Sports Blackout Rules, 63547-63562 [2014-24612]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 79, Number 206 (Friday, October 24, 2014)]
[Rules and Regulations]
[Pages 63547-63562]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-24612]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[MB Docket No. 12-3; FCC 14-141]


Sports Blackout Rules

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Commission eliminates the sports 
blackout rules for cable operators, satellite carriers, and open video 
systems. Elimination of the sports blackout rules will remove 
unnecessary and outdated regulations and remove regulatory 
reinforcement (and the Commission's implicit endorsement) of the NFL's 
private blackout policy, which deprives consumers of the ability to 
view on television the teams that they have subsidized through 
publicly-funded stadiums and other tax benefits. Elimination of the 
sports blackout rules may not end all sports blackouts. To the extent 
that the NFL (or any other sports league) chooses to continue its 
private blackout policy, it will no longer entitled to the protections 
of the sports blackout rules. Instead, it must rely on the same avenues 
available to any other entity that wishes to protect its distribution 
rights in the private marketplace.

DATES: Effective November 24, 2014.

FOR FURTHER INFORMATION CONTACT: For additional information, contact 
Kathy Berthot, Kathy.Berthot@fcc.gov, of the Media Bureau, Policy 
Division, (202) 418-7454.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order, FCC 14-141, adopted and released on September 30, 2014. The 
full text is available for public inspection and copying during regular 
business hours in the FCC Reference Center, Federal Communications 
Commission, 445 12th Street SW., CY-A257, Washington, DC 20554. This 
document will also be available via ECFS (https://www.fcc.gov/cgb/ecfs/
). Documents will be available electronically in ASCII, Word 97, and/or 
Adobe Acrobat. The complete text may be purchased from the Commission's 
copy contractor, 445 12th

[[Page 63548]]

Street SW., Room CY-B402, Washington, DC 20554. To request this 
document in accessible formats (computer diskettes, large print, audio 
recording, and Braille), send an email to fcc504@fcc.gov or call the 
Commission's Consumer and Governmental Affairs Bureau at (202) 418-0530 
(voice), (202) 418-0432 (TTY).
    This document contains no new or modified information collection 
requirements.

Summary of the Report and Order

I. Introduction

    1. In this Report and Order, we eliminate our sports blackout 
rules, which prohibit cable operators, satellite carriers, and open 
video systems from retransmitting, within a protected local blackout 
zone, the signal of a distant broadcast station carrying a sporting 
event if the event is not available live on a local television 
broadcast station. The sports blackout rules have reinforced the sports 
leagues' private blackout policies since 1975, with the objective of 
helping to ensure that sports telecasts are available to the public. 
The sports industry has evolved dramatically over the last 40 years, 
however. The sports blackout rules have little relevance today for 
sports other than professional football. With respect to professional 
football, television revenues have replaced gate receipts as the 
primary source of revenue for NFL teams. For this reason, among others, 
we conclude that the sports blackout rules are no longer needed to 
ensure that sports programming is widely available to television 
viewers.
    2. Eliminating the sports blackout rules will also remove 
unnecessary and outdated regulations. Additionally, eliminating the 
rules will remove regulatory reinforcement (and the FCC's implicit 
endorsement) of the NFL's private blackout policy, which prevents 
consumers--many of whom cannot attend games because they are elderly or 
disabled or are fans who have been priced out of attending games due to 
increased costs for tickets, parking, and concessions, yet have 
subsidized NFL teams with their tax dollars through publicly-financed 
stadiums and other tax benefits--from watching their teams' games on 
local television. For these reasons, we find that eliminating our 
sports blackout rules will serve the public interest. We acknowledge 
that elimination of our sports blackout rules may not end local 
blackouts of sports events because the NFL and other sports leagues may 
choose to continue their private blackout policies. Nevertheless, to 
the extent that the NFL or any other sports league decides to continue 
its blackout policies, it will no longer be entitled to additional 
protections under our sports blackout rules, but instead must rely on 
the same processes available to any other entities that wish to protect 
their distribution rights in the private marketplace.

II. Background

    3. In the Notice of Proposed Rulemaking (NPRM), the Commission 
provided extensive background on the history of the sports blackout 
rules, which we incorporate by reference and do not repeat here. The 
sports blackout rules bar cable operators, satellite carriers, and open 
video systems from retransmitting, within a 35-mile zone of protection, 
a distant broadcast station carrying a sports event that is not 
available live on a television broadcast station licensed to the 
community in which the event is taking place. The Commission first 
adopted a sports blackout rule for cable operators in 1975, when game 
ticket sales were the primary source of revenue for sports leagues. 
This rule was intended to ensure that the potential loss of gate 
receipts resulting from cable system importation of distant stations 
did not lead sports clubs to refuse to sell their rights to sports 
events to distant stations, which would reduce the overall availability 
of sports programming to television viewers. The Commission's objective 
in adopting the cable sports blackout rule was not to ensure the 
profitability of organized sports, but rather to ensure the overall 
availability of sports telecasts to the general public. Indeed, in 
1975, had sports teams refused to allow sports events to be televised 
on distant broadcast stations, their games likely would not have been 
televised at all or perhaps only carried on cable systems to which few 
Americans subscribed. At the direction of Congress, the Commission 
later applied the cable sports blackout rule to open video systems and 
then to satellite carriers to provide parity between cable and newer 
video distributors.
    4. Sports leagues' blackout policies determine which games are 
blacked out on local television stations. These policies are 
implemented primarily through contracts negotiated between the leagues 
or individual teams that hold the distribution rights to the games and 
the entities to which they grant those rights, including television 
networks, local television broadcast stations, Regional Sports Networks 
(RSNs), and multichannel video programming distributors (MVPDs). The 
Commission's rules supplement these contractual relationships by 
barring MVPDs from retransmitting, within the local blackout zone, 
games that the sports leagues or individual teams require local 
television stations to black out.
    5. In November 2011, the Sports Fan Coalition, Inc., National 
Consumers League, Public Knowledge, League of Fans, and Media Access 
Project filed a joint Petition for Rulemaking arguing that the 
Commission should no longer facilitate the sports leagues' ``anti-
consumer'' blackout policies and urging the Commission to eliminate the 
sports blackout rules. On January 12, 2012, the Media Bureau issued a 
Public Notice seeking comment on the Petition. The record compiled in 
response to the Public Notice suggested that, given the dramatic 
changes in the sports industry in the 40 years since the sports 
blackout rules were originally adopted, the sports blackout rules may 
no longer be necessary to ensure that sports programming is widely 
available to television viewers and, in fact, may be reinforcing a 
private policy that promotes just the opposite (i.e., more restrictive 
access for consumers to televised games with little, if any, 
countervailing public interest benefit). On December 18, 2013, the 
Commission released an NPRM proposing to eliminate the sports blackout 
rules. The NPRM sought comment on whether the sports blackout rules 
have become outdated due to marketplace changes since their adoption 
and whether modification or elimination of those rules is appropriate. 
It tentatively concluded that the Commission has the authority to 
repeal the cable sports blackout rule and sought comment on whether the 
Commission also has the authority to repeal the sports blackout rules 
for satellite and OVS. In addition, the NPRM requested comment on 
whether the economic rationale underlying the sports blackout rules 
remains valid. Finally, the NPRM sought comment on the potential 
benefits and harms of eliminating the rules on interested parties, 
including sports leagues, broadcasters, and consumers.

III. Discussion

    6. For the reasons set forth below, we eliminate the sports 
blackout rules. First, we conclude that the Commission has the 
authority to eliminate the sports blackout rules for cable operators, 
satellite carriers, and open video systems. Second, we review the 
changes in the sports industry since the cable sports blackout rule was 
first adopted nearly 40 years ago and conclude that, in light of these 
substantial changes, the sports blackout rules are no longer

[[Page 63549]]

needed to ensure that sports programming is widely available to 
television viewers. We further conclude that elimination of the sports 
blackout rules will serve the public interest by removing unnecessary 
regulation and removing regulatory reinforcement of the NFL's blackout 
policy, which prevents many consumers who have subsidized the NFL 
through publicly-funded stadiums and other tax benefits from watching 
locally blacked out games. To the extent that the NFL (or any other 
sports league) chooses to continue its blackout policies through 
private contractual arrangements, it will no longer be entitled to 
additional protections under our sports blackout rules, but instead 
must rely on the same processes available to any other entities that 
wish to protect their distribution rights in the private marketplace. 
Finally, we conclude that repeal of the sports blackout rules will not 
adversely impact broadcasters, consumers, or local businesses.

