or other
core operations. In some cases, JSAs may include collateral
sharing agreements between brokers and licensees that deal with
issues other than advertising time.
The FCC has adopted media ownership attribution rules for
broadcast stations, which define what media ownership business
interests are counted when applying the FCC's broadcast media
ownership rules. According to the FCC, the attribution rules
are intended to identify interests in licensees which give the
holders a degree of influence or control such that the holder
could have a ``realistic potential'' to affect the licensee's
programming decisions or other core operating functions.
In March 2014, the FCC amended its media ownership rules to
implement new attribution requirements for JSAs between
television stations in the same market. The FCC concluded that
a broker could plausibly exert significant influence over a
brokered station due to its ability to control the brokered
station's advertising revenue, its principal source of income.
Under the rule change adopted by the FCC, where a party with a
``cognizable interest'' in one station sells more than 15
percent of the advertising time per week of a second, same-
market station, the broker must attribute its interest in the
brokered station under the FCC's media ownership rules. For
television station JSAs where attribution results in a
violation of the media ownership rules, the FCC gave parties 2
years to terminate their agreements or otherwise come into
compliance.
The Committee has received testimony outlining the negative
impact of applying an attribution requirement to existing JSAs.
Notably, parties have observed that absent the efficiencies
resulting from such agreements, it may be cost prohibitive to
create local programming, especially in small and mid-sized
markets. In March 2013, for example, FCC Commissioner Ajit Pai
testified before the Committee and stated that:
As broadcasters' share of the advertising market has shrunk
in the digital age, television stations must be able to enter
into innovative arrangements in order to operate efficiently.
JSAs and SSAs [(shared service agreements)] allow stations to
save costs and to provide the services that we should want
television broadcasters to offer. For stations in smaller
markets . . . the choice isn't between JSAs or having both
television stations operate independent news departments.
Rather, the real choice is between JSAs and having at most one
television station continue to provide news programming while
the other does not. If the FCC effectively prohibits these
agreements, fewer stations in small-town America will offer
news programming, and they will invest less in
newsgathering.\1\
In March 2014, Commissioner Pai offered similar testimony
before the Subcommittee on Financial Services and General
Government Appropriations of the Committee on Appropriations of
the Senate and the Subcommittee on Financial Services and
General Government Appropriations of the Committee on
Appropriations of the House of Representatives.
Likewise, when testifying before the Subcommittee on
Communications and Technology of the Committee of Energy and
Commerce of the House of Representatives, in June 2014, the
National Association of Broadcasters noted that a JSA between
television stations in Wichita, Kansas, led to the State's
first Spanish language news broadcast. That broadcaster has
asserted that, without the ability to enter into the JSA, it
could no longer afford to provide the broadcast.
S. 1182 would provide an exemption for those television
station JSAs already in force on the date that the FCC's
attribution rule takes effect, thereby mitigating concerns
about the rule's retroactive impact. Thus, S. 1182 would enable
parties to such JSAs to continue taking advantage of the
efficiencies and reduced costs they provide, in turn allowing
stations to upgrade their technical capabilities, purchase and
produce a wider variety of programming, and encourage viewpoint
diversity in programming.
---------------------------------------------------------------------------
\1\U.S. Congress, Senate Committee on Commerce, Science and
Transportation, Oversight of the Federal Communications Commission,
hearings, 113th Congress, 1st session, S. Hrg. 113-132, (Washington,
DC: GPO, 2014), p.33.
\2\Standing Rules of the Senate, ``Committee Procedure,'' http:www/
rules.senate.gov/public/index.cfm?p=RuleXXVI.
---------------------------------------------------------------------------
Summary of Provisions
S. 1182 would grandfather existing JSAs between television
stations in the same market as of the effective date of the FCC
requirement deeming JSAs to be attributable interests under the
FCC's media ownership rules. As a result, same-market
television JSAs in effect on June 19, 2014, would not be
attributable interests under the FCC's media ownership rules.
