FCC inspector general sticks corruption probe into chairman Ajit Pai amid $4bn media merger

Fine line between free market and favors for pals


Analysis The chairman of America's broadband watchdog – the Federal Communications Commission (FCC) – is under investigation by the regulator's inspector general following a series of decisions that appear to favor one of the country's largest media owners.

Since taking over as chair in January 2017, Ajit Pai has made big play of his effort to cut back rules in an effort to bring back "light touch" regulation. But lawmakers are suspicious of a number of decisions that directly benefitted one media group – Sinclair Broadcasting.

The FCC is due to decide on a $3.9bn merger between Sinclair and the smaller Tribune Media that would give the merged company an enormous media footprint across the United States, reaching 72 per cent of the population.

The proposed deal was only made possible thanks to rule changes proposed and passed by Pai, not all of which fitted his "light touch" template.

The case has also taken on a political dimension thanks to Sinclair's promotion of Republican issues including the controversial use of pre-recorded "must run" news segments that its subsidiaries are ordered to play on local TV stations and which often feature a strongly partisan tone.

As a result, one such lawmaker, House Representative Frank Pallone (D-NJ) – who is a member of the congressional committee that oversees the FCC - wrote to the federal regulator's inspector general in November outlining his concerns and asked him to open a formal investigation.

That letter followed an exchange between Pallone and Pai in August and September in which Pallone asked for information about decisions the FCC had made to lift ownership rules but Pai "repeatedly refused to adequately respond to," according to Pallone.

Confirmation

Following Pallone's exchanges with the FCC boss, the regulator's inspector general kicked off a probe in December to uncover and investigate any signs of suspected corruption, according to congressional aides who spoke anonymously to the New York Times. On Thursday this week, Pallone appeared to confirm the story in two tweets in which he said: "I am grateful to the FCC's inspector general that he has decided to take up this important investigation."

We spoke directly with the inspector general, David Hunt, who stated that as a matter of policy his office does not comment on the existence of any investigation. "I cannot control what comes out of Capitol Hill," he noted.

He did confirm, however, that his office is independent, and has a broad remit to peer into anything that may constitute "waste and abuse" by federal personnel at the FCC.

At the heart of the issue is an unusual decision by the FCC back in April – just three months into Pai's chairmanship – in which the federal regulator brought back a rule that was previously discarded.

The so-called "UHF discount" was introduced at a time when certain TV stations using ultra-high frequency airwaves were at a disadvantage to rivals using VHF (very high frequency) because their signal could not travel as far and therefore reach as many people.

That discount had become irrelevant given the introduction of new digital technologies, but Pai reintroduced it. At the time there were only three FCC Commissioners and one, Mignon Clyburn, voted against the proposal.

In her written dissent [PDF], she expressed confusion over why a rule that "has no place in a post-digital transition era" and which was "divorced from the technical realities of broadcast television in the digital age" had been resurrected.

Coincidence

One month later Sinclair announced it would pay $3.9bn for rival Tribune Media and its 42 television stations dotted across the US, adding to its 173 existing stations.

Such a deal was only possible under media ownership rules overseen by the FCC because the UHF discount rule enabled Sinclair to remove a significant number of its TV stations from the formula used to calculate whether it has too much influence in America's media landscape.

Several other actions by Pai have also raised suspicions that he is acting to "improperly benefit" Sinclair.

One is a seemingly obscure decision [PDF] made less than one month into his chairmanship to "rescind in its entirety and effective immediately" internal FCC rules concerning the review of so-called joint sales agreements – JSAs. These agreements allow television stations to share advertising, giving them economies of scale.

Ajit Pai was opposed to JSA review restrictions when they were retained back in 2014, arguing with some conviction that they helped smaller television stations survive and fund additional content, as well as give minorities a greater opportunity to own television stations.

In his lengthy dissent [PDF], Pai professed to not understand why the FCC had "arbitrarily singled out one aspect of those regulations" – the JSAs – "in a way that ignores the realities of the modern media marketplace" claiming it would "harm localism and diversity."

But the reason that the FCC had focused on JSAs and insisted on giving them special scrutiny was because Sinclair Broadcasting had used the arrangement for more than two decades to drive small television stations out of business and expand into new markets.

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