A. Authority To Eliminate Sports Blackout Rules

    7. We conclude that the Commission has the authority to eliminate 
the sports blackout rules for cable operators, satellite carriers, and 
open video systems. While there is no statutory provision mandating 
that the Commission adopt a sports blackout rule for cable, the 
Commission premised its adoption of the cable sports blackout rule in 
large part on the policy established by Congress in the Sports 
Broadcasting Act of 1961, which exempts from the antitrust laws joint 
agreements among individual teams engaged in professional football, 
baseball, basketball, or hockey that permit the leagues to pool the 
individual teams' television rights and sell those rights as a package 
and expressly permits these four professional sports leagues to black 
out television broadcasts of home games within the home territory of a 
member team. Subsequent legislation directed the Commission to apply 
the cable sports blackout rule to open video services and satellite 
television operators. Thus, Section 653(b)(1)(D) of the Act, as added 
by the 1996 Act, directed the Commission to extend to open video 
systems ``the Commission's regulations concerning sports exclusivity 
(47 CFR 76.67).'' Similarly, Section 339(b) of the Act, as added by 
SHVIA in 1999, directed the Commission to ``apply . . . sports blackout 
protection (47 CFR 76.67) to the retransmission of the signals of 
nationally distributed superstations by satellite carriers'' and, ``to 
the extent technically feasible and not economically prohibitive, apply 
sports blackout protection (47 CFR 76.67) to the retransmission of the 
signals of network stations by satellite carriers.''
    8. We find that elimination of the cable sports blackout rule is 
authorized under the Commission's general rulemaking power, which 
grants the Commission the authority to revisit its rules and modify or 
repeal them if it finds that such action is warranted. As discussed 
above, Congress never required the Commission to adopt a sports 
blackout rule for cable. Further, when it directed the Commission to 
apply the sports blackout protection in 47 CFR 76.67 to DBS and OVS, 
Congress left intact the Commission's general rulemaking authority with 
respect to the cable sports blackout rule, including the authority to 
modify or repeal this rule should it find that such action is 
appropriate. We also note that no commenter disputes our authority to 
eliminate the cable sports blackout rule.
    9. Additionally, we conclude that we have the authority to 
eliminate the sports blackout rules for DBS and OVS. We find 
unpersuasive assertions in the record that the Commission may not 
eliminate the sports blackout rules for DBS and OVS absent 
congressional repeal of Sections 339(b) and 653(b)(1)(D) of the Act. 
The NFL argues that, since these statutory provisions provide that the 
Commission ``shall'' apply the cable sports blackout rule to DBS and 
OVS, the Commission has no discretion to eliminate the sports blackout 
rules for DBS and OVS. We disagree. In enacting Sections 339(b) and 
653(b)(1)(D), Congress did not enact sports blackout protection for DBS 
or OVS but rather directed the Commission to apply to DBS and OVS the 
same sports blackout protection that the Commission applied to cable. 
Thus, the use of ``shall'' in Sections 339(b) and 653(b)(1)(D) merely 
instructed the Commission to apply to DBS and OVS the same sports 
blackout protection that is applicable to cable. The Commission 
discharged its statutory obligation through adoption of sports blackout 
rules for OVS in 1996 (47 CFR 76.1506(m)) and for DBS in 2000 (47 CFR 
76.127). Nowhere did Congress require the Commission to maintain these 
rules in perpetuity, and Congress was aware that the Commission has 
general rulemaking power to revisit its rules and modify or repeal them 
if it finds that such action is appropriate. Sections 339(b) and 
653(b)(1)(D) do not limit the Commission's authority to repeal or 
modify its cable sports blackout rule at some future time, nor is there 
any indication in the legislative history that Congress intended to 
withdraw this authority. Accordingly, we conclude that, by expressly 
tying these statutory provisions to the cable sports blackout rule, 
Congress demonstrated its intent that the Commission accord the same 
regulatory treatment to DBS and OVS as it does to cable with respect to 
sports blackouts, including modification or repeal of the sports 
blackout rules for these services if it determines that modification or 
repeal of the cable sports blackout rule is warranted.
    10. The legislative history of the Satellite Home Viewer 
Improvement Act of 1999 supports this conclusion. The legislative 
history makes clear that Congress sought to place satellite carriers on 
an equal footing with cable operators with respect to the availability 
of broadcast programming. Specifically, the legislative history 
indicates that the sports blackout rules for satellite carriers 
``should be as similar as possible to that applicable to cable 
services.'' Congress's clear intent to create regulatory parity between 
cable and satellite, and its preservation of Commission authority to 
modify or repeal the cable sports blackout rule, thus further support 
our interpretation that Congress intended that the Commission would 
retain its authority to repeal the sports blackout rules for OVS and 
DBS if necessary to maintain regulatory parity with cable in the 
future.
    11. We reject the Baseball Commissioner's assertion that the 
Satellite Home Viewer Extension and Reauthorization Act of 2004 
(SHVERA) evidences Congress's intent that the Commission do no more 
than provide to Congress ``recommendations'' as to whether the sports 
blackout rules for DBS and OVS should be altered, and that any changes 
based on those recommendations were to be made by Congress. SHVERA 
directed the Commission to complete an inquiry and submit a report to 
Congress ``regarding the impact on competition in the multichannel 
video programming distribution market of the current retransmission 
consent, network non-duplication, syndicated exclusivity, and sports 
blackout rules, including the impact of those rules on the ability of 
rural cable operators to compete with direct broadcast satellite 
(`DBS') industry in the provision of digital broadcast television 
signals to consumers.'' SHVERA further directed the Commission to 
``include such recommendations for changes in any statutory provisions 
relating to such rules as the Commission deems appropriate.'' Contrary 
to the Baseball

[[Page 63550]]

Commissioner's suggestion, we do not believe this latter directive can 
reasonably be interpreted to reflect an intent on the part of Congress 
to limit the Commission only to making recommendations about the sports 
blackout rules for DBS and OVS. As noted above, the purpose of the 
SHVERA inquiry and report was to evaluate the impact of the specified 
rules on competition in the MVPD market, including their impact on the 
ability of rural cable operators to compete with DBS in the provision 
of digital broadcast television signals. If Congress had intended to 
suspend or limit the Commission's general rulemaking powers under the 
Communications Act with respect to the sports blackout rules for DBS 
and OVS, Congress would have done so rather than direct that ``such 
report shall include such recommendations for changes in any statutory 
provisions relating to such rules as the Commission deems 
appropriate.'' There is nothing in the SHVERA directive that indicates 
that Congress's objective was to preclude the Commission from making 
any modifications to the sports blackout and other listed rules. 
Indeed, given the inclusion of retransmission consent in the relevant 
SHVERA provision, the Baseball Commissioner's argument, if accepted, 
would lead to the conclusion that Congress barred the Commission 
revising any of its rules pertaining to retransmission consent. We 
reject this position, which has no basis in the text of the statute. 
Rather, we think the more reasonable interpretation is that Congress 
simply intended that the Commission provide recommendations for any 
legislative changes that it deemed necessary or appropriate to address 
the impact of the specified rules on competition among MVPDs.

B. Sports Blackout Rules No Longer Needed To Ensure That Sports 
Telecasts Are Widely Available to the Public

    12. Our policy inquiry begins with an evaluation of whether the 
sports blackout rules are still needed to achieve the objective of 
ensuring the wide availability of sporting events on television in 
light of the dramatic changes that have occurred in the sports industry 
over the last 40 years. As an initial matter, we find that the sports 
blackout rules have little relevance today for sports other than 
professional football. We therefore focus our analysis on whether the 
sports blackout rules remain necessary to preserve the overall 
availability to television viewers of NFL games. We conclude that 
sports blackout rules are no longer needed to serve that purpose. We 
find that, during the past 40 years, television revenues have replaced 
gate receipts as the principal source of revenue for NFL teams and 
there has been a substantial decline in the number of NFL games blacked 
out due to failure to sell out. We further find that the loss to 
consumers of their ability to view the game on television when an NFL 
game is blacked out exceeds any gain in gate receipts and other revenue 
that may accrue to the NFL as a result of a blackout. In addition, the 
record demonstrates that changes in the industry make it unlikely that 
the NFL would move its games to pay TV as a result of the elimination 
of the sports blackout rules, notwithstanding the NFL's claims to the 
contrary. Given that the goal of the rules was not to protect the 
profitability of sports leagues but rather to ensure that sports 
programming is widely available to television viewers, we believe that 
all of these factors weigh in favor of eliminating the sports blackout 
rules.
i. Primary Relevance to Professional Football
    13. The record confirms that the sports blackout rules are no 
longer relevant for sports other than professional football. As 
explained in the NPRM, in professional sports leagues other than the 
NFL, individual teams, rather than the league, hold and sell the 
distribution rights for all or most of their games, both home and away 
games, in their home markets. Thus, each individual team is in control 
of deciding how many of its home games are telecast live in its home 
market, and individual teams have generally chosen to telecast all or 
most of their home games in the team's local market. Moreover, most 
individual teams distribute the majority of their televised games today 
through RSNs rather than over-the-air television stations. The NPRM 
accordingly sought comment on whether the sports blackout rules are 
still relevant for these other professional sports leagues. The NPRM 
also requested specific data on the extent to which games of other 
professional sports leagues, as well as other professional, collegiate, 
and high school sports events, are blacked out locally pursuant to the 
Commission's sports blackout rules and the reasons for any such 
blackouts (i.e., whether they are blacked out due to failure to sell 
out or for some other reason). No commenter asserts, or provides 
supporting data showing, that sports events other than NFL games are 
blacked out locally today pursuant to the Commission's sports blackout 
rules. In the absence of any such assertions or data, we conclude that 
the sports blackout rules are no longer relevant for sports other than 
professional football. Accordingly, we focus our analysis herein on 
whether the sports blackout rules are still needed to ensure the 
overall availability to television viewers of NFL games.
ii. NFL Gate Receipts and Other Revenues
    14. The substantial shift in importance of gate receipts vis-
[agrave]-vis television and other revenues for NFL clubs over the past 
40 years supports our conclusion that the sports blackout rules are no 
longer needed to meet their underlying policy objective of ensuring 
that sports programming is widely available to the viewing public. When 
the Commission adopted the cable sports blackout rule in 1975, it found 
that ``gate receipts were the primary source of revenue for sports 
clubs.'' The Commission acknowledged that ``teams have a reasonable 
interest in protecting their home gate receipts from the potentially 
harmful financial effects of invading telecasts of their games from 
distant television stations'' and found that ``a local team's need to 
protect its gate receipts might require that it prohibit the 
telecasting of its games on [distant] television stations which might 
be carried on local cable systems.'' Gate receipts, however, are no 
longer the primary source of revenue for the NFL. According to the NFL, 
gate receipts account for approximately 25 percent of NFL team revenue 
today. Other estimates suggest that gate receipts account for closer to 
20 percent of NFL revenue. In either event, gate receipts are now 
dwarfed by television revenues, which have grown exponentially over the 
past four decades. In 1975, annual television revenues for the NFL were 
estimated at $55 million (which in today's dollars would be 
approximately $242 million). In 2011, the NFL entered into long-term 
contracts totaling an estimated $27.6 billion with CBS, Fox, and NBC to 
air NFL games from 2014 to 2022. The NFL also has an eight-year, $15 
billion deal with ESPN for the rights to Monday Night Football, which 
extends from 2014 to 2021. Additionally, the NFL's four-year deal with 
DIRECTV for NFL Sunday Ticket, which runs through 2014, is reportedly 
worth an estimated $4.1 billion. Further, the NFL recently entered into 
a one-year contract with CBS to air eight Thursday Night Football 
games, which is estimated to be worth $275 million or $34.4 million per 
game. The NFL is expected to collect an estimated $6 billion per year 
in total television revenues beginning in 2014. Other significant 
sources of revenue for the NFL include sponsorships, which

[[Page 63551]]

