TEGNA Inc., SGCI Holdings III LLC, and CMG Media Operating Company, LLC, Applications for Transfer of Control and Assignment of Certain Subsidiaries

Federal RegisterMar 15, 2023

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FEDERAL COMMUNICATIONS COMMISSION

[MB Docket No. 22-162; DA 22-5149; FR ID 130443]

TEGNA Inc., SGCI Holdings III LLC, and CMG Media Operating Company, LLC, Applications for Transfer of Control and Assignment of Certain Subsidiaries

AGENCY:

Federal Communications Commission.

ACTION:

Notice.

SUMMARY:

This document commences a hearing in connection with a series of applications filed by TEGNA Inc. (TEGNA), SGCI Holdings III LLC (SGCI Holdings), and CMG Media Operating Company, LLC (CMG) seeking Commission consent to the transfer of control and/or assignment of broadcast television station licenses. By this document, the Media Bureau has designated two discrete substantial and material questions of fact for hearing, namely: (1) are the Transactions structured in a way that is likely to trigger a rate increase harmful to consumers, as a result of contractual clauses that take immediate effect after the consummation of the Transactions, and (2) will the Transactions reduce or impair localism, including whether they will result in labor reductions at local stations.

DATES:

Persons desiring to participate as parties in the hearing shall file a petition for leave to intervene no later than April 14, 2023.

ADDRESSES:

File documents with the Office of the Secretary, Federal Communications Commission, 45 L Street NE, Washington, DC 20554, with a copy mailed to each party to the proceeding. Each document that is filed in this proceeding must display on the front page the docket number of this hearing, “MB Docket No. 22-162.”

FOR FURTHER INFORMATION CONTACT:

Jeremy Miller, Media Bureau, at (202) 418-1507 or

jeremy.miller@fcc.gov.

SUPPLEMENTARY INFORMATION:

This is a summary of the Hearing Designation Order (Order), MB Docket No. 22-162, MB 22-149, adopted and released on February 24, 2023. The complete text of this document, including attachments and any related document, is available on the Commission's website at

https://www.fcc.gov/transaction/standard-general-tegna

or by using the search function on the Commission's Electronic Comment Filing System (ECFS) web page at

www.fcc.gov/ecfs.

Alternative formats are available to persons with disabilities by sending an email to

FCC504@fcc.gov

or by calling the Consumer & Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (TTY).

Summary of the Hearing Designation Order

In four sets of applications initially filed on March 18, 2022 and last amended on April 1, 2022, TEGNA Inc. (TEGNA), SGCI Holdings III LLC (SGCI Holdings), and CMG Media Operating Company, LLC (CMG) (collectively, the Applicants) sought consent to transfer control of TEGNA to SGCI Holdings, as well as three other sets of applications filed contemporaneously seeking consent for a series of related transactions: (1) the transfer of control of the four full power television stations of Community News Media LLC (CNM) to a wholly-owned subsidiary of CMG; (2) the transfer of control of Teton Parent Corp. (TPC), the parent company of licensee WFXT(TV), Boston, Massachusetts, from a wholly-owned subsidiary of CMG to SGCI Holdings; and (3) immediately upon consummation of the merger of TEGNA with TPC, the assignment of the licenses of four full-power television stations from subsidiaries of post-merger TEGNA to indirect, wholly-owned subsidiaries of CMG (collectively, the Transactions).

In addition, the Applicants and affiliated entities filed letters with the Commission putting forth certain commitments, including (1) a December 16, 2022 letter from SGCI Holdings and Standard General, L.P. addressing “the applicability of retransmission consent agreements to the TEGNA stations that will be controlled by Standard General L.P. and SGCI Holdings . . . following the [Transactions],” Letter from Soohyung Kim, SGCI Holdings and Standard General, L.P., to Marlene H. Dortch, FCC, Dkt. No. 22-162 (filed Dec. 16, 2022) (SG Waiver Letter); and (2) a December 22, 2022 letter from SGCI Holdings and Standard General, L.P. addressing concerns raised regarding reduction of local jobs after consummation of the Transactions, Letter from Soohyung Kim, SGCI Holdings and Standard General, L.P., to Marlene H. Dortch, FCC, Dkt. No. 22-162 (filed Dec. 22, 2022) (SG Staffing Letter)).

