Sinclair’s Patent Gives Them Unique Market Power

Sinclair’s patent is a vital part of the ATSC 3.0 transmission technology, which gives the broadcasting giant control over the market and the future of broadcasting. The patent, owned by Sinclair subsidiary ONE Media, is for the technology behind the “bootstrap signal,” otherwise known as the System Discovery and Signaling standard.¹ The signal serves as the universal entry point on ATSC 3.0 receivers, alerting the receiver when data is about to come in so that programming can be decoded immediately.²

This technology, owned by Sinclair’s ONE Media, is the backbone of the Next Generation TV broadcast standard. Without it, ATSC 3.0 does not function. The National Association of Broadcasters told the FCC in a joint filing with other petitioners seeking Commission approval of ATSC 3.0 that “by approving and adopting A/321, the FCC will have done all it needs to allow broadcasters and TV manufacturers to deliver compelling new content and services using Next [Generation] TV.”³ A/321 is the classification for the full standard given to the bootstrap technology when it was accepted by the Advanced Television Systems Committee (ATSC) in March 2016. When the committee voted to approve the technology as a full standard for ATSC 3.0, Sinclair put out a press release dubbing the bootstrap the “essential core of the new ATSC 3.0 standard,” noting that it “serves as the universal entry point that allows all receiver devices to process and decode information.”⁴

In fact, the FCC deemed the System Discovery and Signaling bootstrap technology so essential to Next Generation TV that it is the only technological standard the Commission required be included in an ATSC 3.0 signal.⁵ By making the A/321 standard the only mandatory aspect of Next Generation TV signals, the Commission gave ONE Media (and in turn, Sinclair) control over the most powerful tool in broadcasting. Under the FCC’s order, ONE Media’s bootstrap signal essentially is the ATSC 3.0 standard.⁶ So if any other broadcasters want to compete with Sinclair (as well as other video providers) in the Next Generation TV market, they will have to pay whatever royalty Sinclair demands for the technology behind the ATSC 3.0 standard, as would all manufacturers of TV and broadcasting and cable equipment.

The threat to the marketplace is not merely how central Sinclair’s ONE Media’s patent is to ATSC 3.0. The FCC’s lack of oversight of the licensing of patents for this technology allows Sinclair to unilaterally set prices and collect royalties from any and all interested parties looking to join the ATSC 3.0 revolution.⁷ TVNewsCheck reported that ONE Media could earn billions of dollars from these royalties.⁸ FCC Commissioner Jessica Rosenworcel similarly warned of the upcoming windfall for Sinclair: “We know that Sinclair Broadcasting—which holds essential patents for ATSC 3.0—has been one of the biggest champions of this new standard… Before we authorize billions for patent holders and saddle consumers with the bills, we better understand how these rights holders will not take advantage of the special status conferred upon them by the FCC.”⁹

Sinclair also dominates the market for ATSC 3.0 equipment. The American Television Alliance (ATVA) told the FCC that the equipment that will be used for ATSC 3.0 will impose higher costs on multi-video programming distributors (MVPDs), such as cable companies and over the top services such as Sling TV, because equipment built to receive ATSC 3.0 signals (the bootstrap being central to this) are subject to patent royalties.¹⁰ “If MVPDs had to purchase new equipment for ATSC 3.0 carriage, they would have to pay such royalties as part of the purchase price—just as they would if they purchased new ATSC 1.0 equipment,” ATVA argued (ATSC 1.0 makes up the Digital TV standard).¹¹ In the filing, ATVA specifically cited ONE Media’s ownership of patents in the ATSC 3.0 transmission standard and how Sinclair has been “perhaps the most prominent proponent” of the Next Generation TV standard transition.¹² The increased costs for equipment would likely be passed onto consumers, creating a consistent pipeline of profits from broadcast TV viewers to Sinclair.

Further, as the essential patent holder for ATSC 3.0 technology and a broadcaster with a significant national footprint, Sinclair has the misaligned incentives to force the transition to ATSC 3.0 technology and pass the transition costs onto MVPDs and their customers. Though the transition to ATSC 3.0 is currently voluntary for consumers and competitors, Sinclair possesses the ability to withhold Digital TV signals and compel carriage of ATSC 3.0 signals in its retransmission consent (also known as “retrans”) negotiations.¹³ Sinclair has already exploited its leverage against MVPDs before by bundling its Tennis Channel with must-have network programming in retransmission negotiations.¹⁴ If an MVPD is unwilling to pay the high retransmission fees demanded by Sinclair for bundled programming, as Frontier did in 2016, it risks being “blacked out” by the broadcaster (the broadcaster pulls its networks from the MVPD).¹⁵

Sinclair could similarly abuse its current market power in the ATSC 3.0 transition. Sinclair can take advantage of MVPDs, especially small and rural MVPDs that have significantly less bargaining power to push back on broadcaster demands, by demanding higher retransmission fees, effectively passing the costs of transitioning to ATSC 3.0 onto MVPDs and their customers.¹⁶ The acquisition of Tribune would further enhance Sinclair’s leverage over small and rural MVPDs.