The Committee does not intend for this provision to
overturn or affect the recent prohibition on joint
retransmission consent agreements enacted under section 103(a)
of the STELA Reauthorization Act of 2014 (P.L. 113-200; 128
Stat. 2059, 2062; STELAR). Congress enacted STELAR on December
4, 2014, which included an amendment to section 325(b)(3)(C) of
the Communications Act of 1934 (47 U.S.C. 325(b)(3)(C)),
prohibiting joint retransmission consent negotiations unless
the broadcast stations seeking to jointly negotiate are under
``direct or indirect common de jure control.'' JSAs do not
create de jure common control. While S. 1182 would permit
certain television stations to continue operating under
existing JSAs, the Committee intends that stations in
grandfathered JSAs would remain subject to the ban on joint
retransmission consent negotiations as set forth in STELAR.
Legislative History
S. 1182, a bill to exempt application of JSA attribution
rule in case of existing agreements, was introduced by Senator
Roy Blunt, Senator Charles Schumer, Senator Tim Scott, and
Senator Barbara Mikulski on May 4, 2015, and referred to the
Committee on Commerce, Science, and Transportation of the
Senate. The bill is also cosponsored by Senator Cory Gardner,
Senator Ron Johnson, Senator Roger Wicker, Senator Benjamin
Cardin, Senator Richard Durbin, and Senator Kirsten Gillibrand.
On June 25, 2015, the Committee considered the bill in an
open Executive Session. The Committee, by a rollcall vote,
ordered S. 1182 to be reported without amendment.
Estimated Costs
In accordance with paragraph 11(a) of rule XXVI of the
Standing Rules of the Senate and section 403 of the
Congressional Budget Act of 1974, the Committee provides the
following cost estimate, prepared by the Congressional Budget
Office:
S. 1182--A bill to exempt application of JSA attribution rule in case
of existing agreements
Under S. 1182, joint sales agreements (JSAs) entered into
before June 19, 2014, would be exempt from provisions of a rule
limiting those agreements that was adopted by the Federal
Communications Commission (FCC) earlier in that year. A JSA is
an agreement between one television broadcast station that
sells advertising time on behalf of a competing station (the
other party in the agreement) in the same market. In 2014, the
FCC adopted a rule that would treat JSAs allowing one station
to sell 15 percent or more of the weekly advertising time of a
competing station as establishing an ownership interest. Under
current law, FCC rules limit local television ownership to one
station in many local markets across the country, or two, if
certain conditions are met.
Based on information from the FCC, CBO estimates that
implementing S. 1182 would have an insignificant effect on the
agency's costs. The FCC is authorized to collect fees
sufficient to offset its operating costs each year; therefore,
we estimate that the net effect on discretionary spending would
be negligible, assuming appropriation action consistent with
that authority. Enacting S. 1182 would not affect direct
spending or revenues; therefore, pay-as-you-go procedures do
not apply.
S. 1182 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act and
would not affect the budgets of state, local, or tribal
governments.
The CBO staff contact for this estimate is Susan Willie.
The estimate was approved by H. Samuel Papenfuss, Deputy
Assistant Director for Budget Analysis.
Regulatory Impact
In accordance with paragraph 11(b) of rule XXVI of the
Standing Rules of the Senate, the Committee provides the
following evaluation of the regulatory impact of the
legislation, as reported:
number of persons covered
The number of persons covered by S. 1182 should be
consistent with the current levels of individuals impacted
under the provisions of law that are addressed in the bill.
economic impact
S. 1182 would not have an adverse impact on the Nation's
economy.
privacy
S. 1182 would have no impact on the personal privacy of
U.S. citizens.
paperwork
S. 1182 would not significantly increase paperwork
requirements for individuals and businesses.
Congressionally Directed Spending
In compliance with paragraph 4(b) of rule XLIV of the
Standing Rules of the Senate, the Committee provides that no
provisions contained in the bill, as reported, meet the
definition of congressionally directed spending items under the
rule.
Section-by-Section Analysis
Section 1. Exemption of application of JSA Attribution Rule for
existing agreements.
Section 1 would grandfather same-market television station
JSAs that were in effect as of June 19, 2014, which is the
effective date of the JSA attribution requirement adopted by
the FCC in March 2014. Consequently, the FCC may not find that
parties to such agreements are in violation of the FCC's media
ownership rules based on interests attributed to them under the
March 2014 requirement.
