D.C. Circuit Upholds FCC Reinstatement of UHF Discount

The United States Court of Appeals for the D.C. Circuit today dismissed challenges to the FCC's April 2017 decision to reinstate the UHF Discount. That discount allows broadcast television station owners to count only 50 percent of households served by UHF stations when calculating a station's compliance with the FCC's national ownership cap, which limits the number of households that any one station owner may reach. The discount is critical to certain large ownership groups' compliance with the national cap and their opportunities for further expansion.

In 2016, under former Chairman Tom Wheeler, the Commission eliminated the cap based largely on the fact that the original technical reasons for the discount (i.e., the technical disadvantages of analog UHF stations compared to VHF stations) had disappeared with the transition to digital television broadcasting, where most operators find UHF frequencies to be superior. When current Chairman Ajit Pai took over leadership of the Commission, he acted to reinstate the discount pending a more comprehensive review of all aspects of the national ownership cap. Appeals were quickly filed, including requests for a stay of the effectiveness of the reinstatement.

Last June, the D.C. Circuit Court refused to stay the effectiveness of the decision to reinstate the UHF discount, although the appeal continued up to today's decision. This past April, the Court seemed to question the FCC's decision by asking pointed questions to the Commission's attorneys at oral argument about whether the reinstatement was justified. Today's decision does not actually answer those substantive questions. Rather, the Court declined to address the rule change on its merits, finding instead that the public interest groups who had raised the challenge did not have standing to bring the appeal, as they had failed to demonstrate that they or their members would be directly harmed by the decision.

The appeal was dismissed in a short order that the Court determined was not important enough to be published as an official opinion. Since the Court did not reach the merits of the case, we can all continue to question whether the FCC was justified in reinstating the discount, although that speculation is now moot (at least temporarily). The Commission back in December released a Notice of Proposed Rulemaking looking toward reviewing the UHF discount as part of a broader review of the national ownership cap. Comments and reply comments on that NPRM have been filed, and a decision is expected in the coming months. In the meantime, the UHF discount will remain in place, and TV operators interested in mergers will likely be quick to undertake transitions that depend on the discount.