US agency ends 39% local TV station ownership cap

The Federal Communications Commission voted on Thursday to rescind the rule that bars local broadcast station owners from reaching more than 39% of the total number of U.S. TV households in a move that could help spark industry consolidation.

The FCC voted 2-1 to lift the cap in favor of a new case-by-case approach. The commission's sole Democrat, Anna Gomez, said the proposal was illegal and argued only Congress can lift the cap. Many critics argue the move will lead to excessive market power among station owners.

Under the rules, stations with weaker over-the-air signals can be partially counted against a company's ownership cap. The FCC has limited ownership of local broadcast stations since 1941 and most recently raised the cap to 39% in 2004.

In March, the FCC approved the $3.54 billion sale of local television station owner Tegna to Nexstar NXST.O despite objections from Democratic-led states.

The acquisition, if not reversed by courts, will expand Nexstar's presence to cover 80% of U.S. TV households. The FCC has said it was waiving the 39% rule in approving the deal.

Senate Commerce Committee Chair Ted Cruz, a Republican, said last month he is skeptical the FCC can hike the 39% cap without an act of Congress.

FCC Chair Brendan Carr said the move is about helping local broadcasters survive and pointed to the sharp decline in local newspapers. "We should stop hamstringing this one segment of the broader market with outdated restrictions," Carr said.

The FCC said the new rule would consider applications on television company mergers that would go above 39% on an individual basis to determine if they are in the public interest. The agency said it would "remove artificial restrictions on opportunities for broadcast television to attract capital and generate revenue."