totaled an estimated $1.07 billion in 2013, merchandising and 
licensing, which are estimated at around $1 billion per year, and in-
stadium revenues such as concessions and parking. Total NFL revenues 
reportedly topped $10 billion for the first time during the 2013 
season. The NFL is the most lucrative sports league in the world, with 
each of its 32 teams worth on average $1.17 billion.
    15. We find that the replacement of television revenues for gate 
receipts as the main source of revenue for NFL clubs creates a powerful 
economic incentive for the industry to make games widely available to 
television viewers even in the absence of the blackout rules. This 
change in the NFL's economic structure thus supports our conclusion 
that the sports blackout rules are no longer necessary to promote 
attendance at games in order to ensure that sports programming is 
widely available to television viewers. We are not persuaded by NAB's 
argument that the Commission should not consider gate receipts or the 
economic condition of the sports leagues as part of our analysis of 
whether to eliminate the sports blackout rules. According to NAB, it is 
misguided to base possible elimination of the sports blackout rules on 
changing economic conditions. Rather, it maintains that, if the NFL 
believes that it is economically desirable to maintain a policy of 
blackouts in local markets when games do not sell out, the Commission 
should not substitute its judgment for that of the NFL. However, as we 
stated in the NPRM, ``[t]he objective of the sports blackout rules is 
not to ensure the profitability or financial viability of sports 
leagues, but rather to ensure that sports programming is widely 
available to television viewers. Thus, we are interested in gate 
receipts and other revenues only to the extent that such revenues are 
relevant to this objective.'' We conclude that it is relevant to our 
analysis of the continued need for the sports blackout rules that 
television revenues have supplanted gate receipts as NFL clubs' 
principal source of revenue and that total revenues for the NFL have 
skyrocketed since 1975.
iii. Reduction in NFL Blackouts
    16. We also conclude that the substantial decline in the number of 
NFL games blacked out locally over the past 40 years supports a finding 
that the sports blackout rules are no longer needed to ensure that 
sports programming is widely available to television viewers. The 
record shows that the NFL's rise in popularity since 1975 has made it 
easier for teams to sell out games than it was at the time the sports 
blackout rules were first adopted. In 1975, the year the Commission 
adopted the cable sports blackout rule, 59 percent of regular season 
NFL games were blacked out locally due to failure to sell out. As the 
NFL notes, ``NFL football over the past few decades has become the most 
popular, most watched professional sport in America.'' The Sports 
Economists explain that televising NFL games has substantially 
increased the fan base for professional football, which in turn has 
allowed teams to sell more tickets. Indeed, the immense popularity of 
NFL football has ensured that the vast majority of NFL teams sell out 
all of their games every season. Thus, the number of regular season NFL 
games blacked out has declined substantially since 1975. Between 1975 
and 2013, the percentage of regular season NFL games blacked out 
dropped by more than 58 percent. During the 2013 NFL season, only two 
(0.78 percent) of 256 regular season NFL games were blacked out. Total 
attendance at NFL games in 1975 was approximately 10.2 million. In 
2013, total NFL attendance rose for the third straight year to 
approximately 17.3 million. In addition, blackouts of NFL games have 
been limited in recent years to a few markets.
    17. The NFL asserts that one reason for the ``success'' of its 
blackout policy is that ``the League has adjusted its policy in recent 
years to give teams more flexibility as they seek to strike the right 
balance between promoting the in-stadium experience and engaging fans 
over television.'' There is little evidence, however, that the NFL's 
relaxation of its blackout policy in 2012 has had a significant impact 
on the number of NFL games blacked out during the past two NFL seasons. 
Moreover, the NFL fails to explain why it believes that its relaxed 
policy favors retention of the sports blackout rules. Under the revised 
blackout policy, NFL teams have the option of deciding at the beginning 
of each season to reduce the percentage of tickets that must be sold at 
least 72 hours prior to the game in order to avoid a blackout to 
anywhere between 85 and 100 percent and adhering to that alternative 
blackout threshold throughout the season. Few NFL teams have taken 
advantage of this policy because, if the team's ticket sales exceed the 
benchmark threshold set by the team at the beginning of the season, the 
team must share a higher percentage of the revenue from those ticket 
sales than usual with the visiting team. The total number of NFL games 
blacked out dropped by only one game between 2011 and 2012, the first 
year the revised blackout policy was in effect. One of the teams that 
elected to lower its benchmark threshold to 85 percent, the Tampa Bay 
Buccaneers, actually saw an increase in the number of games blacked out 
from 2011 to 2012; the team took other measures in 2013 to avoid 
blackouts altogether. In contrast, three teams that experienced 
blackouts in both 2011 and 2012--the Cincinnati Bengals, Buffalo Bills, 
and San Diego Chargers--all reduced their number of blackouts in 2013, 
despite electing not to lower their benchmark thresholds. Thus, we do 
not believe that the NFL's recent relaxation of its blackout policy 
favors retention of the Commission's sports blackout rules.
    18. We further note that individual NFL clubs have used a variety 
of other measures in recent years to avoid blackouts, which suggest 
that they value television revenues more than selling out stadiums. 
Such measures have included removing seats or covering seats with tarps 
to reduce stadium capacity; reducing ticket prices; and buying tickets 
themselves at a discounted price. In addition, local television network 
affiliates that would otherwise be airing these games and other local 
businesses that would benefit from the games being televised have 
purchased outstanding tickets to help avert blackouts. The fact that 
many NFL clubs, as well as local network affiliates and other local 
businesses, choose to take such measures to avoid blackouts, even when 
it entails an economic cost, reflects the industry trend toward 
maximizing television revenues above other considerations, including 
selling out stadiums.
    19. We conclude that the substantial decrease in the number of NFL 
games blacked out locally since 1975 demonstrates that the sports 
blackout rules are no longer necessary to ensure the wide availability 
of sports telecasts to the general public and thus weighs in favor of 
eliminating the sports blackout rules. At the time that the sports 
blackout rules were first adopted, nearly 60 percent of NFL games were 
blacked out locally due to failure to sell out. Since that time, the 
popularity of NFL football has soared, making it far easier for most 
teams to sell out all of their games and making blackouts of NFL games 
increasingly rare. Additionally, the measures taken by NFL teams in 
recent years to prevent blackouts indicate that these teams are more 
concerned with television revenues than with selling out every seat in 
the stadium. NAB argues that the fact that the 2013 NFL season featured 
the fewest local blackouts since the league's inception ``demonstrates 
that the

[[Page 63552]]

existing blackout policies . . . are working well and should not be 
upset.'' We find this argument unpersuasive. NAB offers no support for 
its suggestion that the 2013 season featured the fewest local blackouts 
as a result of the NFL's blackout policies, much less the Commission's 
rules. Moreover, even the NFL acknowledges that there are a number of 
factors apart from its blackout policies--such as stadium capacity, 
weather, and team performance--that determine whether a team sells out 
a particular home game. Thus, we cannot conclude that the very low 
number of blackouts during the 2013 season is attributable to the NFL's 
blackout policies or that it establishes that the sports blackout rules 
should be retained. Rather, if anything, the very low number of 
blackouts in 2013 seems to suggest that stadium revenues that once were 
preserved by blackouts are less significant than the television 
revenues the NFL enjoys by preventing blackouts.
iv. Impact of Blackouts on NFL Attendance and Gate Receipts
    20. As reviewed above, the Commission adopted the sports blackout 
rules to promote the availability of sports programming to television 
viewers, not to boost sports leagues' financial bottom line. 
Nevertheless, based on the record before us, we conclude that the loss 
to consumers of their ability to view an NFL game that has been blacked 
out locally exceeds any gains in gate receipts and other in-stadium 
revenues that may accrue to the NFL as a result of blacking out the 
game. In the NPRM, we sought comment on the conclusion of the Sports 
Economists that, based on their review of several econometric studies 
of attendance at NFL games as well as other team sports in the U.S. and 
Europe, there is no evidence that local blackouts of NFL games 
significantly affect either ticket sales or no-shows at those games. 
The NFL disputes this conclusion, arguing that recent empirical 
research demonstrates that the sports blackout rules play a vital role 
in ensuring that professional sports games reach near-capacity 
attendance and that blackouts are associated with ``a statistically 
significant increase in attendance and decrease in `no-shows.' '' 
Specifically, the NFL's economist expert, Dr. Singer, asserts that a 
2000 study by Putsis and Sen demonstrates that the NFL's blackout 
policy has a positive effect on attendance at NFL games. The Putsis and 
Sen study examined the impact of blackouts on attendance at NFL games 
using data on economic, demographic, team, and game specific variables 
for the eight NFL teams that experienced blackouts of at least one home 
game during the 1996-1997 NFL season. The study found that, for these 
eight teams, blackouts were associated with an average maximum increase 
in overall tickets sold per game of 11,310, an average maximum decrease 
in no-shows per game of 4,959, and an average maximum per game increase 
in revenues of $414,336 per team.
    21. We acknowledge that the Putsis and Sen study indicates that 
blackouts have a positive impact on gate receipts and other in-stadium 
revenues. As the Sports Economists observe, however, Dr. Singer focuses 
only on the statistical significance of this study and fails to 
consider its economic significance. In this regard, Putsis and Sen also 
find that, when viewed in the broader context of the societal and 
economic loss due to the game not being broadcast in the local area, 
the gain to the NFL in on-site stadium revenue due to a blackout (e.g., 
through additional ticket and concession sales) is small in comparison 
to the loss to consumers of their ability to view NFL games that have 
been blacked out locally. Specifically, Putsis and Sen state that 
``even if one estimates the maximum potential impact on NFL game day 
revenue--the welfare loss resulting from the blackouts likely exceeds 
the loss in NFL revenue. Thus, the imposition of a blackout creates a 
market failure. . . .'' In other words, as the Sports Economists put 
it, the added money spent by the few fans ``driven'' to the stadium by 
a blackout is a gain to the NFL but is not economically significant 
when compared to the loss of viewer value. The Sports Economists 
therefore conclude that this study does not provide evidence of an 
economically significant relationship between attendance and blackouts. 
We agree. Particularly when considered in relation to the NFL's $6 
billion annual television revenues, we cannot conclude based on this 
study that blackouts have an economically significant impact on 
attendance at NFL games or gate receipts from those games. 
Additionally, we cannot conclude based on this study that the positive 
impact of the sports blackout rule on gate receipts and attendance 
exceeds the loss of television revenues or the societal loss to 
consumers of their ability to view locally blacked out NFL games. In 
any event, the goal of the sports blackout rules is not to protect the 
profitability of sports leagues but rather to ensure that sports 
programming is widely available to television viewers.
v. Migration of NFL Games to Pay TV
    22. We conclude that elimination of the sports blackout rules is 
unlikely to reduce the availability of NFL games to free, over-the-air 
television viewers by leading the NFL to migrate its games to pay TV. 
As noted above, the NFL's existing contracts with the broadcast 
networks extend through 2022 so migration of NFL games will not even be 
an issue until 2023. Dr. Singer asserts that, by spurring attendance at 
games, the sports blackout rules facilitate the NFL's ``free TV'' 
model. In the absence of the sports blackout rules, he continues, the 
NFL would likely be forced to migrate to a ``pay TV'' model in order to 
preserve its private blackout policy (and thus its ability to control 
the distribution of its programming). Dr. Singer states that the NFL 
would seek to preserve its private blackout policy because this policy 
is profit-maximizing. Migration of NFL games to pay TV, he maintains, 
would leave consumers who rely solely on over-the-air television unable 
to view NFL games (i.e., it would reduce the overall availability of 
sports telecasts to the public).
    23. To support his assertions, Dr. Singer states that the NFL's 
calculus for switching from its ``free TV'' model to pay TV in the 
absence of the sports blackout rules is as follows: the NFL would 
switch to pay TV if the value to the NFL of distributing its games via 
pay TV (i.e., the revenues that the NFL would earn from distributing 
its games via pay TV) plus the increase in gate revenue from its 
blackout policy exceeds the value to the NFL of distributing its games 
via over-the-air television in the absence of the sports blackout rules 
(i.e., the revenues that the NFL would earn from distributing its games 
via over-the-air television in the absence of the sports blackout 
rules). According to Dr. Singer, the value to the NFL of distributing 
its games via over-the-air television would decrease in the absence of 
the sports blackout rules because the lack of exclusivity for local 
broadcasters that would result from elimination of the sports blackout 
rules would reduce the value of the NFL telecasts to advertisers, which 
in turn would reduce the value that the networks would pay for rights 
to NFL games. Dr. Singer also indicates that the NFL's calculus 
``assume[s] that no amount of contracting . . . can restore the full 
value of exclusivity.''
    24. Even if we were to assume that elimination of the sports 
blackout rules will result in the reduction in exclusive distribution 
rights for some local broadcasters and that no amount of

