In Depth

Editorial: Stations Are at Risk if Renewal Term Changes

Federal Communications Commission Acting Chairman Michael Copps last week said the process for renewing station licenses should be radically altered.

We couldn’t disagree more. There are stations on the ropes around the country, and tinkering with the renewal process right now could drive many of them over the edge. It’s an instance where regulatory arcana can translate into real harm in the marketplace—harm that pushes stations into the red and reduces broadcast television choices for viewers.

Specifically, Mr. Copps said the current system, in which station licenses are renewed every eight years, should be replaced by a three-year cycle that tacks new public-interest obligations on stations.

We agree that stations could do a heck of a lot more to promote the public good over the airwaves they use at the public’s pleasure. After all, do you remember the last time you saw meaningful coverage of a House of Representatives race on local TV?

Unfortunately, Mr. Copps’ route to that goal is completely wrongheaded and poorly timed.
If the period between renewal processes is shortened, and contingencies attached that could result in a station owner being more likely to lose a license, business troubles could pile up quickly.

Let’s look at the current business climate. Who would have foreseen a day when a media company as big (and vital to the broadcast business) as Tribune would go into bankruptcy? While Sam Zell’s foolhardy risk-taking was the proximate cause of the company’s downfall, the tough business environment for stations set the stage for the failure.

Anyone with a clear eye sees that more and more companies that own stations will be failing to meet loan covenants and renegotiating loans in the coming months.

By introducing another variable into the license-renewal process, Mr. Copps would give lenders another reason to deny credit to stations on the brink. Conceivably that could lead to stations going dark or changing ownership. Why would Mr. Copps want to spook the few investors who currently have the stomach to sink money into the station business?

Pushing stations closer to the edge would frustrate Mr. Copps’ (laudable) default policy preferences of increasing diversity and localism in the broadcast business. Indeed, in the end such a move would likely send more viewers into the arms of pay TV services. If local stations are too cash-poor to produce programming that viewers want, what is consumers’ impetus not to sign on with cable or satellite?

It’s likely that Mr. Copps’ proposal will die a natural death when Julius Genachowski, the presumptive FCC chairman-to-be, takes office. After all, Mr. Genachowski is both a policy wonk and a businessman, having learned the TV ropes with the likes of Barry Diller.

Let’s hope Mr. Copps’ well-intentioned but potentially destructive license renewal proposal doesn’t find a receptive audience with Mr. Genachowski.