Votes in Committee
Senator Blunt made a motion to adopt the bill. A rollcall
vote resulted in 14 yeas and 10 nays. Senate Standing Rule
XXVI(7)(a)(3) requires that ``[t]he vote of any committee to
report a measure or matter shall require the concurrence of a
majority of the members of the committee who are present.''\2\
At the time of the vote, 16 Committee members were present, of
which 8 were yeas. Because a concurrence of a majority of
present members was not achieved, the motion failed. The yeas
and nays were as follows:
YEAS--14 NAYS--10
Mr. Wicker Mr. Nelson
Mr. Blunt Ms. Cantwell
Mr. Rubio\1\ Ms. McCaskill\1\
Ms. Ayotte Ms. Klobuchar
Mr. Cruz Mr. Blumenthal
Ms. Fischer\1\ Mr. Schatz
Mr. Moran\1\ Mr. Markey
Mr. Sullivan Mr. Booker
Mr. Johnson\1\ Mr. Udall\1\
Mr. Heller Mr. Peters
Mr. Gardner
Mr. Daines\1\
Mr. Manchin\1\
Mr. Thune
\1\By proxy
Chairman Thune made a motion to reconsider the vote by
which the Blunt motion failed. A rollcall vote resulted in 14
yeas and 10 nays. At the time of the vote, 16 committee members
were present, of which 10 were yeas. Because a concurrence of a
majority of present members was achieved, the bill was ordered
to be reported favorably without amendment. The yeas and nays
were as follows:
YEAS--14 NAYS--10
Mr. Wicker Mr. Nelson
Mr. Blunt Ms. Cantwell
Mr. Rubio\1\ Ms. McCaskill\1\
Ms. Ayotte Ms. Klobuchar
Mr. Cruz Mr. Blumenthal\1\
Ms. Fischer Mr. Schatz
Mr. Moran\1\ Mr. Markey
Mr. Sullivan Mr. Booker
Mr. Johnson\1\ Mr. Udall\1\
Mr. Heller Mr. Peters\1\
Mr. Gardner
Mr. Daines
Mr. Manchin\1\
Mr. Thune
\1\By proxy
Minority Views of Senator Nelson
S. 1182 would undermine a carefully crafted Federal
Communications Commission (FCC) proposal to address when and
how Joint Sales Agreements (JSAs) may be used by local
broadcast television stations. The FCC developed this new
policy after seeking significant public comment and with the
understanding that comes from expertise in application of the
FCC's media ownership rules to these complex agreements. I do
not support the effort in S. 1182 to unwind this careful
balance reached after years of work by the agency. I also
believe that the substance of S. 1182 is flawed, offering a
permanent exemption for existing JSAs rather than a more
targeted approach that places reasonable limits on the
grandfathering process.
JSAs are complex arrangements that allow one TV station
(usually owned by a large ownership group) to sell the
advertising time of a separately-owned TV station. As noted by
the FCC, these agreements also are often linked to other shared
services agreements that impact other aspects of the operations
of the TV station - creating significant operational ties
between the two stations. The FCC has found that JSAs often
involve the brokerage of significant advertising time up to, in
some cases, 100 percent of the ad time of the second station.
The agreements also often are of substantial duration - five
years or more is common, with provisions that automatically
renew the agreement for additional terms unless one of the
stations elects to cancel the contract. Various reports suggest
that the use of JSAs by the television broadcast industry has
grown substantially, though a report by the Government
Accountability Office concluded that it is hard to measure the
impact of such agreements (along with shared services
agreements) on the industry because they are confidential.
As part of the FCC's proceeding examining the effect of
JSAs on its media ownership limitations, the Department of
Justice (DoJ) submitted comments for the FCC's consideration.
Those comments, filed in February 2014, strongly supported FCC
regulation of JSA through media ownership attribution. DoJ's
comments indicated that the existence and scope of JSAs have
become important factors in DoJ's review of pending TV station
transactions. Based on this history, DoJ argued that TV JSAs
provide incentives similar to common ownership and should be
made attributable under the FCC's media ownership limits.