Multiple parties filed petitions and other formal pleadings seeking, among other things, to dismiss or deny the Transactions. These parties' arguments include objections that the structure of the Transactions would unfairly harm subscribers through increased multichannel video programming distributors (MVPD) subscription prices resulting from the triggering of after-

acquired clauses in retransmission contracts. More specifically, some parties raise concerns with the structure and sequencing of the Transactions and the perceived exploitation of contractual provisions in the retransmission consent agreements held by the stations, which they allege would result in the imposition of higher retransmission fees in a manner inconsistent with a functioning, competitive marketplace. Opponents also argue that the Transactions undermine localism by reducing the amount and scope of local news coverage because the Applicants' business intentions and commitments include reporter layoffs.

Section 310(d) of the Act, 47 U.S.C. 310(d), provides that no station license shall be transferred or assigned unless the Commission, on application, determines that the public interest, convenience, and necessity will be served thereby. If the transaction would not violate a statute or rule, the Commission considers whether it could result in public interest harms by substantially frustrating or impairing the objectives or implementation of the Act or related statutes. Under Section 309(d) of the Act, “[i]f a substantial and material question of fact is presented or if the Commission for any reason is unable to find that grant of the application would be consistent [with the public interest, convenience, and necessity],” it must formally designate the application for a hearing in accordance with Section 309(e) of the Act. 47 U.S.C. 309(d) and (e). Courts have stated that, in reviewing the record, the Commission must designate an application for hearing if “the totality of the evidence arouses a sufficient doubt” as to whether grant of the application would serve the public interest.

Serafyn

FCC,

149 F.3d 1213, 1216 (D.C. Cir. 1998) (quoting

Citizens for Jazz on WRVR Inc.

FCC,

775 F.2d 392, 395 (D.C. Cir. 1985)).

Potential Public Interest Harm from Increased Retransmission Consent Fees.

Pursuant to section 325 of the Communications Act, 47 U.S.C. 325(b), MVPDs may retransmit the signal of a local broadcast television station on a cable or satellite television system only with the station's permission. To facilitate the carriage of local stations, the Act permits licensees of commercial television stations to elect to either require the MVPDs to carry their signals automatically but without compensation, or to negotiate with MVPDs for the right to retransmit the station's signal in exchange for remuneration. If a station elects transmission consent, the station and MVPD negotiate a carriage agreement, known as retransmission consent agreement, which typically involves a fee paid to the local broadcast station calculated on a per-subscriber, per-month basis.

Communications Marketplace Report,

GN Docket No. 22-203, FCC 22-103, Report, at 167, paragraph 275 (2022). If the parties are unable to negotiate such a carriage agreement, the MVPD must stop retransmitting the station's broadcast signal and viewers lose access to the station on the MVPD's cable or satellite television system in what is known as a blackout.

Commission caselaw makes clear that increases in retransmission consent rates can constitute a public interest harm if such increases are not simply the product of a properly functioning competitive marketplace. In particular, evidence that anticompetitive practices or other wrongdoing could distinguish what would perhaps constitute a market-driven rate increase from one that is anti-competitive, unwarranted, and harmful to consumers and the public interest. In the instant matter, we find that there is a substantial and material question of fact as to whether any increase in retransmission fees as a result of this transaction is the result of a properly functioning, competitive marketplace, or, alternatively, whether such rate increases would be the result of: (1) the unique structure of the Transactions in which the various assignments and/or transfers of control are closed sequentially in order to take advantage of after-acquired station clauses and maximize retransmission revenue, or (2) some other anticompetitive practices or other wrongdoing, and accordingly, the impact of any such rate increases on the viewing public, including MVPD subscribers.

