President Trump and Democrat Joe Biden are now going head-to-head in the battle for the White House. Depending on whether the President secures another four years or Biden makes him a one-termer, media and telecommunication policies could be in store for big changes in the coming months. On Wall Street, analysts have begun to handicap the impact Election Day could have on media companies.
“A change in White House leadership would likely lead to a more heavy-handed regulatory environment and potentially higher taxes,” said UBS media analyst John Hodulik. In a report to clients he said everything from who leads the Federal Communications Commission to the fate of net neutrality regulation hangs in the balance. But Hodulik said it’s not the Trump versus Biden battle that he believes is most important to investors. Instead, he is watching to see if the Democrats not only hold the House but also take control of the Senate. “We believe the composition of Congress is even more important in determining how much legislation is able to get through,” Hodulik said.
UBS thinks there are three likely outcome scenarios to the election. One would be a Biden win and Democratic control of both houses of Congress. A second scenario would be a Biden win with control of Congress split between the two parties. The status quo could remain in the third scenario with Trump in the White House and a split Congress.
“A Democratic sweep would be the most onerous outcome for the industry in our view, enabling more permanent legislative changes, while a Biden victory and split Congress would likely be less impactful,” said Hodulik. His conclusion is based on a potential revival of net neutrality regulations to Obama-era rules, and closer scrutiny of mergers and acquisitions.
“Changes in tax policy may have the biggest impact on our coverage,” said Hodulik. “However, the path forward is largely contingent on a Democratic sweep in November.” He said the Trump administration’s tax reform, which lowered the corporate tax rate from 35% to 21%, benefited most of the large media and telecom companies. But Biden’s tax plan would increase the corporate tax rate to 28% and would include a minimum corporate tax for companies with $100 million or more of net income.
“Tax changes are less likely, however, if the Democrats fail to take full control of Congress,” said Hodulik. UBS economists also believe Biden’s proposal could be “watered down” or delayed if economic growth remains subdued.
More Scrutiny On Deals
Democratic administrations have traditionally taken a harder line on media consolidation, and reviews of mergers and acquisitions. Hodulik expects that will be the case if Biden wins. “We believe a Biden administration would be unlikely to block the two major transactions that we see as most likely over the next five years,” he told clients. The two television deals he thinks would be at risk would be in cable TV, with a possible Charter buyout of Altice USA, and in satellite TV with a potential merger between AT&T’s DirecTV and DISH.
No mega-radio deals are on the horizon, but they might have a harder time getting past the FCC if they materialize. “We believe a Democratic administration would be less likely to loosen media ownership restrictions and has raised concerns previously about diversity in local media,” said Hodulik.
Who Will Lead The FCC?
Regardless of who wins the White House, many in Washington believe there will be a change at the FCC with current chairman Ajit Pai said to be eying a departure from the agency that he has led since 2017. Hodulik expects a “like-minded replacement” would fill the role if Trump wins. “We believe the FCC would continue the lighter touch approach to regulation as seen in recent years,” he told clients.
But if Biden wins, a new Democratic chair would take control. Hodulik thinks former FCC Commissioner Mignon Clyburn would be a “leading contender” to become chair after her father, Rep. Jim Clyburn (D-SC), helped Biden win the South Carolina primary. “During her time on the Commission, she closely aligned with party proposals,” said Hodulik, who noted Clyburn backed net neutrality regulation and was also a vocal advocate for closing the digital divide.
Current Commissioner Jessica Rosenworcel should also be seen as a candidate for the job said Hodulik, who said Democratic Commissioner Geoffrey Starks could also be up for the post. He also said that Larry Strickling, a tech policy veteran and policy coordinator for the Biden campaign, could also be on a short list to lead the FCC.