[[Page 63553]]

contracting could restore the full value of exclusivity, it does not 
follow that it would be more profitable for the NFL to migrate its 
games to pay TV. It is necessary to consider the magnitude of the 
reduction in exclusivity and the impact of that reduction on the rights 
payment that the NFL would receive from broadcasters in the absence of 
the sports blackout rules. We believe that, if there were any 
reduction, the magnitude would be small because only a small number of 
games are blacked out locally today due to failure to sell out. 
Moreover, both Putsis and Sen and the Sports Economists agree that the 
increase in gate revenue to the NFL from its blackout policy is small. 
Under the NFL's calculus, the NFL would not be expected to migrate its 
games to pay TV unless the NFL could earn almost as much from 
distributing its games via pay TV as it could from distributing its 
games via over-the-air television in the absence of the sports blackout 
rules. Because the record does not show that eliminating the sports 
blackout rules would have a significant impact on the NFL's over-the-
air revenues, and for the reasons provided below, we think that this is 
highly unlikely.
    25. While the NFL currently distributes a limited number of games 
via pay TV, the fact that it distributes the majority of its games via 
broadcast television stations (which may be viewed by consumers on 
free, over-the-air television or on basic MVPD service) indicates that 
it is more profitable for it to do so. Indeed, we note that NFL games 
are consistently the highest rated programs on broadcast television. 
According to a recent NFL press release, average viewership of NFL 
games on broadcast television has increased 31 percent from 15.5 
million in 2003 to 20.3 million in 2013. NFL games accounted for 34 of 
the 35 most-watched television shows among all programming during the 
2013 NFL regular season and 22 of these games were watched by at least 
25 million viewers. In addition, NFL games attract the young male 
demographic highly coveted by advertisers, and most consumers watch NFL 
games live, which is important to advertisers at a time when many 
viewers record programs and then skip the commercials when they watch 
them. The high viewership of NFL games on broadcast television stations 
(whether viewed by consumers over-the-air or via MVPD service) enables 
television networks and their local affiliates to command the highest 
possible advertising rates for spots during NFL games. In contrast, 
ESPN and NFL Network, the two pay TV networks that currently hold 
rights to distribute some NFL games, do not attract nearly the same 
level of viewership as the television networks. In 2013, ESPN's Monday 
Night Football averaged 13.7 million viewers and NFL Network's Thursday 
Night Football averaged 8.1 million viewers. ESPN and NFL Network 
therefore are unable to charge as much as broadcast networks for 
advertising spots aired during NFL games. Specifically, estimates for a 
30-second spot aired during an NFL game on ESPN in 2013 range from 
$325,000 to $410,000, while estimates for a 30-second spot aired during 
an NFL game on broadcast television in 2013 range from $593,000 to 
$628,000. The substantial difference in viewership of NFL games on 
broadcast television stations and pay TV networks--and the 
corresponding difference in the advertising rates that broadcast 
television and pay TV networks charge for spots during NFL games--
reflects, among other things, the fact that a significant number of 
consumers rely exclusively on broadcast television received over the 
air or subscribe only to basic MVPD service. According to the NFL, 
approximately 22.4 million households (almost 20 percent of all U.S. 
households with a television) relied solely on over-the-air 
broadcasting in 2013. The Commission recently found that, as of July 
2012, approximately 11.1 million U.S. households with a television, 
which represented 9.7 percent of all television households at that 
time, relied exclusively on over-the-air television. In addition, a 
recent Media Bureau survey indicates that, as of January 1, 2013, 14 
percent of cable subscribers took basic service only. Thus, in order 
for the NFL to earn almost as much from distributing its games via pay 
TV as it could from distributing its games via broadcast television 
stations, a significant percentage of the over-the-air television 
households would have to switch to pay TV and the households that 
subscribe only to basic cable service would have to upgrade to a higher 
tier of pay TV. While Dr. Singer suggests that if the NFL migrated all 
of its games to pay TV, some over-the-air television households would 
subscribe to pay TV in order to receive the games, he does not provide 
any estimate or evidence of the number of over-the-air television 
households that would switch to pay TV. There is also no evidence in 
the record as to the number of basic service tier only subscribers that 
could be expected to upgrade to a higher service tier if the NFL 
migrated its games to pay TV. Given the immense popularity of NFL 
football on broadcast television and the significant number of over-
the-air television households and households that subscribe only to 
basic MVPD service, we think that it is highly unlikely that it would 
be more profitable for the NFL to distribute its games via pay TV than 
via broadcast television in the absence of the sports blackout rules. 
Furthermore, we note that the broadcast networks also value NFL 
programming highly because it provides them a platform to promote their 
prime-time lineups and boosts their ratings for prime-time and other 
network programming, which may allow broadcasters to demand higher 
retransmission consent fees from MVPDs. Thus, the broadcast networks 
will have a strong incentive to take measures to ensure that the NFL 
does not migrate its games to pay TV after their current contracts 
expire in 2022. Accordingly, we conclude that the NFL is unlikely to 
migrate a substantial number of its games to pay TV as a result of 
elimination of the sports blackout rules. Ultimately, we believe that 
the market, rather than the elimination of our sports blackout rules, 
will determine whether NFL football stays on broadcast television or 
moves to pay TV.
vi. Erosion of Economic Basis for Sports Blackout Rules
    26. As previously discussed, the sports blackout rules were 
premised on the concern that the potential loss of gate receipts 
resulting from cable, OVS and satellite system importation of distant 
stations would lead the NFL and other sports leagues to refuse to sell 
their rights to sports events to distant stations, thereby 
substantially reducing the overall availability of sports programming 
to television viewers. We conclude that this concern is no longer valid 
in today's marketplace. As discussed above, blackouts are no longer 
relevant for sports other than professional football. With respect to 
NFL football, television revenues have become the dominant share of NFL 
revenues with a corresponding decrease in gate receipts as a proportion 
of overall revenues. Moreover, the number of sell-outs and total 
attendance at NFL games has increased substantially since 1975, 
reflecting an increase in the popularity of NFL games. These trends 
undermine the notion that the NFL would find it profitable to 
significantly restrict television broadcasts of its games to protect 
gate receipts and in-stadium revenues. Additionally, the record shows 
that the loss to consumers of their ability to view a game on local 
television when an NFL game is blacked

[[Page 63554]]

out exceeds any gain to the NFL in gate receipts and other in-stadium 
revenue as a result of a blackout and that the NFL is unlikely to 
migrate its games to pay TV as a result of elimination of the sports 
blackout rules because it would not be profitable for it to do so. 
Accordingly, based on all of these factors, we conclude that the 
economic considerations underlying the sports blackout rules are no 
longer valid and, therefore, the sports blackout rules are no longer 
needed to ensure that NFL games are widely available to the viewing 
public.
vii. Elimination of the Sports Blackout Rules
    27. As explained in detail above, the sports blackout rules are no 
longer necessary to ensure the overall availability of NFL games to 
television viewers. Accordingly, we conclude that the sports blackout 
rules are outdated and should be eliminated. We recognize that 
eliminating our sports blackout rules is unlikely to end all sports 
blackouts. The NFL has stated that it most likely will continue its 
underlying blackout policy. Thus, consumers may still be unable to view 
locally blacked out NFL games despite repeal of our rules. 
Nevertheless, we conclude that it will serve the public interest to 
eliminate regulations that are no longer needed to serve their original 
purpose of ensuring that sports telecasts are widely available to the 
viewing public. If regulations are no longer serving a public interest 
purpose, they should be eliminated.
    28. We also find that the public interest will be served by 
removing regulatory reinforcement of the NFL's blackout policy. With 
annual revenues totaling around $10 billion, the NFL is the most 
lucrative sports league in the world. In addition, most NFL teams are 
heavily subsidized by consumers through publicly funded stadiums and 
other tax benefits. Yet consumers--including elderly and disabled 
sports fans who are physically unable to attend games in person and 
sports fans who cannot afford to attend games due to high ticket prices 
or the economy--are sometimes unable to watch their favorite teams on 
television simply because a game is not completely sold out. We 
acknowledge that repeal of our sports blackout rules may not provide an 
immediate, direct benefit to these consumers. We find, however, that 
rather than fulfilling their intended goal of ensuring the widespread 
availability of sports programming to the viewing public, our sports 
blackout rules may be having the opposite effect by reinforcing and 
implicitly endorsing a private policy that deprives many consumers of 
the ability to watch on television the teams that they have subsidized 
through their tax dollars. Accordingly, we conclude that the public 
interest will be served by eliminating regulatory reinforcement and 
endorsement of the NFL's blackout policy.

C. Impact of Eliminating Sports Blackout Rules on NFL's Ability To 
Control Distribution of Its Games

    29. The NFL claims that the sports blackout rules provide 
protections that cannot be achieved through other regulatory means or 
by private contract and thus without the rules, there would likely be a 
decrease in the amount of professional sports on broadcast television, 
thereby decreasing the availability of sports programming to the 
public. Specifically, the NFL and NAB raise a number of arguments as to 
why, as a result of the compulsory copyright licenses and contractual 
limitations, the NFL will be unable to control the distribution of its 
games or obtain blackout protection in the private marketplace--
measures they claim are necessary to ``[help] keep sports programming 
on free, over-the-air broadcast television, available to all viewers.'' 
Below, we address these arguments and explain that the protections that 
will remain available to the NFL after repeal of the sports blackout 
rules will be adequate to ensure that broadcast television remains an 
attractive medium for distributing sports content. Accordingly, if the 
NFL (or any other sports league) chooses to continue its blackout 
policy, it must do so by relying on the same processes available to any 
other entity that wishes to protect its distribution rights in the 
marketplace.
i. NFL's Blackout Policy
    30. Elimination of the sports blackout rules will not, by itself, 
preclude blackouts of future NFL games because the NFL's blackout 
policy, rather than the Commission's rules, determines whether games 
are blacked out on local television stations. The NFL's blackout policy 
is given effect through contractual arrangements between the NFL and 
the entities to which it grants distribution rights, including 
television networks and their affiliates, national sports networks such 
as ESPN and the NFL Network, and MVPDs. The Commission's sports 
blackout rules have merely reinforced these contractual arrangements by 
barring MVPDs from retransmitting, within the specified local blackout 
zone, games that the NFL has required local television stations to 
black out. Thus, repeal of the sports blackout rules will not remove 
the NFL's private blackout policy or likely end blackouts on local 
television stations. The NFL indicates that it likely will continue to 
enforce its blackout policy in the absence of the sports blackout 
rules. As we explain below, to the extent that the NFL chooses to 
continue its blackout policy, we find it to be in the public interest 
to require it to rely on the same avenues available to other market 
participants in order to protect its distribution rights rather than 
provide additional protections under sports blackout rules which no 
longer serve their original purpose of ensuring that sports telecasts 
are widely available to the viewing public.
ii. Compulsory Copyright Licenses
    31. The compulsory copyright licenses granted under the Copyright 
Act permit cable systems and, to a more limited extent, satellite 
carriers to retransmit the signals of distant broadcast stations 
without obtaining the consent of owners of content carried on the 
stations, including the sports leagues whose games are carried on those 
stations, when the carriage of such stations is permitted under FCC 
rules. The NFL and NAB argue that, in the absence of the sports 
blackout rules, the compulsory copyright licenses will enable MVPDs to 
circumvent the private contractual agreements between the NFL and 
broadcasters and retransmit distant stations carrying locally blacked 
out games. This ``loss of control'' over program distribution, 
according to commenters, ``would threaten the continued distribution of 
major sporting events on free, over-the-air television'' thereby 
leading sports leagues to move the programming to ``pay platforms where 
the compulsory license would not undermine their ability to control 
distribution.'' We do not agree with the NFL and NAB that the Copyright 
Act, left unchecked by sports blackout rules, will make broadcast 
television less competitive in obtaining rights to popular sports 
programming and accelerate its migration to pay TV. With respect to 
satellite carriers, we expect that the limited nature of the compulsory 
license granted to satellite carriers by the Copyright Act may largely 
preclude them from retransmitting the signals of distant network 
stations carrying locally blacked out NFL games. Satellite carriers may 
retransmit the signals of distant network stations to subscribers only 
if local network stations are unavailable to the subscribers as part of 
a local-into-local satellite package and the subscribers are 
``unserved'' by the

