2010 Quadrennial Regulatory Review, 2868-2904 [2012-148]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 77, Number 12 (Thursday, January 19, 2012)]
[Proposed Rules]
[Pages 2868-2904]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-148]



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Vol. 77

Thursday,

No. 12

January 19, 2012

Part IV





Federal Communications Commission





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47 CFR Part 73





2010 Quadrennial Regulatory Review; Proposed Rule

Federal Register / Vol. 77 , No. 12 / Thursday, January 19, 2012 / 
Proposed Rules

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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 73

[MB Docket Nos. 09-182 and 07-294; FCC 11-186]


2010 Quadrennial Regulatory Review

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this document, section 202(h) of the Telecommunications Act 
of 1996 requires the Commission to review its broadcast ownership rules 
quadrennially to determine whether these rules are necessary in the 
public interest as a result of competition. This document solicits 
comment on proposed changes to the broadcast ownership rules in 
compliance with this requirement. In addition, this document solicits 
comment on certain aspects of the Commission's 2008 Diversity Order 
that the U.S. Court of Appeals for the Third Circuit remanded and 
directed the Commission to address in this proceeding. This document 
solicits comment also on potential changes to the Commission's 
broadcast attribution rules.

DATES: The Commission must receive written comments on or before March 
5, 2012 and reply comments on or before April 3, 2012. Written comments 
on the Paperwork Reduction Act proposed information collection 
requirements must be submitted by the public, Office of Management and 
Budget (OMB), and other interested parties on or before March 19, 2012.

ADDRESSES: Federal Communications Commission, 445 12th Street SW., 
Washington, DC 20554. In addition to filing comments with the 
Secretary, a copy of any comments on the Paperwork Reduction Act 
information collection requirements contained herein should be 
submitted to the Federal Communications Commission via email to 
PRA@fcc.gov and to Nicholas A. Fraser, Office of Management and Budget, 
via email to Nicholas_A._Fraser@omb.eop.gov or via fax at (202) 395-
5167.

FOR FURTHER INFORMATION CONTACT: Hillary DeNigro, Industry Analysis 
Division, Media Bureau, FCC, (202) 418-2330. For additional information 
concerning the PRA proposed information collection requirements 
contained in the Notice of Proposed Rulemaking, contact Cathy Williams 
at (202) 418-2918, or via the Internet at PRA@fcc.gov.

SUPPLEMENTARY INFORMATION: This Notice of Proposed Rulemaking, in MB 
Docket Nos. 09-182; 07-294, FCC 11-186, was adopted and released on 
December 22, 2011. The complete text of the document is available for 
inspection and copying during normal business hours in the FCC 
Reference Center, 445 12th Street SW., Washington, DC 20554, and may 
also be purchased from the Commission's copy contractor, BCPI, Inc., 
Portals II, 445 12th Street SW., Washington, DC 20054. Customers may 
contact BCPI, Inc. at their Web site https://www.bcpi.com or call 1-
(800) 378-3160.

Initial Paperwork Reduction Act of 1995 Analysis

    This Notice of Proposed Rule Making may result in a new or revised 
information collection requirement. If the Commission adopts any new or 
revised information collection requirement, the Commission will publish 
a notice in the Federal Register inviting the public to comment on the 
requirement, as required by the Paperwork Reduction Act of 1995, Public 
Law 104-13 (44 U.S.C. 3501-3520). In addition, pursuant to the Small 
Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 
U.S.C. 3506(c)(4), the Commission seeks specific comment on how it 
might ``further reduce the information collection burden for small 
business concerns with fewer than 25 employees.''

