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[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.
```