[[Page 63555]]

local network stations over the air. Satellite carriers currently offer 
local-into-local service to more than 99 percent of U.S. television 
households, including all markets that are home to NFL teams. Thus, 
with certain exceptions, it appears that satellite carriers may be 
precluded by statute from retransmitting distant network stations 
carrying locally blacked out NFL games. And although cable operators 
may in certain circumstances use the compulsory copyright license to 
retransmit the signals of distant broadcast stations without obtaining 
the consent of the content owners, including the sports leagues whose 
games are carried on those stations, we believe, as explained below, 
that the NFL can adequately protect its distribution rights through 
private contractual arrangements with broadcast networks and MVPDs.
iii. Retransmission Consent and Contractual Arrangements With 
Broadcasters
    32. The NFL asserts that private contractual arrangements with 
broadcast networks will not adequately protect its program distribution 
rights and, therefore, eliminating the sports blackout rules will 
result in the migration of sports programming from broadcast television 
to pay TV, thereby decreasing public access to games. We disagree. As 
explained above, we believe that it would not be in the NFL's economic 
interest to remove their games from broadcast television. And in any 
event, as explained below, the retransmission consent requirement and 
its contractual arrangements with broadcasters will provide the NFL 
with adequate protection to control the distribution of its programming 
following elimination of the sports blackout rules. When the cable 
sports blackout rule was first adopted nearly 40 years ago, the 
Communications Act prohibited a broadcast station from rebroadcasting 
another station's signal without the latter's permission, but did not 
prohibit cable retransmission of broadcast stations without permission. 
In the 1992 Cable Act, however, Congress extended this restriction on 
unauthorized retransmission of broadcast stations to cable operators. 
The restriction on unauthorized retransmission of broadcast stations 
was later extended to all MVPDs. Thus, with limited exceptions, MVPDs 
today may not carry a broadcaster's signal without the permission of 
the broadcaster. Accordingly, the retransmission consent requirement 
helps to ensure that broadcast television remains an attractive medium 
for distributing sports content.
    33. The NFL argues that without sports blackout rules, private 
contracts with broadcasters will not adequately protect its 
distribution rights. According to the NFL, it is unable to prevent 
contractually network affiliates from allowing their signals to be 
imported into a market where an NFL game has been blacked out because 
it lacks direct privity of contract with the affiliates; its contracts 
with the broadcast networks do not contain provisions requiring the 
networks to ensure that their affiliates prohibit MVPDs from 
retransmitting blacked out NFL games into a local market; and the 
networks have no incentive to reopen these contracts to add such a 
provision. A review of network affiliation agreements on file with the 
Commission, however, indicates that many existing network affiliation 
agreements already include provisions prohibiting the affiliate from 
allowing its signal to be retransmitted by an MVPD in a distant market. 
It appears, therefore, that such provisions are likely standard clauses 
routinely included in network affiliation agreements. Given that many, 
if not all, existing network affiliation agreements effectively provide 
the NFL with blackout protection, we find that the NFL's assertion that 
the networks would be required to amend their affiliation agreements 
with each of their nearly 200 local network affiliates to adequately 
protect its distribution rights (e.g., include blackout protection) is 
at least greatly overstated.
    34. To the extent that any existing network affiliation agreements 
do not already include such provisions, the record suggests that the 
NFL has the ability to adequately protect its rights (e.g., obtain 
blackout protection) through negotiations with broadcast networks in 
the private marketplace. Contrary to the NFL's assertion, the record 
shows that the networks would have a very strong incentive to reopen 
their contracts with the NFL and affiliates to include blackout 
protection for the NFL--namely, to increase the chances that each 
network will be able to continue airing NFL games after 2022, when 
their existing contracts with the NFL expire. For example, were CBS to 
reopen its contracts but NBC fail to take this step, presumably CBS 
would enjoy an advantage over NBC in the next competition for NFL 
television rights. As discussed above, NFL games are consistently the 
most highly-rated programs on broadcast television, which translates 
into the highest possible advertising revenues for the networks. The 
popularity of the NFL games and the steep ad rates that these games 
command appear to provide the networks ample motivation to reopen their 
contracts with the NFL to include blackout protection, where such 
protection is needed. In addition, NFL programming is highly valuable 
to the broadcast networks because it provides them a platform to 
promote their prime-time lineups and boosts their ratings for prime-
time and other network programming. Further, while the NFL contends 
that an affiliate would have no incentive to open its existing 
affiliation agreement for early renegotiation to accept such a 
provision, the record shows that the affiliates will likewise be highly 
motivated to keep the NFL games on their network. In any event, 
regardless of the NFL's ability to obtain blackout protection without 
the rules, we conclude that there is no public interest justification 
for retaining the rules because we find that there is little risk that 
sports telecasts on broadcast television will be significantly 
curtailed without them.
iv. Contractual Arrangements With MVPDs
    35. The NFL similarly asserts that it cannot adequately protect its 
program distribution rights through its private contractual agreements 
with MVPDs and, therefore, repeal of the sports blackout rules may 
force it to move its games from broadcast television to pay TV, 
resulting in reduced public access to NFL games. But so long as the NFL 
is able to protect its program distribution rights through agreements 
with broadcasters, it need not do so through agreements with MVPDs. In 
any event, contrary to the NFL's arguments, we observe that the NFL 
also has the ability to obtain blackout protection through private 
contractual arrangements with MVPDs. The NFL indicates that it has 
contracts with nine major operators of cable, satellite, and 
telecommunications services and a national cooperative that represents 
many smaller MVPDs that distribute the NFL Network and NFL RedZone, but 
asserts that these contracts contain no provisions that prohibit the 
MVPDs from importing a distant signal of a non-NFL Network game into a 
market where that game has been blacked out on the local broadcast 
station. The NFL claims that without such protection, it cannot 
accomplish the goals of the sports blackout rules through these 
contracts. The NFL argues that it took many years of difficult 
negotiations with the MVPDs to achieve widespread carriage of the NFL 
Network and NFL RedZone and that it sees no incentives for the MVPDs to 
reopen these contracts--which

[[Page 63556]]

typically run for seven to nine years--and accept an unrelated, 
collateral provision that limits their ability to import a distant 
signal of a local non-NFL Network game that has been blacked out. Based 
on the record gathered in this proceeding, we believe the NFL's claimed 
difficulty is overstated. We recognize that contract negotiations can 
be difficult. Nevertheless, the record shows that the NFL is 
sufficiently positioned to incentivize the MVPDs to reopen their 
contracts and include blackout provisions to protect the NFL's 
distribution rights of its games shown on broadcast television if 
necessary. The NFL Network is one of the fastest growing cable 
networks, and is highly valued by MVPDs. Accordingly, we expect that 
MVPDs will be motivated to reopen their contracts and discuss inclusion 
of a blackout provision, if the NFL offers adequate incentives. Even if 
the MVPDs are unwilling to do so, however, as discussed above, we find 
that there is little risk that the NFL will move its games from 
broadcast television to pay TV.
    36. We note, moreover, that the NFL offers no explanation as to why 
MVPDs currently comply with the NFL's policy of blacking out games that 
are not sold out throughout the NFL clubs' home territories, which 
generally extend well beyond the 35-mile zone of protection afforded by 
the Commission's sports blackout rules. The NFL has more broadly 
defined a club's ``home territory'' to include the surrounding 
territory 75 miles in every direction from the exterior corporate 
limits of the city in which the club is located. In addition, the NFL 
has defined one or more ``secondary markets'' for most teams, which 
include any network affiliate station(s) whose signal can be seen 
within 75 miles of the game site. Under the NFL's blackout policy, if a 
game is not sold out within 72 hours prior to kickoff, the game is 
blacked out on network affiliates in both the team's home market and 
any secondary markets. And notwithstanding the fact that the 
Commission's sports blackout rules only provide a 35-mile zone of 
protection, MVPDs apparently comply with the NFL's policy of blacking 
out games in both the home and secondary markets. Such blackouts 
clearly go well beyond the scope of what is required under the 
Commission's sports blackout rules and indicate that the NFL has the 
ability to obtain even greater blackout protection from MVPDs in the 
private marketplace than that afforded under the Commission's sports 
blackout rules. In any event, regardless of the NFL's ability to obtain 
blackout protection without the rules, we conclude that there is no 
public interest justification for retaining the rules because we find 
that there is little risk that sports telecasts will not be widely 
available on television without them.
v. Compulsory License and Retransmission Consent Fees
    37. The NFL and NAB argue that the current copyright royalty system 
would not discourage all cable systems from retransmitting distant 
signals of locally blacked out games. We expect, however, that even if 
cable operators are able to obtain consent to retransmit a distant 
signal of a locally blacked out game, compulsory license fees, along 
with retransmission consent fees, may make it unprofitable for them to 
do so in many cases. The copyright royalty system is highly complex and 
the cost of importing distant signals varies widely by cable system, 
depending on the size of the cable system and the number of distant 
signals carried. As NCTA and SFC point out, cable systems that 
retransmit a distant signal for a single day, or even a single sports 
event, must pay royalties for the signal as if it had been carried for 
the entire six-month compulsory license accounting period. Thus, in 
some cases, compulsory license fees alone may make it prohibitively 
expensive for cable systems to retransmit a distant signal carrying a 
locally blacked out sports event.
    38. Additionally, we note that retransmission consent fees have 
risen sharply in recent years, and the trend is expected to continue. 
The rising costs for sports rights have been a significant factor in 
broadcasters' demands for larger retransmission consent fees. NFL games 
are among the most popular and costly programming on television. 
Moreover, unlike a situation where a station cannot reach an agreement 
on retransmission consent with a cable system for in-market carriage--
resulting in a loss of the station's local audience and a corresponding 
loss in local advertising revenues--a distant station does not risk 
losing any local advertising revenues if it cannot reach an agreement 
with a cable system for out-of-market carriage; thus, a distant station 
would be in a very good bargaining position vis-[agrave]-vis the cable 
system to demand high retransmission consent fees. Accordingly, we 
expect that retransmission consent fees charged by distant stations for 
retransmission of locally blacked out NFL games would be substantial 
and, along with the compulsory license fees, may make it cost 
prohibitive for cable systems to carry such distant stations in at 
least many situations. In any event, regardless of the NFL's ability to 
obtain blackout protection without the rules, we conclude that there is 
no public interest justification for retaining the rules because we 
find that there is little risk that sports telecasts will not be widely 
available on television without them.