I. Synopsis of the Notice of Proposed Rulemaking

A. Introduction

    1. Pursuant to a statutory mandate under the Telecommunications Act 
of 1996, the Commission seeks comment in this Notice of Proposed 
Rulemaking on the Commission's media ownership rules and proposed 
changes thereto. The Commission is required by statute to review its 
media ownership rules every four years to determine whether they ``are 
necessary in the public interest as the result of competition.'' A 
challenge in this proceeding is to take account of new technologies and 
changing marketplace conditions while ensuring that the media ownership 
rules continue to serve the Commission's public interest goals of 
competition, localism, and diversity. The Commission is also seeking 
comment on economic studies analyzing the relationship between local 
media market structure and the policy goals that underlie the 
Commission's media ownership rules. In addition, the Commission seeks 
comment in this proceeding on the aspects of the Commission's 2008 
Diversity Order (73 FR 28361, May 16, 2008, FCC 07-217, rel. Mar. 5, 
2008) that the Third Circuit remanded in Prometheus Radio Project v. 
FCC (Prometheus II).
    2. The proliferation of broadband Internet and other new 
technologies has had a dramatic impact on the media marketplace. 
Consumers are increasingly turning to online and mobile platforms to 
access news content and audio and video programming. For example, in 
2010 and in the first quarter of 2011, satellite radio and TV 
companies, which offer both satellite and online access to content, 
have reported growth in subscribership. Similarly, content providers 
are increasingly looking to the Internet and other new media platforms 
to bypass traditional media and reach consumers directly. Social media 
sites are empowering individuals to share news and information in real 
time, becoming tools of social interaction and revolution throughout 
the world.
    3. For the broadcast and newspaper industries, the growth of these 
new technologies both challenges established business models and 
provides opportunities to reach new audiences and generate new revenue 
streams. Broadcast and newspaper consumption in traditional forms is in 
decline, and advertising revenues have been shrinking in recent years. 
Some broadcast and newspaper outlets have contracted the size of news 
staffs in response. These economic realities have sounded an alarm for 
some who are concerned that non-traditional media sources are not 
adequate substitutes for the provision of local news and information by 
broadcasters subject to public interest obligations. In voicing such 
concerns, some commenters have asserted that the Commission's media 
ownership limitations remain vitally important, as increased 
consolidation places control of programming choices in the hands of too 
few owners, limiting diversity and underserving the needs of local and 
minority communities.
    4. In short, the media marketplace is in transition, particularly 
as a result of broadband Internet; but new media are not yet available 
as ubiquitously as traditional broadcast media. The nation has not yet 
reached universal deployment or adoption of broadband. Too much of the 
country is unserved or underserved by broadband, and the average 
broadband speed available to consumers varies in different areas and 
lags behind some other nations. Broadband adoption remains under 70 
percent, meaning that tens of millions of Americans do not have access 
to news and other programming on the Internet.