Based on the record before us, we are unable to find, due to the unique structure of the Transactions in which the various assignments and/or transfers of control are closed sequentially in order to take advantage of after-acquired station clauses and maximize retransmission revenue, that rates to MVPD subscribers would not rise beyond that which would occur in a properly functioning competitive market. In addition, especially given questions about the intended scope of the commitments relating to enforcement of such clauses, we are unable to find that the commitments offered by the Applicants would adequately mitigate such a result. Accordingly, we designate the Applications for a hearing to determine: whether the sequencing of the Transactions was intended primarily to increase retransmission fees; whether consummation of the Transactions will likely cause an increase in rates for the retail subscribers of the MVPDs that currently hold, or will in the future negotiate, retransmission agreements with the Applicants; whether the sequencing of the Transactions constitutes anticompetitive activity; what the extent of harm to viewers and the public interest would be as a result, whether any such harm would be adequately mitigated by the commitments offered by the Applicants in the SG Waiver Letter; and/or whether any of the Applicants violated any Commission rules or committed other wrongdoing in constructing the Transactions.

Potential Public Interest Harm to Localism, Including Due to Labor Reductions.

Localism, along with competition and diversity, is a longstanding core Commission broadcast policy objective, which together forms the cornerstone of broadcasting. 2

002 Biennial Regulatory Review—Review of the Commission's Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996,

Report and Order and Notice of Proposed Rulemaking, 18 FCC Rcd 13620, 13643-13644, paras. 73 through76 (2003) (subsequent history omitted) (

2002 Biennial Review

); B

roadcast Localism,

Notice of Inquiry, 19 FCC Rcd 12425 at paragraph 1 (2004) (

Broadcast Localism NOI

) The Commission has consistently interpreted the localism obligation to require that broadcasters air material that is responsive to the needs and interests of the communities that their stations are licensed to serve, including local news, information, and public affairs programming.

See, e.g.,

Applications of Comcast Corporation, General Electric Company and NBC Universal, Inc. for Consent to Assign Licenses and Transfer Control of Licensees,

Memorandum Opinion and Order, 26 FCC Rcd. 4238, 4320, paragraph 197 (2011) (

Comcast/NBCU Order

) (citation omitted). As the Supreme Court recently recognized, “[t]he FCC has long explained that the ownership rules seek to promote competition, localism, and viewpoint diversity by ensuring that a small number of entities do not dominate a particular media market.”

Fed. Commc'ns Comm'n

Prometheus Radio Project,

141 S.Ct. 1150, 1155 (2021).

We recognize that local journalism is the heart of local news and community-responsive programming, and in that context we take seriously concerns that

a diminution in the employment of local journalists and other local staff poses a threat to localism.

Plans and Commitments Regarding Jobs.

The conflicting evidence on the record before us about SGCI Holdings' intentions and commitments with regard to local staffing at the TEGNA stations, leaves us with substantial and material questions of fact, unresolved by Applicants' filings, that require further investigation to determine the ultimate effects on localism. Central to this determination would be reconciling the accuracy and legitimacy of the Applicants' explanations for the documents seeming to indicate intent and commitments to reduce station-level staff, including whether the “synergies” of job cuts have already taken place; evaluation of SGCI Holdings' explanations that station-level savings have already been achieved and that the financial model is distinguishable from a financial plan; identification of any such jobs that would likely be cut as a result of the proposed transaction and their impact on the Commission's localism policies; and resolution of apparent timeline inconsistencies about representations on staffing.

The Applicants have offered certain commitments regarding staffing at the TEGNA stations if the Commission were to approve the Transactions. However, the specific deficiencies highlighted by some of the opponents of the Transactions, including the practicality and sufficiency of the SG Staffing Letter, remain unaddressed and unresolved, leaving substantial and material questions of fact as to whether and how station-level staffing might be reduced and the effect of any such reduction on localism.