D. Local Impact of Eliminating Sports Blackout Rules

    39. We now examine the impact of eliminating the sports blackout 
rules on other interested parties. We conclude that eliminating the 
sports blackout rules will not adversely impact broadcasters, 
consumers, or local businesses.
i. Impact on Localism
    40. We conclude that the elimination of the sports blackout rules 
is unlikely to adversely impact localism in broadcasting. NAB asserts 
that elimination of the sports blackout rules will result in decreased 
advertising revenues for local stations in markets prone to NFL 
blackouts, such as San Diego, Jacksonville, Buffalo, and Cincinnati, 
which in turn will diminish those stations' ability to provide quality 
programming, including sports programming. As explained in detail 
above, however, the record demonstrates that the sports blackout rules 
are no longer needed to ensure that sports programming is widely 
available to the viewing public. In addition, elimination of the sports 
blackout rules is unlikely to accelerate the migration of NFL games 
from over-the-air to pay TV in the near future or in the longer term. 
We also note that the record demonstrates that the NFL will be able to 
achieve exclusivity following the repeal of the sports blackout rules, 
if it chooses to do so, thus maintaining the attractiveness of NFL 
games to advertisers. Further, we note that it may benefit localism if 
the NFL ended its blackout policy because local stations in markets 
prone to blackouts may carry more games and earn more advertising 
revenues. Therefore, we conclude that retention of the sports blackout 
rules is not necessary to preserve or promote localism.
ii. Impact on Consumers
    41. We acknowledge that repeal of the sports blackout rules may not 
provide consumers relief from local blackouts of NFL games because the 
NFL may choose to continue its private blackout policy. The NFL has 
indicated that it will likely still require non-sold-out games to be 
blacked out locally, and consumers will

[[Page 63557]]

be unable to watch those games on either broadcast television or pay 
TV. We also conclude, however, that elimination of the sports blackout 
rules is unlikely to harm consumers. As we discuss at length above, the 
record indicates that elimination of the sports blackout rules is 
unlikely to accelerate the migration of NFL games from free, over-the-
air television to pay TV. Since the NFL is in the first year of nine-
year contracts with the CBS, Fox, and NBC television networks to air 
NFL games on broadcast television, there will be no additional 
migration of NFL games to pay TV through at least 2022.
    42. Additionally, we find unconvincing the arguments that 
elimination of the sports blackout rules will harm consumers by causing 
NFL teams to raise ticket prices. The NFL's economist expert, Dr. 
Singer, asserts that the sports blackout rules provide its teams with 
an economic incentive to price tickets below the levels that would 
exist if teams were maximizing gate receipts only. Dr. Singer states 
that even if a team could increase its total gate receipts by raising 
ticket prices, the team likely would keep prices low in an effort to 
fill seats and avoid a blackout because blackouts result in loss of 
advertising revenues. Thus, he avers that elimination of the sports 
blackout rules likely would lead to higher ticket prices because sports 
teams would no longer have an incentive to keep attendance above a 
certain level; instead, their ticket pricing strategy would focus on 
maximizing gate receipt revenue. As the Sports Economists observe, 
however, there is no empirical support for this argument and ``there is 
no logical connection between the [NFL's blackout] policy and 
pricing.'' In addition, Dr. Singer concedes that ``[e]conomists have 
offered additional hypotheses to explain why NFL teams refrain from 
raising ticket prices, including public pressure, the need to establish 
long-term relationships with fans, and the desire to maximize in-
stadium revenues, such as concessions and parking. . . . It is 
plausible that some or all of these considerations also play a role in 
tempering ticket prices. . . .'' Dr. Singer makes no attempt to 
quantify the marginal impact of the sports blackout rules on ticket 
prices given these other factors. Moreover, as the Sports Economists 
point out, an NFL team can take other measures to avoid blackouts, such 
as reducing the prices of unsold seats and removing seats or covering 
them with tarps to reduce a stadium's seating capacity. Furthermore, to 
the extent the NFL chooses to continue its blackout policy through 
other existing regulations and through private contractual agreements, 
teams will retain their incentive to limit increases in ticket prices.
    43. Dr. Singer also asserts that the sports blackout rules benefit 
national television viewers because ``[s]old-out stadiums populated by 
boisterous, visible fans make telecasts of NFL games more appealing to 
the marginal, national fan, thereby improving fans' viewing 
experiences, and increasing the value of NFL programming'' to national 
audiences and therefore to advertisers. As the Sports Economists 
observe, however, the difference between a fully sold-out stadium and a 
nearly full stadium subject to a local blackout due to failure to sell 
out is likely not very significant in terms of appeal to national 
audiences and advertisers, and it is not technologically difficult for 
broadcasters to avoid showing empty portions of non-sold-out stadiums. 
Further, we note that the NFL's blackout policy allows teams to cover 
seats with tarps in order to reduce stadium capacity and thereby avoid 
blackouts, and to reduce the percentage of tickets that must be sold in 
order to avoid a blackout to as low as 85 percent (thereby leaving up 
to 15 percent of non-premium seats empty). In addition, the NFL does 
not count non-sold-out premium seats for purposes of its blackout 
policy. We find it difficult to reconcile these features of the NFL's 
blackout policy--which allow teams to leave significant numbers of 
seats empty without facing a blackout--with its argument that the 
sports blackout rules are needed to make telecasts of NFL games more 
appealing to audiences and advertisers.
iii. Impact on Local Businesses and Economies
    44. Several commenters express concern that elimination of the 
sports blackout rules will adversely impact local businesses and 
economic activity in and surrounding NFL stadiums by removing 
incentives to fill the stadiums. These commenters assert that NFL 
stadiums and related infrastructure investment have helped to create 
jobs, support businesses, and generate tax revenue and are important 
sources of employment, growth, and development for local communities. 
We disagree that eliminating the sports blackout rules will remove 
incentives for NFL clubs to sell out stadiums. In-stadium revenues 
(e.g., concessions, parking) are a significant source of revenue for 
NFL clubs and will provide them an economic incentive to fill their 
stadiums. Additionally, if the NFL chooses to continue its blackout 
policy, it will be able to control the distribution of its games 
through other existing regulations or through contractual arrangements 
in the private marketplace. Accordingly, repeal of the sports blackout 
rules will not create a disincentive for NFL teams to fill their 
stadiums or have a negative impact on local economies.
Other Issues
    45. We reject the Baseball Commissioner's assertion that the sports 
blackout rules remain necessary to protect the ability of MLB clubs to 
license to RSNs the exclusive right to televise home games. The 
Baseball Commissioner states that the sports blackout rules prevent 
MVPDs from exploiting the compulsory copyright license by importing 
distant broadcasts of games that MLB clubs have licensed to RSNs such 
as MASN and YES Network to televise on an exclusive basis. According to 
the Baseball Commissioner, the ability to protect these exclusive 
rights under the sports blackout rules incentivizes RSNs, as exclusive 
licensees, to televise the games in their local markets and 
incentivizes MLB clubs to license the distribution of games on distant 
broadcast stations (i.e., in the away team's local market), thereby 
maintaining the overall availability of sports programming to 
television viewers. We note, however, that the sports blackout rules 
were not intended to protect the exclusive distribution rights granted 
by individual sports teams to RSNs, nor were they intended to prevent 
dual telecasts of the same game in the same local market. Rather, they 
were intended to promote the wide availability of sports events on 
television, and the Baseball Commissioner did not submit into the 
record any economic evidence or analysis that it would be profitable 
for baseball teams to curtail the availability of games on television 
if the blackout rules are repealed. Accordingly, we see no need to 
retain the sports blackout rules to protect RSN exclusivity. 
Additionally, the Baseball Commissioner's proposal that we 
``strengthen'' the sports blackout rules by prohibiting MVPDs from 
importing a distant station carrying a game that is being carried live 
on a local broadcast station is beyond the scope of this proceeding and 
we decline to consider it.

[[Page 63558]]