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Some parts of the population, including minorities, people with 
disabilities, and low-income Americans, have much lower rates of 
broadband adoption. Access to sufficient broadband speeds is critical 
for consumers to take full advantage of today's online programming and 
applications, including access to media content through streaming 
technology and downloading programs. According to one estimate, more 
than 14 million Americans do not have access to broadband 
infrastructure that can support today's applications. Much of the 
content available by streaming and downloads requires minimum broadband 
speeds. The Commission is taking important steps to close this digital 
divide, but much work remains.
    5. The Commission began this proceeding with a series of workshops 
held from November 2009 through May 2010. Participants in the workshops 
discussed the scope and content of the review process. Thereafter the 
Commission released a Notice of Inquiry (75 FR 33227, June 11, 2010, 
FCC 10-92, rel. May 25, 2010) (NOI) on May 25, 2010, seeking comment on 
a wide range of issues to help us determine whether the current media 
ownership rules continue to serve the Commission's policy goals. The 
NOI sought input on developments in the marketplace since the last 
review and on whether the Commission should adopt alternatives to 
bright-line, sector-specific rules. It also sought comment on the 
Commission's fundamental goals of competition, localism, and diversity 
and how to balance these goals when they conflict. In response, 
industry participants and representatives, public interest groups, and 
members of the public filed a significant number of comments.
    6. To provide data on the impact of market structure on the 
Commission's policy goals of competition, localism, and diversity, the 
Commission commissioned eleven economic studies, which were conducted 
by outside researchers and Commission staff. The Commission previously 
released the studies to allow parties additional time to review the 
data and analyses and now is seeking formal comment on them herein. As 
discussed herein, the Commission reaffirms that its media ownership 
rules are necessary to further the Commission's longstanding policy 
goals of fostering competition, localism, and diversity. In particular, 
the Commission reaffirms that a major goal of the rules is to encourage 
the provision of local news, and the Commission invites suggestions 
about how that goal can be further achieved.
    7. In Prometheus II, the Court of Appeals for the Third Circuit 
considered appeals of the Commission's review of the media ownership 
rules in the 2006 Quadrennial Review Order (73 FR 9481, February 21, 
2008, FCC 07-216, rel. Feb. 4, 2008). As discussed in more detail 
below, the court affirmed the Commission's decision to retain the local 
television and radio rules to protect competition in local media 
markets. The court also affirmed the Commission's decision to retain 
the dual network rule based on potential harm to competition that would 
result from mergers of the top four networks. The court also affirmed 
the Commission's conclusion to retain the radio/television cross-
ownership rule as well as, in part, to retain the local radio rule 
based on the benefits to the Commission's diversity goal. Moreover, the 
Third Circuit vacated and remanded the newspaper/broadcast cross-
ownership rule as modified by the Commission in the 2006 Quadrennial 
Review Order, concluding that the Commission failed to comply with the 
notice and comment provisions of the Administrative Procedures Act. As 
discussed in more detail below, the court also vacated and remanded a 
number of measures adopted in the Commission's 2008 Diversity Order, 
which the Commission now addresses in this proceeding.
    8. As discussed in detail herein, as part of its regular review of 
broadcast ownership rules required by the Communications Act, the 
Commission proposes the elimination of one rule and suggests leaving 
the others largely unchanged. The Commission believes that the public 
interest is best served by these modest, incremental changes to the 
Commission's rules. Recognizing current market realities, the 
Commission seek comment on the following proposals:
     Local Television Ownership Rule. The Commission 
tentatively concludes that it should retain the current local 
television ownership rule with minor modifications. Specifically, the 
Commission proposes to eliminate the Grade B contour overlap provision 
of the current rule. The Commission tentatively concludes that it 
should retain the prohibition against mergers among the top-four-rated 
stations, the eight-voices test, and the existing numerical limits. In 
addition, the Commission seeks comment on whether to adopt a waiver 
standard applicable to small markets, as well as appropriate criteria 
for any such standard. Also, the Commission seeks comment on whether 
multicasting should be a factor in determining the television ownership 
limits.
     Local Radio Ownership Rule. The Commission proposes to 
retain the current local radio ownership rule. The Commission also 
seeks comment on modifications to the rule and whether and how the rule 
should account for other audio platforms. The Commission proposes to 
also retain the AM/FM subcaps, and seeks comment on the impact of the 
introduction of digital radio. The Commission seeks comment on whether 
to adopt a waiver standard and on specific criteria to adopt.
     Newspaper/Broadcast Cross-Ownership Rule. The Commission 
tentatively concludes that some newspaper/broadcast cross-ownership 
restrictions continue to be necessary to protect and promote viewpoint 
diversity. The Commission proposes to use Nielsen Designated Market 
Area (DMA) definitions to determine the relevant market area for 
television stations, given the lack of a digital equivalent to the 
analog Grade A service contour. The Commission proposes to adopt a rule 
that includes elements of the 2006 rule, including the top 20 DMA 
demarcation point, the top-four television station restriction, and the 
eight remaining voices test. The Commission seeks comment on these 
proposals and whether to incorporate other specific elements and 
factors of the 2006 rule.
     Radio/Television Cross-Ownership Rule. The Commission 
proposes to eliminate the radio/television cross-ownership rule in 
favor of reliance on the local radio rule and local television rule. 
The Commission believes that the local radio and television ownership 
rules adequately protect the Commission's localism and diversity goals 
and seeks comment on this proposal.
     Dual Network Rule. The Commission tentatively concludes 
that the dual network rule remains necessary in the public interest to 
promote competition and localism and should be retained without 
modification.
    9. Minority and Female Ownership. As noted above, the Commission 
seeks comment in this proceeding on the aspects of the Commission's 
2008 Diversity Order that the Third Circuit remanded in Prometheus II. 
Specifically, the court vacated and remanded a number of measures 
adopted in the Diversity Order that were designed to increase ownership 
opportunities for ``eligible entities,'' including minority- and women-
owned entities, because it determined that the Commission's revenue-
based eligible entity definition was arbitrary and

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capricious. The court directed the Commission to address this issue in 
the course of the 2010 Quadrennial Review. As directed by the court, 
the Commission invites views on how its ownership rules and policies 
can promote greater minority and women ownership of broadcast stations. 
The Commission will explore a broad range of potential actions it might 
take to that end, consistent with judicial precedent.

