Illustration: Rebecca Zisser/Axios

TV station owners are taking advantage of FCC rules to quietly take over small-town airwaves, but cable and satellite companies are crying foul to regulators.

Driving the news: Broadcasters aren't supposed to own more than one top-rated outlet in any market, but they are snapping up multiple stations anyway in small markets like Parkersburg, West Virginia and Greenville, Mississippi, as the broadcast TV market is challenged by changes in technology and advertising.

The big picture: Broadcasters have long faced unique regulatory limits on their reach, but now digital competition has shrunk their share of the ad pie. Consolidation, they argue, is how they can compete with digital giants as well as cable and satellite companies while still providing local broadcasts.

  • Cable companies, which pay broadcasters to retransmit TV signals to their customers, say the local TV market consolidation raises their costs and harms consumers.
  • But broadcasters, who scoff at the notion they have more leverage than giants like AT&T and Comcast, argue the arrangements provide rural Americans with network programming and more local news.

Details: The FCC’s rules prohibiting broadcasters from owning two top-rated stations in a market aims to protect business competition and diversity of viewpoints.

  • But those rules don’t apply to low-power TV stations, which don’t have the geographic reach of a full-power station, or to multicast channels made possible by the shift to digital television.
  • In tiny St. Joseph, Missouri, the News-Press & Gazette Company owns the CBS, FOX and NBC affiliates, as well as the local newspaper. The company tried to buy the ABC affiliate, too, before withdrawing its bid at the FCC this month.
  • "You’re seeing some stations say, 'We have to have more than one to survive,'" said David Bradley, CEO of News-Press & Gazette.

What they're saying: Critics of the practice say it reduces competition, but broadcasters say it's a choice between having one company providing local broadcast news in a small town, or having none. "You’re going to really cut the guts out of local journalism if it keeps going without some changes like this," Bradley said.

What's next: The battle over the future of the media ownership rules will heat up this fall. The Senate Commerce Committee will hear Wednesday from industry officials as it considers reauthorizing legislation allowing satellite companies to import distant broadcast signals, along with other video marketplaces issues.

  • The FCC is also seeking comment on updates to its media ownership rules, including whether it should change how it treats low-power stations and multicast channels. The agency noted in 2018 there are “at least several dozen” markets where a single broadcaster has two of the big network affiliates using a multicast channel.
  • Both cable industry group NCTA and the American Television Alliance, which represents AT&T, DISH and others, want the FCC to crack down on the practice because it gives broadcasters the ability to blackout prime-time network programming in a market during disputes over retransmission rates.
  • But National Association of Broadcasters spokesman Dennis Wharton called it “comical” to think the arrangements are an unfair competitive threat to cable or satellite companies.

Meanwhile, Democratic lawmakers are taking FCC Chairman Ajit Pai to task after his agency approved Gray Television's request to buy the third-rated TV station in Sioux Falls, South Dakota, even though Gray already owns the second-rated station.

  • The FCC approval came a day after the Third Circuit Court of Appeals overruled Pai's attempt to relax broadcast media ownership rules to allow such an arrangement.
  • In a letter Tuesday, House Energy & Commerce Committee Chairman Frank Pallone and communications subcommittee Chairman Mike Doyle wrote, “The FCC’s technical arguments about why it doesn’t have to comply with the court’s decision seem highly suspect, at best, and an intentional flouting of the rule of law at worst.”
  • An FCC spokesman said the commission would have granted the request under the old rules or the new ones the court struck down. The agency has said it intends to seek a review of the court's decision.

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