IV. Procedural Matters

A. Final Regulatory Flexibility Act Analysis

    46. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), the Initial Regulatory Flexibility Analysis (IRFA) was 
incorporated into the Notice of Proposed Rulemaking (NPRM) in this 
proceeding. The Federal Communications Commission (Commission) sought 
written public comment on the proposals in the NPRM, including comment 
on the IRFA. The Commission received no comments on the IRFA. This 
Final Regulatory Flexibility Analysis (FRFA) conforms to the RFA.
Need for, and Objectives of, the Report and Order
    47. The Commission's sports blackout rules prohibit cable 
operators, satellite carriers, and open video systems (OVS) from 
retransmitting, within a protected local blackout zone, the signal of a 
distant broadcast station carrying a live sporting event if the event 
is not available live on a local television broadcast station. The 
Commission first adopted a sports blackout rule for cable operators in 
1975, when game ticket sales were the primary source of revenue for 
sports leagues. This rule was intended to ensure that the potential 
loss of gate receipts resulting from cable system importation of 
distant stations did not lead sports clubs to refuse to sell their 
rights to sports events to distant stations, which would reduce the 
overall availability of sports programming to television viewers. At 
the direction of Congress, the Commission later applied the cable 
sports blackout rule to open video systems and then to satellite 
carriers to provide parity between cable and newer video distributors.
    48. Sports leagues' blackout policies, rather than the Commission's 
rules, determine which sports events are blacked out on local 
television stations. These policies are given effect through 
contractual arrangements negotiated between the leagues or individual 
teams that hold the rights to the games and the entities to which they 
grant distribution rights, including television networks, local 
television broadcast stations, Regional Sports Networks (RSNs), and 
multichannel video programming distributors (MVPDs). The Commission's 
rules merely supplement these contractual relationships by barring 
MVPDs from retransmitting, within the local blackout zone, games that 
the sports leagues or individual teams require local television 
stations to black out.
    49. In 2012, the Media Bureau issued a Public Notice to request 
comment on a Petition for Rulemaking seeking elimination of the sports 
blackout rules. The record amassed in response to the Public Notice 
suggested that, given the substantial changes in the sports industry in 
the 40 years since the sports blackout rules were originally adopted, 
the sports blackout rules may no longer be necessary to ensure the 
overall availability of sports programming to the general public. The 
Commission subsequently released an NPRM seeking comment whether the 
sports blackout rules have become outdated due to marketplace changes 
since their adoption and whether modification or elimination of those 
rules is appropriate.
    50. Based on the record before us, we conclude that the sports 
blackout rules are no longer necessary to ensure that sports 
programming is widely available to the public. The sports industry has 
evolved dramatically in the four decades since the cable sports 
blackout rule was adopted. The record confirms that the sports blackout 
rules are no longer relevant for sports other than professional 
football. With respect to NFL football, television revenues have become 
the dominant share of NFL revenues with a corresponding decrease in 
gate receipts. Moreover, the number of sell-outs and total attendance 
at NFL games has increased substantially since 1975, reflecting an 
increase in the quality and popularity of NFL games. These trends 
undermine the notion that the NFL would find it profitable to 
significantly restrict television broadcasts of its games to protect 
gate receipts and in-stadium revenues. Additionally, the loss to 
consumers of their ability to view the game on television when an NFL 
game is blacked out exceeds any gain in gate receipts and other revenue 
that may accrue to the NFL as a result of a blackout, and the record 
indicates that the NFL is unlikely to migrate its games to pay TV 
following elimination of sports blackout rules because it would not be 
profitable for it to do so. Accordingly, based on all of these factors, 
we conclude that the economic considerations underlying the sports 
blackout rules are no longer valid and the sports blackout rules 
therefore are no longer needed to ensure that NFL games are widely 
available to television viewers.
    51. We recognize that eliminating our sports blackout rules is 
unlikely to end all sports blackouts. The NFL has stated that it most 
likely will continue its underlying blackout policy. Thus, consumers 
may still be unable to view locally blacked out NFL games despite 
repeal of our rules. Nevertheless, we conclude that it will serve the 
public interest to eliminate regulations that are no longer needed to 
serve their original purpose of ensuring that sports telecasts are 
widely available to the viewing public. We also find that the public 
interest will be served by removing regulatory reinforcement (and the 
Commission's implicit endorsement) of the NFL's blackout policy. 
Although the NFL is the most lucrative sports league in the world with 
annual revenues totaling around $10 billion and most NFL teams are 
heavily subsidized by consumers through publicly funded stadiums and 
other tax benefits, consumers are sometimes unable to watch their 
favorite teams on television simply because a game is not completely 
sold out. While repeal of our sports blackout rules may not provide an 
immediate, direct benefit to these consumers, rather than fulfilling 
their intended goal of ensuring the widespread availability of sports 
programming to the general public, our sports blackout rules may be 
having the opposite effect by reinforcing a private policy that 
deprives many consumers of the ability to watch on television the teams 
that they have subsidized through their tax dollars.
    52. To the extent that the NFL or any other sports league decides 
to continue their blackout policies following elimination of the sports 
blackout rules, it will no longer be entitled to additional protections 
under our sports blackout rules, but instead must rely on the same 
processes available to any other entities that wish to protect their 
distribution rights in the private marketplace. While the NFL argues 
that the sports blackout rules provide protections that cannot be 
achieved through other regulatory means or by private contract, we find 
that the NFL will be able to protect its distribution rights following 
elimination of the sports blackout rules through other existing 
regulations and through private contractual arrangements. First, the 
limited nature of the satellite compulsory license will largely 
preclude satellite carriers from retransmitting distant stations 
carrying locally blacked out NFL games. In addition, the retransmission 
consent requirement and the NFL's contractual arrangements with 
broadcasters will provide the NFL with the means to control the 
distribution of its programming. Specifically, we note that many 
existing network affiliation agreements already include provisions 
prohibiting the affiliate from allowing its signal to be retransmitted 
by an

[[Page 63559]]

MVPD in a distant market and some network affiliation agreements also 
include provisions giving the NFL broad discretion to limit or 
condition an affiliate's distribution rights to NFL games. To the 
extent that any network affiliation agreements do not include such 
provisions, the record indicates that the NFL can obtain blackout 
protection through negotiations with the broadcast networks in the 
private marketplace. The NFL also has the ability to obtain blackout 
protection through private contractual negotiations with MVPDs. 
Moreover, we note that MVPDs currently comply with the NFL's policy of 
blacking out games that are not sold out throughout the NFL clubs' 
``home territories,'' which generally extend well beyond the 35-mile 
zone of protection afforded by the Commission's sports blackout rules. 
This indicates that the NFL has the ability to obtain greater 
protection than that provided by the Commission's sports blackout rules 
in the private marketplace, should it choose to do so. We further 
observe that retransmission consent fees and compulsory copyright 
license fees may, to some extent, make it unprofitable for cable 
operators to take advantage of the compulsory copyright licenses to 
retransmit distant stations carrying locally blacked out NFL games.
    53. Finally, we conclude that elimination of the sports blackout 
rules will not adversely affect broadcasters, consumers, or local 
businesses. Localism is unlikely to be adversely affected by repeal of 
the sports blackout rules. In addition, elimination of the sports 
blackout rules will not harm consumers by forcing the NFL to migrate 
its games to pay TV or by causing the NFL to raise its ticket prices. 
Moreover, eliminating the sports blackout rules will not harm local 
businesses and local economies in areas surrounding NFL stadiums by 
removing incentives to fill the stadiums.
Summary of Significant Issues Raised in Response to the IRFA
    54. No comments were filed in response to the IRFA. Additionally, 
pursuant to the Small Business Jobs Act of 2010, the Commission is 
required to respond to any comments filed by the Chief Counsel for 
Advocacy of the Small Business Administration, and to provide a 
detailed statement of any change made to the proposed rules as a result 
of those comments. The Chief Counsel did not file any comments in 
response to the proposed rules in this proceeding.
Description and Estimate of the Number of Small Entities to Which the 
Rules Will Apply
    55. The RFA directs the Commission to provide a description of and, 
where feasible, an estimate of the number of small entities that will 
be affected by the rules adopted in the Order. The RFA generally 
defines the term ``small entity'' as having the same meaning as the 
terms ``small business,'' ``small organization,'' and ``small 
governmental jurisdiction.'' In addition, the term ``small business'' 
has the same meaning as the term ``small business concern'' under the 
Small Business Act. A ``small business concern'' is one which: (1) Is 
independently owned and operated; (2) is not dominant in its field of 
operation; and (3) satisfies any additional criteria established by the 
SBA. Below are descriptions of the small entities that are directly 
affected by the rules adopted in the Order, including, where feasible, 
an estimate of the number of such small entities.
    56. Wired Telecommunications Carriers. The 2007 North American 
Industry Classification System (``NAICS'') defines ``Wired 
Telecommunications Carriers'' as follows: ``This industry comprises 
establishments primarily engaged in operating and/or providing access 
to transmission facilities and infrastructure that they own and/or 
lease for the transmission of voice, data, text, sound, and video using 
wired telecommunications networks. Transmission facilities may be based 
on a single technology or a combination of technologies. Establishments 
in this industry use the wired telecommunications network facilities 
that they operate to provide a variety of services, such as wired 
telephony services, including VoIP services; wired (cable) audio and 
video programming distribution; and wired broadband Internet services. 
By exception, establishments providing satellite television 
distribution services using facilities and infrastructure that they 
operate are included in this industry.'' The SBA has developed a small 
business size standard for wireline firms within the broad economic 
census category, ``Wired Telecommunications Carriers.'' Under this 
category, the SBA deems a wireline business to be small if it has 1,500 
or fewer employees. Census data for 2007 shows that there were 31,996 
establishments that operated that year. Of this total, 30,178 
establishments had fewer than 100 employees, and 1,818 establishments 
had 100 or more employees. Therefore, under this size standard, we 
estimate that the majority of businesses can be considered small 
entities.
    57. Cable Television Distribution Services. Since 2007, these 
services have been defined within the broad economic census category of 
Wired Telecommunications Carriers, which was developed for small 
wireline businesses. This category is defined as follows: ``This 
industry comprises establishments primarily engaged in operating and/or 
providing access to transmission facilities and infrastructure that 
they own and/or lease for the transmission of voice, data, text, sound, 
and video using wired telecommunications networks. Transmission 
facilities may be based on a single technology or a combination of 
technologies. Establishments in this industry use the wired 
telecommunications network facilities that they operate to provide a 
variety of services, such as wired telephony services, including VoIP 
services; wired (cable) audio and video programming distribution; and 
wired broadband Internet services.'' The SBA has developed a small 
business size standard for this category, which is: All such businesses 
having 1,500 or fewer employees. Census data for 2007 shows that there 
were 31,996 establishments that operated that year. Of this total, 
30,178 establishments had fewer than 100 employees, and 1,818 
establishments had 100 or more employees. Therefore, under this size 
standard, we estimate that the majority of such businesses can be 
considered small entities.
    58. Cable Companies and Systems. The Commission has also developed 
its own small business size standards, for the purpose of cable rate 
regulation. Under the Commission's rules, a ``small cable company'' is 
one serving 400,000 or fewer subscribers nationwide. Industry data 
shows that there were 1,100 cable companies at the end of December 
2012. Of this total, all but ten cable operators nationwide are small 
under this size standard. In addition, under the Commission's rate 
regulation rules, a ``small system'' is a cable system serving 15,000 
or fewer subscribers. Current Commission records show 4,945 cable 
systems nationwide. Of this total, 4,380 cable systems have less than 
20,000 subscribers, and 565 systems have 20,000 or more subscribers, 
based on the same records. Thus, under this standard, we estimate that 
most cable systems are small entities.
    59. Cable System Operators (Telecom Act Standard). The 
Communications Act of 1934, as amended, also contains a size standard 
for small cable system operators, which is ``a cable operator

[[Page 63560]]