B. Policy Goals

    10. The Commission reaffirms that media ownership rules are 
necessary to further the Commission's longstanding policy goals of 
fostering competition, localism, and diversity. In the NOI, the 
Commission sought comment on how these goals should be defined and 
measured and on whether there are additional goals the Commission 
should consider. The Commission did not receive many specific comments 
on defining, measuring, and evaluating the performance of the 
Commission's policy goals, and the Commission invites such comment 
again. In particular, the Commission describes and seeks comment below 
on the Commission's 11 Media Ownership studies that evaluate the impact 
of local media market structure on the Commission's policy goals. In 
addition, the Commission invites parties to submit their own studies 
evaluating the impact of particular market structures on the 
Commission's goals. Below, the Commission discusses its competition, 
localism, diversity, and other policy goals. The Commission also 
discusses how it should evaluate the costs and benefits of the media 
ownership rules.
    11. Competition. As the Commission noted in the NOI, because 
broadcast content is available for free to end users, broadcast 
competition cannot be assessed in the same manner as in many other 
markets. Specifically, the Commission cannot examine changes in price 
to assess the impact of different levels of ownership concentration. 
Accordingly, the Commission sought comment on a variety of potential 
ways to assess competition in the media marketplace. The Commission 
discussed whether competition among broadcast outlets is likely to 
benefit consumers by making available programming that satisfies 
consumer preferences.
    12. The Commission reaffirms its longstanding commitment to ensure 
that media markets are competitive. The Commission strives to set 
ownership rules that create a marketplace in which broadcast 
programming meets the needs of consumers, and the Commission believes 
competition is a key means to that end. Moreover, the Commission 
reaffirms the Commission's previous findings that the local ownership 
rules should be analyzed in the context of local markets. The 
Commission finds however that for the Dual Network rule, competition is 
appropriately analyzed in the national advertising and programming 
markets.
    13. Localism. In the NOI, the Commission sought comment generally 
on how to define and promote localism in the context of the media 
ownership rules, including whether its traditional localism goal needs 
to be redefined in light of today's media marketplace.
    14. The Commission reaffirms its commitment to promote localism 
through the media ownership rules. At its core, localism policy is 
``designed to ensure that each station treats the significant needs and 
issues of the community that it is licensed to serve with the 
programming that it offers.'' The media ownership rules, as part of the 
Commission's overall regulatory framework, seek to promote a 
marketplace in which broadcast stations ``respond to the unique 
concerns and interests of the audiences within the stations' respective 
service areas.'' The Commission continues to evaluate the extent of 
localism in broadcasting markets by determining whether programming is 
responsive to local needs and interests. The Commission's focus 
continues to be on news and public information programming. The 
Commission continues to believe that these types of programming are 
relevant to evaluating the extent of localism as it exists in local 
markets. While the Commission's core commitment to promoting localism 
in media remains undiminished, the Commission also recognizes that 
changes in the marketplace and changes in consumer preferences may 
impact aspects of localism in today's marketplace. Thus, the Commission 
believes that the appropriate definition of localism today, in the 
digital age, may not be the same definition as in decades past.
    15. As a result of the growing availability of the Internet and the 
proliferation of wireless technology, consumers are accessing news and 
public affairs programming through their computers and electronic 
devices. Moreover, the potential for hyper-local Web sites and blogs to 
provide consumers with local news and information, such as 
neighborhood-specific news and events, may contribute to meeting the 
current or future needs and interests of local communities. As 
consumers continue to rely more and more on additional, multiple 
sources of local news, the Commission seeks comment on whether, and 
how, to reevaluate localism to account for changes in the way consumers 
get local news.
    16. Diversity. In the NOI, the Commission sought comment on how to 
define and measure diversity in today's marketplace to determine 
whether the current media ownership rules are meeting the Commission's 
diversity goal. The Commission has relied on its media ownership rules 
to ensure that diverse viewpoints and perspectives are available to the 
American people in the content they receive over the broadcast 
airwaves. The policy is premised on the First Amendment, which ``rests 
on the assumption that the widest possible dissemination of information 
from diverse and antagonistic sources is essential to the welfare of 
the public.'' The Commission historically has approached the diversity 
goal from five perspectives: viewpoint, outlet, program, source, and 
minority and female ownership diversity. In the 2002 Biennial Review 
Order (68 FR 46286, August 5, 2003, FCC 03-127, rel. July 2, 2003), the 
Commission concluded that program diversity is best achieved by 
reliance on competition among delivery systems rather than by 
government regulation and that the media ownership rules ensure 
competition in local markets. In addition, the Commission concluded 
that source diversity was not one of the diversity goal objectives of 
the media ownership rules. The Commission reaffirms those conclusions. 
The Commission has regulated media ownership as a means of enhancing 
viewpoint diversity based on the premise that diffuse ownership among 
media outlets promotes the presentation of a larger number of 
viewpoints in broadcast content than would be available in the case of 
a more concentrated ownership structure. The Commission previously has 
discussed two schools of thought on the relationship between ownership 
and diversity. On one side is the notion that the more independently 
owned outlets there are, the greater the viewpoint diversity. The 
concept is that 51 station owners will provide more diverse viewpoints 
than 50 station owners. The second school of thought is that 
concentrated ownership will provide an opportunity for diverse content. 
According to this view, an owner of multiple stations in a local market 
will provide a variety of programming and viewpoints in order to gain 
the widest audience and market share. It can be questioned whether the 
latter approach is as likely to provide the public with information 
from ``diverse and

