Sinclair Wins Again at FCC, and Favoritism Claim Is Revived

(Bloomberg) -- A divided Federal Communications Commission approved a new TV broadcast standard backed by Sinclair Broadcast Group Inc., sparking renewed criticism that the agency is favoring the company -- a notion rejected by its Republican chairman.

The FCC, on a 3-2 party-line vote Thursday, said broadcasters may voluntarily start using so-called Next Gen TV, an over-the-air service that promises better pictures and interactive services and also gives broadcasters an ability to better target advertising.

Next Gen TV represents an advance for TV stations into the digital world that for decades has been siphoning viewers away to the likes of Facebook Inc., Netflix Inc., Google’s YouTube and Amazon.com Inc.’s Prime video service.

Sinclair released a statement congratulating the FCC and saying the company is set to “fully deploy” Next Gen TV. The FCC vote marks “marks both the conclusion and commencement of a decades-long effort by Sinclair” to enhance broadcasting, the Maryland-based company said.

“As we have pressed for 20 years, broadcasters and consumers alike deserve the best innovations available,” said David Smith, Sinclair’s executive chairman. “We finally have that ability and are ready to lead.”

A range of broadcasters, including Sinclair, Nexstar Media Group Inc. and the National Association of Broadcasters, backed the new system. But FCC Commissioner Jessica Rosenworcel, a Democrat who voted against the measure, said the agency under Pai’s leadership has shown a pattern of helping Sinclair.

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"We have engaged in a series of media policy changes at this agency that are striking in the one thing that they have in common: They are all custom-built for a company called Sinclair Broadcasting,” Rosenworcel said at a news conference Thursday after the commission’s monthly meeting.

The agency this year has reinstated an obsolete rule to loosen ownership restrictions and voted Thursday to relax local limits on station ownership. “And we have now authorized a new television standard" that incorporates patents held by Sinclair, Rosenworcel said.

Pai bridled when asked about criticism of favoritism to Sinclair, which had also come from Democratic lawmakers.

Two House Democrats on Nov. 13 asked the FCC’s inspector general for an investigation of whether Pai’s actions have improperly benefited Sinclair. Two days later, they were joined by 15 senators who sent their own letter questioning the FCC’s independence and impartiality.

Impartiality Questioned

The senators, 14 Democrats and one independent who caucuses with them, said they had “strong concerns” about the agency’s review of Sinclair’s proposed $3.9 billion purchase of Tribune Media Co.’s TV stations.

“I completely reject any of these suggestions,” Pai told reporters. “I’ve had a very consistent view on media ownership and other media policies” since joining the agency in 2012, he said.

Sinclair had no comment on the dispute, said Rebecca Hanson, a company spokeswoman. Sinclair Broadcast has formed a partnership with Nexstar and Univision Holdings Inc. to use the new technology.

The new standards will let TV stations do something cable companies already do: harvest data about viewers so advertisers can customize pitches.

Earlier, Pai said Next Gen TV has the potential to bring a wide range of benefits, including TV on smartphones, immersive audio and improved emergency alerts.

The National Association of Broadcasters, a trade group, said the vote “marks the beginning of a reinvention of free and local broadcast television in America.”

“This is game-changing technology for broadcasting and our viewers,” Gordon Smith, president of the broadcasters’ trade group, said in an emailed statement.

The rules passed Thursday would allow -- and not require -- stations to use the new standard that sends signals in a different format than current technology. 

Broadcasters using Next Gen will also need to offer the same programming on their traditional stream for five years. After that, TV stations would be free to shift popular shows to the Next Gen stream only -- possibly stranding older TV sets with lesser programming.

Cable providers have said they will need to install new equipment to handle Next Gen TV signals.

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