Failure to take this step, according to DoJ, could result in TV
stations skirting the FCC's media ownership limits and
frustrate competition and diversity in local TV markets.
In March 2014, the FCC declared that certain JSAs operate
in such a way so as to violate its longstanding media ownership
rules, which limit the number of TV stations one company can
own or control in a local market. According to the FCC, some
JSAs (specifically, those JSAs that allow a TV station to
broker more than 15 percent of the ad time of a second station)
effectively gave the larger station operational control (in the
FCC's words, ``significant influence'') over the smaller
station through its control over the advertising revenue stream
for the smaller station. Specifically, the existence of the JSA
gives the station selling the TV ad time the incentive and
ability to influence or control the programming and core
operational decisions of the other station. The FCC determined
that these JSAs amount to attributable ownership interests
under the media ownership rules, which rightfully seek to limit
consolidation of the media in the hands of a few companies and
to preserve localism and diversity in the media landscape.
Importantly, the FCC modeled these limitations on TV JSAs
on its existing rules that limit radio station JSAs, and the
FCC had signaled almost a decade ago that it was considering
limits on TV station JSAs because of their potential to be used
to skirt media ownership limits. Even so, the FCC gave
companies with existing JSAs two years to come into compliance
with its revised rules (Congress further delayed enforcement of
JSA rules for another six months, until December 19, 2016). It
also established a robust waiver process (with shot clocks)
that allows TV stations to make the case to the FCC that
certain JSAs that would violate the new rules should
nevertheless be preserved because they are in the public
interest.
Under S, 1182, all JSAs in place at the time of the FCC's
decision would be exempted from the revised rules. I understand
the desire expressed by the proponents of the legislation that
regardless of the merits of the FCC's decision to limit the use
of JSAs by TV stations, the FCC should be careful not to unduly
upset settled business arrangements. I also respect the
arguments put forth by opponents of the new JSA rules,
including TV stations from my home state, that these
arrangements help keep TV broadcasting robust. But I cannot
support an approach to preserving existing JSA agreements that
gives them statutory protections that are unprecedented, and
effectively sanctions the ability of TV stations to skirt the
FCC's media ownership limitations. In fact, the FCC itself
rejected just such an approach in its rulemaking, concluding
that a blanket grandfathering of existing agreements ``would
allow arbitrary and inconsistent changes'' to its media
ownership rules that do not comply with the public interest.
Any rule exemption like the one proposed in this
legislation should be limited in time and scope, and should
apply only to the parties who entered into the agreement at the
time of grandfathering. Both of these requirements would have
placed common-sense limitations on the exemption granted by the
bill that comport with past precedent (both in statute and at
the FCC). Without these reasonable limitations, S. 1182
effectively places JSAs that existed before the FCC acted above
the law. They will be exempted from the FCC's rules in
perpetuity, and the signers of those agreements can modify them
at will (resulting, potentially, in even more egregious
violations of the FCC's media ownership rules). In addition,
the existing parties to the deals are free to transfer them at
will. At best, the FCC will be able to review the agreement at
the time a merger or acquisition is placed in front of the
agency for approval pursuant to the requirements of the
Communications Act. And I strongly believe that the text of
this bill does not prevent such a review consistent with the
FCC's obligations to ensure that license transactions are in
the public interest. Similarly, S. 1182 does not restrict the
ability of the FCC to require the parties to an agreement to
modify or terminate a JSA to receive FCC approval for a
transaction.
Even more fundamentally, however, I have concerns about
Congress rejecting the reasoned decision of the FCC in this
case without even letting the rules go into full effect. It
appears that at no point has a TV broadcast station actually
sought a waiver for its existing JSA. Thus, the FCC was not
able to utilize its expertise, based upon the extensive record
it had gathered relating to JSAs, to judge what of those
agreements may in fact be in the public interest. Rather, there
was the proverbial race to the courthouse - or in this case
Congress's - door to undermine the agency's approach to judging
the value of these agreements.
For these reasons, I oppose S. 1182.
Changes in Existing Law
In compliance with paragraph 12 of rule XXVI of the
Standing Rules of the Senate, the Committee states that the
bill as reported would make no change to existing law.