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antagonistic sources.'' The Commission seeks comment on this issue and 
on how the Commission should account for this aspect of its diversity 
goal in any rules the Commission might adopt.
    17. The Commission reaffirms its belief that media ownership limits 
are necessary to preserve and promote viewpoint diversity. Furthermore, 
the Commission also reaffirms its conclusion that viewpoint diversity 
is generally promoted by competition among independently owned media 
outlets. The Commission believes that a key measure of how well the 
Commission's current rules promote the Commission's overall diversity 
goal is the availability of local news and information, and the 
Commission examines that availability herein as it relates to local 
ownership structure and the level of civil engagement.
    18. Minority and Female Ownership. In the NOI, the Commission 
sought comment on a variety of questions regarding the impact of the 
ownership rules on minorities and females, including minority and 
female ownership of broadcast stations. The Commission asked how its 
localism goal should be defined and measured as applied to historically 
underserved minority communities. The Commission sought comment on what 
aspects of localism are most relevant specifically to minority 
communities, as well as on the effect of consolidated ownership on the 
availability of a variety of diverse viewpoints to women and minority 
consumers. The NOI asked if women and minorities are increasing their 
ownership shares in companies that are content providers or in other 
aspects of media production aside from station ownership.
    19. There were only limited comments on these issues. According to 
Diversity and Competition Supporters (DCS), significant barriers to 
entry for minority ownership remain in both the traditional and new 
media industries. DCS states that minority-owned stations are more 
likely than non-minority owned stations to provide programming geared 
toward minority audiences and that minority communities are underserved 
as a result of the lack of minority media ownership. DCS supports 
measures that facilitate minority media ownership.
    20. The Commission tentatively concludes that its policy goals of 
competition, localism, and diversity are the appropriate framework 
within which to evaluate and address minority and female interests as 
they relate to the media ownership rules. The Commission seeks comment 
on this tentative conclusion. The Commission also seeks additional 
comment on how the proposed framework for each of the media ownership 
rules, as explained herein, would affect minority and female ownership 
opportunities.
    21. Additional Policy Goals. In the NOI, the Commission sought 
comment on whether it should consider any other formal policy goals, in 
addition to the Commission's competition, diversity, and localism 
goals, in determining ownership limits in this proceeding. 
Specifically, the Commission sought comment on whether to consider the 
impact of the media ownership rules on the availability to all 
Americans of news and information, including national news and 
information. The Commission also sought comment on whether it should 
consider the impact of its rules on investigative journalism, and 
whether any specific aspects of the National Broadband Plan, including 
issues related to broadband access, are relevant to the media ownership 
rules. The Commission tentatively concludes not to adopt any other 
formal policy goals in this proceeding. As described above, the 
Commission's longstanding policy goals of competition, localism, and 
diversity are broadly defined to promote the core responsibilities of 
broadcast licensees. The Commission notes that its media ownership 
rules seek to further consumer welfare by promoting the availability of 
community-responsive news and public affairs programming from a variety 
of sources. The Commission seeks comment on its tentative conclusion 
not to adopt any policy goals other than competition, localism, and 
diversity in this proceeding.
    22. Balancing the Costs and Benefits of Limiting Media 
Combinations. The Commission seeks information that will help it 
balance the positive benefits of the ownership limits in promoting the 
Commission's policy goals against the costs that specific limits may 
impose on consumers and firms. The Commission has discussed in broad 
terms in this section the policy goals it seeks to promote. Section V 
of the Notice of Proposed Rulemaking presents the studies that the 
Commission commissioned to quantify the influence of the Commission's 
rules on the policy goals. In particular, Media Ownership Study 2 
quantifies the benefits and costs of particular media market structures 
on consumers. The Commission seeks comment on the appropriate use of 
this study in quantifying the impact of the media ownership rules on 
consumers and balancing the positive effects on consumers with any 
adverse effects on firms.
    23. The Commission's studies do not address the direct impact 
ownership limits have on media outlets. The Commission seeks detailed 
information on the benefits that would accrue to media outlets from 
entering into combinations that currently are impermissible. What are 
the cost-savings associated with a combination of two TV stations in 
markets where duopolies are not currently permitted? What are the 
sources of those cost savings? Are the savings a one-time event or are 
they recurring? Do they vary by the size of the market or the 
popularity of the TV station? The Commission seeks similar detailed 
estimates of cost savings for the combination of radio stations as well 
as cross-media combinations between newspapers, TV stations, and radio 
stations. Commenters should document to the extent possible the sources 
and methods of their estimates.
    24. How should the Commission balance the effects of its rules on 
consumers with those on firms, in particular, media outlets? Should 
each receive equal weight? How should the Commission account for 
situations in which the costs and the benefits of a change in the rules 
occur at different points in time? The Commission encourages commenters 
to provide examples of the suggested balancing of the Commission's 
rules.