that, directly or through an affiliate, serves in the aggregate fewer 
than 1 percent of all subscribers in the United States and is not 
affiliated with any entity or entities whose gross annual revenues in 
the aggregate exceed $250,000,000.'' There are approximately 56.4 
million incumbent cable video subscribers in the United States today. 
Accordingly, an operator serving fewer than 564,000 subscribers shall 
be deemed a small operator if its annual revenues, when combined with 
the total annual revenues of all its affiliates, do not exceed $250 
million in the aggregate. Based on available data, we find that all but 
ten incumbent cable operators are small entities under this size 
standard. We note that the Commission neither requests nor collects 
information on whether cable system operators are affiliated with 
entities whose gross annual revenues exceed $250 million. Although it 
seems certain that some of these cable system operators are affiliated 
with entities whose gross annual revenues exceed $250,000,000, we are 
unable at this time to estimate with greater precision the number of 
cable system operators that would qualify as small cable operators 
under the definition in the Communications Act.
    60. Television Broadcasting. This Economic Census category 
``comprises establishments primarily engaged in broadcasting images 
together with sound. These establishments operate television 
broadcasting studios and facilities for the programming and 
transmission of programs to the public.'' The SBA has created the 
following small business size standard for such businesses: Those 
having $35.5 million or less in annual receipts. The 2007 U.S. Census 
indicates that 2,076 television stations operated in that year. Of that 
number, 1,515 had annual receipts of $10,000,000 dollars or less, and 
561 had annual receipts of more than $10,000,000. Since the Census has 
no additional classifications on the basis of which to identify the 
number of stations whose receipts exceeded $35.5 million in that year, 
the Commission concludes that the majority of television stations were 
small under the applicable SBA size standard.
    61. Apart from the U.S. Census, the Commission has estimated the 
number of licensed commercial television stations to be 1,387. In 
addition, according to Commission staff review of the BIA Advisory 
Services, LLC's Media Access Pro Television Database on March 28, 2012, 
about 950 of an estimated 1,300 commercial television stations (or 
approximately 73 percent) had revenues of $14 million or less. We 
therefore estimate that the majority of commercial television 
broadcasters are small entities.
    62. We note, however, that in assessing whether a business concern 
qualifies as small under the above definition, business (control) 
affiliations must be included. Our estimate, therefore, likely 
overstates the number of small entities that might be affected by our 
action because the revenue figure on which it is based does not include 
or aggregate revenues from affiliated companies. In addition, an 
element of the definition of ``small business'' is that the entity not 
be dominant in its field of operation. We are unable at this time to 
define or quantify the criteria that would establish whether a specific 
television station is dominant in its field of operation. Accordingly, 
the estimate of small businesses to which rules may apply does not 
exclude any television station from the definition of a small business 
on this basis and is therefore possibly over-inclusive to that extent.
    63. In addition, the Commission has estimated the number of 
licensed noncommercial educational television stations to be 395. These 
stations are non-profit, and therefore considered to be small entities.
    64. Direct Broadcast Satellite (DBS) Service. DBS service is a 
nationally distributed subscription service that delivers video and 
audio programming via satellite to a small parabolic ``dish'' antenna 
at the subscriber's location. DBS, by exception, is now included in the 
SBA's broad economic census category, Wired Telecommunications 
Carriers, which was developed for small wireline businesses. Under this 
category, the SBA deems a wireline business to be small if it has 1,500 
or fewer employees. Census data for 2007 shows that there were 31,996 
establishments that operated that year. Of this total, 30,178 
establishments had fewer than 100 employees, and 1,818 establishments 
had 100 or more employees. Therefore, under this size standard, the 
majority of such businesses can be considered small entities. However, 
the data we have available as a basis for estimating the number of such 
small entities were gathered under a superseded SBA small business size 
standard formerly titled ``Cable and Other Program Distribution.'' The 
definition of Cable and Other Program Distribution provided that a 
small entity is one with $12.5 million or less in annual receipts. 
Currently, only two entities provide DBS service, which requires a 
great investment of capital for operation: DIRECTV and DISH Network. 
Each currently offer subscription services. DIRECTV and DISH Network 
each report annual revenues that are in excess of the threshold for a 
small business. Because DBS service requires significant capital, we 
believe it is unlikely that a small entity as defined under the 
superseded SBA size standard would have the financial wherewithal to 
become a DBS service provider.
    65. Satellite Master Antenna Television (SMATV) Systems, also known 
as Private Cable Operators (PCOs). SMATV systems or PCOs are video 
distribution facilities that use closed transmission paths without 
using any public right-of-way. They acquire video programming and 
distribute it via terrestrial wiring in urban and suburban multiple 
dwelling units such as apartments and condominiums, and commercial 
multiple tenant units such as hotels and office buildings. SMATV 
systems or PCOs are now included in the SBA's broad economic census 
category, Wired Telecommunications Carriers, which was developed for 
small wireline businesses. Under this category, the SBA deems a 
wireline business to be small if it has 1,500 or fewer employees. 
Census data for 2007 show that there were 31,996 establishments that 
operated that year. Of this total, 30,178 establishments had fewer than 
100 employees, and 1,818 establishments had 100 or more employees. 
Therefore, under this size standard, the majority of such businesses 
can be considered small entities.
    66. Home Satellite Dish (HSD) Service. HSD or the large dish 
segment of the satellite industry is the original satellite-to-home 
service offered to consumers, and involves the home reception of 
signals transmitted by satellites operating generally in the C-band 
frequency. Unlike DBS, which uses small dishes, HSD antennas are 
between four and eight feet in diameter and can receive a wide range of 
unscrambled (free) programming and scrambled programming purchased from 
program packagers that are licensed to facilitate subscribers' receipt 
of video programming. Because HSD provides subscription services, HSD 
falls within the SBA-recognized definition of Wired Telecommunications 
Carriers. The SBA has developed a small business size standard for this 
category, which is: all such businesses having 1,500 or fewer 
employees. Census data for 2007 show that there were 31,996 
establishments that operated that year. Of this total, 30,178 
establishments had fewer than 100 employees, and 1,818 establishments 
had 100 or more employees. Therefore, under this size standard, the 
majority of such

[[Page 63561]]

businesses can be considered small entities.
    67. Open Video Systems. The open video system (OVS) framework was 
established in 1996, and is one of four statutorily recognized options 
for the provision of video programming services by local exchange 
carriers. The OVS framework provides opportunities for the distribution 
of video programming other than through cable systems. Because OVS 
operators provide subscription services, OVS falls within the SBA small 
business size standard covering cable services, which is ``Wired 
Telecommunications Carriers.'' The SBA has developed a small business 
size standard for this category, which is: All such businesses having 
1,500 or fewer employees. Census data for 2007 shows that there were 
31,996 establishments that operated that year. Of this total, 30,178 
establishments had fewer than 100 employees, and 1,818 establishments 
had 100 or more employees. Therefore, under this size standard, we 
estimate that the majority of these businesses can be considered small 
entities. In addition, we note that the Commission has certified some 
OVS operators, with some now providing service. Broadband service 
providers (BSPs) are currently the only significant holders of OVS 
certifications or local OVS franchises. The Commission does not have 
financial or employment information regarding the other entities 
authorized to provide OVS, some of which may not yet be operational. 
Thus, again, at least some of the OVS operators may qualify as small 
entities.
    68. Cable and Other Subscription Programming. The Census Bureau 
defines this category as follows: ``This industry comprises 
establishments primarily engaged in operating studios and facilities 
for the broadcasting of programs on a subscription or fee basis. . . . 
These establishments produce programming in their own facilities or 
acquire programming from external sources. The programming material is 
usually delivered to a third party, such as cable systems or direct-to-
home satellite systems, for transmission to viewers.'' The SBA has 
developed a small business size standard for this category, which is: 
All such businesses having $35.5 million dollars or less in annual 
revenues. Census data for 2007 show that there were 659 establishments 
that operated that year. Of that number, 462 operated with annual 
revenues of $9,999,999 dollars or less. One hundred ninety-seven (197) 
operated with annual revenues of between $10 million and $100 million 
or more. Thus, under this size standard, the majority of such 
businesses can be considered small entities.
i. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements for Small Entities
    69. The Report and Order eliminates the sports blackout rules for 
cable operators, satellite carriers, and open video systems. The Report 
and Order does not adopt any new reporting, recordkeeping, or 
compliance requirements for small entities.
Steps Taken To Minimize Economic Impact on Small Entities and 
Significant Alternatives Considered
    70. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its proposed approach, 
which may include the following four alternatives (among others): (1) 
The establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
(3) the use of performance, rather than design, standards; and (4) an 
exemption from coverage of the rule, or any part thereof, for small 
entities. The IRFA invited comment on issues that had the potential to 
have a significant impact on some small entities.
    71. To the extent that the NFL or any other sports league decides 
to continue it blackout policy following elimination of the sports 
blackout rules, it can protect its distribution rights through other 
existing regulations and through private contractual arrangements. 
Because the NFL can protect its distribution rights through other 
existing regulations and through private contractual arrangements, 
repeal of the sports blackout rules will not adversely impact 
broadcasters or other affected entities as identified above, including 
small entities, by decreasing advertising revenues for local stations 
in markets prone to NFL blackouts or leading the NFL to migrate its 
games from broadcast television to pay TV.
ii. Report to Congress
    72. The Commission will send a copy of the Order, including this 
FRFA, in a report to be sent to Congress pursuant to the Congressional 
Review Act. In addition, the Commission will send a copy of the Order, 
including this FRFA, to the Chief Counsel for Advocacy of the SBA. The 
Order and FRFA (or summaries thereof) will also be published in the 
Federal Register.

B. Paperwork Reduction Act

    73. This document does not contain new or modified information 
collection requirements subject to the Paperwork Reduction Act of 1995 
(PRA), Public Law 104-13. In addition, therefore, it does not contain 
any new or modified information collection burden for small business 
concerns with fewer than 25 employees, pursuant to the Small Business 
Paperwork Relief Act of 2002.

C. Additional Information

    74. For additional information on this proceeding, contact Kathy 
Berthot, Kathy.Berthot@fcc.gov, of the Media Bureau, Policy Division, 
(202) 418-2120.

V. Ordering Clauses

    75. Accordingly, it is ordered that, pursuant to the authority 
found in Sections 1, 4(i), 4(j), 303(r), 339(b), and 653(b) of the 
Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i), 154(j), 
303(r), 339(b), 573(b), this Report and Order is adopted, effective 
thirty (30) days after the date of publication in the Federal Register.
    76. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Report and Order in MB Docket No. 12-3, including the 
Final Regulatory Flexibility Analysis, to the Chief Counsel for 
Advocacy of the Small Business Administration.
    77. It is further ordered that the Commission shall send a copy of 
this Report and Order in MB Docket No. 12-3 in a report to be sent to 
Congress and the Government Accountability Office pursuant to the 
Congressional Review Act.

List of Subjects in 47 CFR Part 76

    Cable television.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Final Rules

    For the reasons discussed in the preamble, the Federal 
Communications Commission amends 47 part 76 as follows:

PART 76--MULTICHANNEL VIDEO AND CABLE TELEVISION SERVICE

0
1. The authority citation for part 76 continues to read as follows:

    Authority:  47 U.S.C. 151, 152, 153, 154, 301, 302, 302a, 303, 
303a, 307, 308, 309, 312, 315, 317, 325, 339, 340, 341, 503, 521, 
522, 531, 532, 534, 535, 536, 537, 543, 544, 544a, 545, 548, 549, 
552, 554, 556, 558, 560, 561, 571, 572 and 573.

[[Page 63562]]

0
2. Amend Sec.  76.110 by revising the first sentence to read as 
follows:


Sec.  76.110  Substitutions.

    Whenever, pursuant to the requirements of the syndicated 
exclusivity rules, a community unit is required to delete a television 
program on a broadcast signal that is permitted to be carried under the 
Commission's rules, such community unit may, consistent with these 
rules, substitute a program from any other television broadcast 
station. * * *


Sec.  76.111  [Removed]

0
3. Remove Sec.  76.111.
0
4. Amend Sec.  76.120 by revising the heading and removing paragraph 
(e)(3) to read as follows:


Sec.  76.120  Network non-duplication protection and syndicated 
exclusivity rules for satellite carriers: Definitions.

* * * * *


Sec. Sec.  76.127 and 76.128  [Removed]

0
5. Remove Sec. Sec.  76.127 and 76.128.
0
6. Amend Sec.  76.130 by revising the first sentence to read as 
follows:


Sec.  76.130  Substitutions.

    Whenever, pursuant to the requirements of the network program non-
duplication or syndicated program exclusivity rules, a satellite 
carrier is required to delete a television program from retransmission 
to satellite subscribers within a zip code area, such satellite carrier 
may, consistent with this subpart, substitute a program from any other 
television broadcast station for which the satellite carrier has 
obtained the necessary legal rights and permissions, including but not 
limited to copyright and retransmission consent. * * *


Sec.  76.1506  [Amended]

0
7. Amend Sec.  76.1506 by removing paragraph (m) and redesignating 
paragraphs (n) and (o) as paragraphs (m) and (n).

[FR Doc. 2014-24612 Filed 10-23-14; 8:45 am]
BILLING CODE 6712-01-P