Structure of Ownership.

The record also indicates that two aspects of the ultimate ownership proposed for New TEGNA also warrant further investigation in order to determine the potential impact on localism. First, the parties present sharply divergent cases as to whether the organizational form of SGCI Holdings as an investment fund benefits or harms the ability of the TEGNA Stations to provide local service going forward. A material question remains whether the specific change in ownership in this transaction from a publicly traded corporation to a private company owned by an investment fund would promote, hinder, or indeed, have no effect on localism. Second, any assessment of localism would also benefit from a determination of the role of Standard General L.P. in the past as a station owner and, more importantly, its role going forward. Although the Applicants, on occasion, refer to the role of Standard General L.P. going forward in an apparent ownership or control capacity, most notably in the recent commitment letters filed in December, it is not clear that this entity is involved in the Transactions. There is a material question how relevant the experience under different, unidentified Standard General L.P. ownership would be compared to that of SGCI Holdings.

Programming Production.

We also find two issues related to the production of community-responsive programming to raise substantial and material questions of fact as to whether SGCI Holdings' acquisition of the TEGNA stations will harm localism. First, questions have been raised in the record regarding how New TEGNA's creation and use of a Washington, DC, news bureau will impact localism, and, in particular, whether it would increase or reduce the Stations' local journalism and coverage of local issues. Second, questions have been raised in the record regarding whether SGCI Holding's apparent intent to provide local news services remotely will promote or harm localism. In order to assess the impact of SGCI Holdings' planned operations on the TEGNA Stations' ability to serve the needs and interests of their local communities, further examination of New TEGNA's evident plans to gather and broadcast local news remotely is necessary.

Accordingly,

it is ordered

, That, pursuant to Sections 309(e) of the Act, 47 U.S.C. 309(e), and section 1.254 of the Commission's rules, 47 CFR 1.254, the above-captioned applications

are designated for hearing

to be held at a time and location specified in a subsequent Order by the Administrative Law Judge, upon the following questions:

(a) Whether, in light of the record presented, retransmission consent fees will rise as a result of the Transactions, and if so, whether such an increase is the result of a properly functioning, competitive marketplace, or, alternatively, whether such rate increases would be the result of the unique structure of the Transactions in which the various assignments and/or transfers of control are closed sequentially in order to take advantage of after-acquired station clauses and maximize retransmission revenue, and further, whether such a result would be mitigated by the commitments offered by the Applicants; and

(b) Whether, and to what extent, in light of the record presented, local content and programming in the affected communities would be adversely affected due to the proposed plans and commitments of SGCI Holdings for station-level staff; its intentions for investments in the stations; the potential financial pressures connected with the acquisition and ownership structure; and the potential effectiveness of the commitments offered by the Applicants.

It is further ordered

, That, pursuant to Section 309(e) of the Act, 47 U.S.C. 309(e), and section 1.254 of the Commission's rules, 47 CFR 1.254, both the

burden of proceeding

with the introduction of evidence and the

burden of proof

with respect to issues specified above shall be upon SGCI Holdings, CNM, CMG, TEGNA, and TPC. We are assigning the burdens in this manner because SGCI Holdings, CNM, CMG, TEGNA, and TPC have the particular knowledge of the specific facts at issue in this proceeding, as well as the statutory obligation to demonstrate that grant of the Transaction is in the public interest.

It is further ordered

, That to avail itself of the opportunity to be heard, SGCI Holdings, CNM, CMG, TEGNA, and TPC pursuant to Section 1.221(c) and 1.221(e) of the Commission's Rules, 47 CFR 1.221(c) and 1.221(e), in person or by their respective attorneys,

shall file a written appearance

, stating an intention to appear on the date fixed for the hearing and present evidence on the issues specified in the Order. Such written appearance shall be filed within 20 days of the mailing of this Order. Pursuant to Section 1.221(c) of the Commission's rules, if the applicants fail to file an appearance within the specified time period, or have not filed prior to the expiration of that time a petition to dismiss without prejudice, or a petition to accept, for good cause shown, such written appearance beyond expiration of said 20 days, the assignment application will be dismissed with prejudice for failure to prosecute.