C. Media Ownership Rule Proposals

1. Local Television Ownership Rule
a. Introduction
    25. As discussed in the NOI, in the 2006 Quadrennial Review Order, 
the Commission determined that the then long-standing local television 
ownership rule promotes competition within local television markets. 
Consistent with this conclusion, the Commission retained that rule. The 
rule allows an entity to own two television stations in the same DMA 
(duopoly rule) only if there is no Grade B contour overlap between the 
commonly owned stations, or at least one of the commonly owned stations 
is not ranked among the top-four stations in the market (top-four 
prohibition) and at least eight independently owned television stations 
remain in the DMA after ownership of the two stations is combined 
(eight-voices test). The court in Prometheus II upheld the Commission's 
decision in the 2006 Quadrennial Order to retain the local television 
ownership rule, specifically concluding that the Commission was 
justified in retaining the top-four prohibition, the eight-voices test, 
and the duopoly rule.

[[Page 2872]]

    26. Based on the record in this proceeding, the Commission 
tentatively concludes that the local television ownership rule, with 
certain modifications discussed below, remains necessary in the public 
interest as a result of competition. The Commission tentatively agrees 
with the Commission's previous determination that the local television 
ownership rule is necessary to promote competition. While the 
Commission proposes to adopt a local television ownership rule to 
advance its competition goal, the Commission seeks comment on whether 
the proposed rule also is necessary to promote the Commission's 
localism and viewpoint diversity goals.
    27. As discussed in greater detail below, the Commission proposes 
to eliminate the Grade B contour overlap provision of the current rule 
and seek comment on this proposal. The Commission tentatively concludes 
that it should retain the prohibition against mergers among the top-
four-rated stations. The Commission proposes to also retain the eight-
voices test and the existing numerical limits, but seek comment on 
whether modifications to either the voice test or numerical limits is 
warranted. In addition, the Commission seeks comment on whether to 
adopt a waiver standard applicable to small markets, as well as 
appropriate criteria for any such standard. Also, the Commission seeks 
comment on whether and how the digital transition and multicasting may 
impact television ownership limitations. Finally, the Commission seeks 
comment on the impact of the proposed rule on minority and female 
ownership.
b. Background
    28. In the NOI, the Commission sought comment on whether to retain 
the current rule, including the eight-voices test, the top-four 
prohibition, and the contour overlap definition. It also asked whether 
relaxation of the rule is warranted in small markets to help 
broadcasters achieve efficiencies sufficient to compete with other 
video programming providers.
    29. Television broadcasters generally support relaxing the local 
television ownership rule, asserting that they face decreased revenues, 
as a result of both increased competition from nonbroadcast video 
programming providers and the recent economic downturn. Broadcasters 
assert that the efficiencies gained from combined ownership will allow 
them to compete better in today's changing marketplace. According to 
broadcasters, common ownership can increase viewpoint diversity, as 
owners of multiple stations seek to capture the greatest possible 
audience share by diversifying their news and public interest program 
offerings among co-owned properties. In addition, they contend that the 
cost savings generated by common ownership allow stations to add local 
newscasts and other locally oriented programming.
    30. Public advocacy groups, on the other hand, caution the 
Commission against using current economic conditions as a justification 
for relaxing the local television ownership rule. UCC et al., for 
example, assert that every U.S. industry was impacted by the declining 
economy and that signs suggest that the broadcast television industry 
has emerged from the downturn. Moreover, they contend that, if certain 
