FCC Votes to End UHF Discount (finally... sort of)

The FCC has had a policy for decades giving owners of UHF broadcast television stations a 50% discount in terms of applying market size to the national ownership caps.  That is, owners of a "UHF" station only counted have of their reach in terms of a broadcast group's total audience reach.  An all-UHF group owner could theoretically have an actual audience reach of 78%, yet still fall within the FCC's national ownership limits of 39%.  This has let a dozen or so of the largest TV station
groups and media conglomerates have an effective reach of 40-65% of US TVHH while technically remaining under the national ownership cap of 39%.  While ending the discount, the FCC will grandfather in those groups, and allow others with station deals in progress to retain the discount (allowing them to continue to bypass the national caps).  So the big guys get to continue violating the official cap limits. That's the "sort of" part of the headline.

The "finally" part is that the policy is a legacy of old technological limits that have long since been bypassed.  The root of the discount is the fact that in the 1950s and 1960s, UHF stations in the U.S. were at a serious technical disadvantage to VHF outlets.  UHF signals didn't go as far, and required much more electrical power for transmissions.  In the 50s and early 60s, most TV sets sold in the U.S. didn't even have UHF tuners - and it wasn't until the mid 70s that UHF tuners in TV sold in the U.S. had to meet the same quality standards as VHF tuners.  All of this put UHF stations competing with VHF stations in their market as a serious competitive disadvantage.  In fact, in research I did for my dissertation, I was able to estimate that UHF stations had a "discount" of 50% in terms of the money they were able to get for advertising spots, even with roughly equal audience sizes.
  However, by the late 70s and early 80s, things had turned around for UHF stations - improved standards in TV sets narrowed the viewing difference, and the growth of cable systems removed a lot of the coverage differences.  By the early 80s, my dissertation went on to show, that UHF financial disadvantage in terms of advertising rates (discount) had virtually disappeared.
  Still, the FCC wanted to encourage greater use of UHF frequencies (many remained unclaimed until the FCC started taking back large sections of the UHF TV bandwidth).  When the FCC shifted ownership focus from the number of stations to national reach, it seemed to make some sense to apply a "discount" to UHF to provide an incentive for large owners to start purchasing UHF stations or getting new licenses and putting new UHF stations on the air.  The 50% figure, like many FCC policy numbers, seemed to come out of thin air - although its possible someone in the agency read my dissertation and pulled the number from there (as out of context as that would be).
  However, then came the shift from digital to analog - a shift that required stations to start broadcasting on different channels, and mostly in the UHF band.  But the UHF discount - a discount remember that was supposed to be based on technological disadvantages - was still given, but was based now on the original frequency allocation, not on the actual broadcast channel used.  Initially, an argument can be made that the FCC just didn't want to deal with the additional dislocation of having to refigure ownership reach (or deal with stations pushing for changing their new allocations)  so they continued to apply the discount to the original channel assignment.
   Thus the FCC kept the old policy in place, despite being applied to channel allocations no longer in effect and justified by "technological disadvantages" that had disappeared long ago.
  So it should be no surprise that they finally ditched it - after the industry's been expecting it since 1998, and certainly since 2009 (when the digital transition was completed).  Although, as noted above, with the grandfather clause, they really haven't.  And with the TV national ownership caps under regular review and court challenge, it's not likely to really change anything in terms of concentration in the broadcast TV industry in the long run.

  To recap, the FCC created a policy in 1985 to allegedly compensate for technical disadvantages that had virtually disappeared a decade earlier, kept it in place for two decades despite knowing there was almost no remaining disadvantages, and for about a decade after the shift to digital began.  With the shift to digital, the new digital UHF allocations actually had a slight technical advantage in reach over VHF allocations, and yet the discount continued to be applied.  Moreover, it was not applied based on to the new allocated frequencies, but to the original analog channel allocations instead that were being phased out.  Now, five years after analog phase-out, the FCC is considering dropping the discount.  However, the FCC has decided it will not let owners apply the "UHF discount" in future purchases of stations, but won't require those who have used the discount to bypass ownership limits to actually come into compliance with those caps by selling off stations.

Sounds about right for government policy - create a solution to fix a problem that disappeared long ago, and continue to apply it to channel allocations that are no longer being used.  And even in "dropping" the policy, continue to allow those who took advantage of the policy to continue to evade the intent and letter of ownership caps.

Source -  FCC Proposes to Eliminate UHF Discount,  Broadcasting & Cable