It is further ordered

, that, having filed petitions to deny, TNG-CWA and the National Association of Broadcast Employees and Technicians-CWA (NABET-CWA) (collectively, CWA) and Common Cause and United Church of Christ, OC, Inc. (collectively, Common Cause/UCC) are made parties to the proceeding pursuant to Section 1.221(d) of the Commission's rules, 47 CFR 1.221(d). To avail themselves of the opportunity to be heard, pursuant to Sections 1.221(e) of the Commission's rules, each of these parties, in person or by its attorneys,

shall file,

written appearance,

stating its intention to appear on the date fixed for the hearing and present evidence on the issues specified in this Order. Such written

appearance shall be filed within 20 days of the mailing of this Order. If any of these parties fails to file an appearance within the time specified, it shall, unless good cause for such failure is shown, forfeit its hearing rights.

It is further ordered

, That the Chief, Enforcement Bureau, shall be made a party to this proceeding without the need to file a written appearance.

It is further ordered

, That a copy of each document filed in this proceeding subsequent to the date of adoption of this document

shall be served

on the counsel of record appearing on behalf of the Chief, Enforcement Bureau. Parties may inquire as to the identity of such counsel by calling the Investigations & Hearings Division of the Enforcement Bureau at (202) 418-1420. Such service copy

shall be addressed

to the named counsel of record, Investigations & Hearings Division, Enforcement Bureau, Federal Communications Commission, 45 L Street NE, Washington, DC 20554.

It is further ordered

, That SGCI Holdings, pursuant to Section 311(a)(2) of the Act, 47 U.S.C. 311(a)(2), and Section 73.3594 of the Commission's Rules, 47 CFR 73.3594,

shall give notice

of the hearing within the time and in the manner prescribed in such Rules, and

shall advise

the Commission of the publication of such notice as required by Section 73.3594(b) of the Rules, 47 CFR 73.3594(b).

It is further ordered

, That a copy of this document, or a summary thereof, shall be published in the

Federal Register

It is further ordered

, That, within fifteen (15) days of the date that

written appearances

are due, the Administrative Law Judge shall issue a Scheduling Order that includes a set date for resolution.

It is further ordered

, That the Commission's Consumer and Governmental Affairs Bureau, Reference Information Center

shall send

a copy of this Order by certified mail/return receipt requested to:

TEGNA, Inc.

Michael Beder, TEGNA Inc., 8350 Broad Street, Suite 2000, Tysons, VA 22102

Jennifer A. Johnson, Covington & Burling LLP, One CityCenter, 850 Tenth Street NW, Washington, DC 20001

SGCI Holdings III LLC/Community News Media LLC

Soohyung Kim, SGCI Holdings III LLC, 767 Fifth Avenue, 12th Floor, New York, NY 10153

Scott R. Flick, Pillsbury Winthrop Shaw Pittman LLP, 1200 Seventeenth Street NW, Washington, DC 20036

CMG Media Corporation/Teton Parent Corp.

CMG Legal Dept., 1601 W Peachtree Street NE, Atlanta, GA 30309, United States

Michael Basile, Cooley LLP, 1299 Pennsylvania Avenue NW, Suite 700, Washington, DC 20004

Common Cause

Yosef Getachew, Common Cause, 805 15th Street NW, Suite 800, Washington, DC 20005

United Church of Christ Media Justice Ministry

Cheryl A. Leanza, United Church of Christ Media Justice Ministry, 100 Maryland Avenue NE, Washington, DC 20002

The Newsguild—CWA/National Association of Broadcast Employees and Technicians—CWA

Andrew Jay Schwartzman, 1341 G Street NW, Fifth Floor, Washington, DC 20005

David R. Goodfriend, The Goodfriend Group, 208 I Street NE, Washington, DC 20002

Federal Communications Commission.