stations cannot survive in the current economic climate, then the 
public interest is best served by allowing new entrants to become 
broadcasters or finding new uses for the broadcast spectrum. In 
addition, public advocacy groups assert that further consolidation will 
reduce viewpoint diversity through reductions in female and minority 
ownership and the loss of independent news operations. Contrary to the 
broadcasters' assertion, the public advocacy commenters cite to studies 
that have found that consolidation does not lead to increases in local 
programming, suggesting that additional consolidation would not serve 
the Commission's localism goal.
    31. In the media ownership studies, the Commission sought data to 
help determine how best to structure a local television ownership rule 
to satisfy the Commission's policy goals. Particularly relevant to the 
local television rule, Media Ownership Study 1 examines whether common 
ownership of stations affects the amount of local news provided by 
television stations in the local market. The study does not find 
significant evidence that common ownership affects local media usage or 
programming. In addition, Media Ownership Study 4 analyzes, at both the 
market level and the station level, the relationship between media 
ownership and the amount of local news and public affairs programming 
provided in a local television market. The study suggests that multiple 
ownership in a local market does not impact the amount of local 
information programming at the market level or at the station level. 
Media Ownership Study 9 provides a theoretical analysis of the impact 
of media ownership structure on viewpoint diversity, finding that more 
independent outlets can increase viewpoint diversity in a market.
c. Discussion
    32. Market. Broadcasters generally assert that they are facing 
increased competition from new technologies, which has led, at least in 
part, to a reduction in advertising revenues, which could threaten the 
financial viability of local television stations. Broadcasters contend, 
therefore, that the Commission should modify the local television 
ownership rule to permit increased common ownership in local markets.
    33. The Commission proposes that the local television ownership 
rule continue to focus on promoting competition among broadcast 
television stations in local television viewing markets. The Commission 
tentatively concludes that the video programming market is distinct 
from the radio listening market. The Commission finds that local 
broadcast television stations compete directly with each other, 
particularly during the parts of the day in which these stations do not 
transmit the programming of affiliated broadcast networks. The 
Commission previously has determined that the video programming market 
includes both broadcast television stations and cable networks. 
Moreover, the Commission recognizes that viewers are increasingly able 
to access current network programming (both broadcast and cable) and an 
increasing array of video programming alternatives via the Internet, 
including on mobile devices. However, competition between local 
television stations and cable networks may be of limited relevance, 
because national cable networks generally do not alter their 
programming decisions based on the actions of individual local 
television stations. Competition in local markets among local 
television stations and programming alternatives available via the 
Internet may be similarly limited, as these alternatives compete 
largely in national markets and are not likely to respond to conditions 
in local markets. The Commission seeks comment on whether the 
development of local and hyperlocal Web sites should alter this 
analysis. The Commission seeks data in support of alternative 
conclusions, for example, that nonbroadcast video programmers modify 
programming decisions based on the actions of individual local 
television stations.
    34. The Commission also seeks comment on the impact of alternative 
video platforms on the continued viability of broadcast television 
stations. While the growth of MVPDs and Internet delivery of video 
programming is undeniable, the impact of this growth