Thomas Horan,

Chief of Staff, Media Bureau.

Attachment

TEGNA Merger Applications

Call sign

Community of license

Application file Nos.

Licensee

Facility ID

WUPL(TV)

Slidell, LA

0000186355

Belo TV, Inc

13938

WBXN-CD

New Orleans, LA

0000186356

Belo TV, Inc

70419

KTHV(TV)

Little Rock, AR

0000186358

Cape Publications, Inc

2787

KFSM-TV

Fort Smith, AR

0000186359

Cape Publications, Inc

66469

WZZM(TV)

Grand Rapids, MI

0000186369

Combined Communications of Oklahoma, LLC

49713

KENS(TV)

San Antonio, TX

0000186371

KENS-TV, Inc

26304

KFMB-TV

San Diego, CA

0000186372

KFMB-TV, LLC

42122

KING-TV

Seattle, WA

0000186389

KING Broadcasting Company

34847

KREM(TV)

Spokane, WA

0000186391

KING Broadcasting Company

34868

KTVB(TV)

Boise, ID

0000186394

KING Broadcasting Company

34858

K15IO-D

McCall & New Meadows, ID

0000186397

KING Broadcasting Company

34869

K16JE-D

Glenns Ferry, ID

0000186393

KING Broadcasting Company

188132

K17KF-D

Cambridge, ID

0000186392

KING Broadcasting Company

188131

K21CC-D

Lewiston, ID

0000186390

KING Broadcasting Company

50532

K23KY-D

Council, ID

0000186399

KING Broadcasting Company

11446

K29NB-D

Cascade, ID

0000186396

KING Broadcasting Company

34884

K30QA-D

Coeur D'Alene, ID

0000186398

KING Broadcasting Company

34861

KTFT-LD

Twin Falls, ID

0000186395

KING Broadcasting Company

167056

KONG(TV)

Everett , WA

0000186373

KONG-TV, Inc

35396

KSKN(TV)

Spokane, WA

0000186387

KSKN Television, Inc

35606

KTTU(TV)

Tucson, AZ

0000186400

KTTU-TV, Inc

11908

KWES-TV

Odessa, TX

0000186401

KWES Television, LLC

42007

KXTV(TV)

Sacramento, CA

0000186403

KXTV, LLC

25048

KBMT(TV)

Beaumont, TX

0000186374

LSB Broadcasting, Inc

10150

KCEN-TV

Temple, TX

0000186384

LSB Broadcasting, Inc

10245

KIDY(TV)

San Angelo, TX

0000186376

LSB Broadcasting, Inc

58560

KIII(TV)

Corpus Christi, TX

0000186379

LSB Broadcasting, Inc

10188

KXVA(TV)

Abilene, TX

0000186377

LSB Broadcasting, Inc

62293

KYTX(TV)

Nacogdoches, TX

0000186385

LSB Broadcasting, Inc

55644

KUIL-D

Beaumont, TX

0000186380

LSB Broadcasting, Inc

168234

KAGS-LD

Bryan, TX

0000186378

LSB Broadcasting, Inc

10246

KIDB-LD

Sweetwater, TX

0000186375

LSB Broadcasting, Inc

53545

KIDU-LD

Brownwood, TX

0000186383

LSB Broadcasting, Inc

58559

KIDV-LD

Albany, TX

0000186381

LSB Broadcasting, Inc

58571

KVHP-LD

Jasper, TX

0000186382

LSB Broadcasting, Inc

168235

WGRZ(TV)

Buffalo, NY

0000186402

Multimedia Entertainment, LLC

64547

KARE(TV)

Minneapolis, MN

0000186415