[[Page 2873]]

on the broadcast television industry is unclear. While broadcast 
television's share of television viewing has been on the decline, 
broadcast network programming remains popular. Viewership, however, 
appears to be fractured between local affiliates, the Internet, and 
other mobile platforms. Is there evidence that viewers find broadcast 
television stations to be interchangeable with new technologies, or is 
broadcast television unique? If it is unique, what characteristics 
define it as such? Should the Commission determine that, contrary to 
its tentative conclusion, the local television ownership rule should 
focus on promoting competition among broadcast television stations and 
alternatives to broadcast television stations in local markets, the 
Commission seeks comment below on whether and how to include these 
alternatives in the rule, either in the eight-voices test or any 
alternate framework the Commission may adopt for determining whether to 
permit common ownership in a local market.
    35. Moreover, the Commission seeks comment on whether the product 
market for review of the local television rule should include more than 
video programming. For instance, some of the alternative sources of 
locally oriented content, such as Web sites and blogs, may not be 
entirely in video form. Is the relevant product market expanding from a 
video-only market to one that also contains non-video sources of local 
news and information? The Commission tentatively concludes that, 
although the relevant product market may expand beyond video 
programming over time, it has not done so at this point. Evidence 
suggests that, in the aggregate, Internet-only Web sites provide only a 
small amount of local news content. The Commission has not seen 
evidence that non-video information sources modify programming 
decisions based on the actions of local television stations or vice 
versa. The Commission seeks comment on these tentative conclusions.
    36. Contour Overlap. The current local television ownership rule 
employs a Grade B contour overlap test for determining whether to allow 
common ownership of television stations. The Grade B contour is an 
analog contour that is no longer relevant now that television stations 
have completed the digital transition and ceased broadcasting in 
analog. The Commission sought comment in the NOI on whether an overlap 
provision or some reliance on contours in the local television 
ownership rule was still necessary or whether the Commission should 
rely on geographic areas, such as a television DMAs. NAB asserts that 
the Commission should, to the extent feasible, maintain a contour-based 
approach for the local television ownership rule. Grant Group asks the 
Commission to grandfather existing combinations in the event an 
alternate approach is adopted and to permit the sale of grandfathered 
combinations to a single party.
    37. The Commission believes that eliminating the contour approach 
is necessary to be consistent with today's marketplace realities. 
Therefore, the Commission tentatively concludes that it will eliminate 
the Grade B contour approach and rely solely on Nielsen DMAs. Because 
of the Commission's mandatory carriage requirements, MVPDs generally 
will carry all the broadcast stations assigned to the DMA in which they 
are located. These MVPDs are also likely to carry most major cable 
networks. Therefore, the DMA most accurately captures the universe of 
broadcast and MVPD video programming available to viewers. As such, any 
combination of stations in a particular DMA could have an impact on the 
levels of competition in that local market. However, the current rule 
permits certain mergers between stations that compete in the same 
market simply because of a lack of Grade B contour overlap--a factor 
that may not have any significant impact on the level of competition 
between those stations. Therefore, the Commission tentatively concludes 
that eliminating the contour-overlap requirement in favor of the DMA-
based approach would result in a more consistent application of the 
local television ownership rule. Moreover, the Commission believes that 
the grandfathering provisions discussed below will preserve existing 
ownership combinations, thus avoiding disruption of settled 
expectations and alleviating any negative impact this change could have 
on the provision of television service in rural areas. The Commission 
seeks comment on these tentative conclusions.
    38. The Commission previously adopted a geographic market 
definition for the local radio rule. In the radio context, Arbitron 
Metro market definitions were found to be an industry standard and to 
represent a reasonable definition of the geographic market within which 
radio stations compete. Adopting Arbitron Metro markets was found to 
improve the Commission's ability to preserve and promote competition by 
more accurately identifying actual geographic markets; more accurately 
measuring concentration levels in local markets; and providing for a 
more consistent application of the local radio ownership rule. The 
Commission has long recognized in the television ownership rule that 
DMAs are the relevant geographic market in which television stations 
compete, and the Commission expects that a DMA-based approach here will 
achieve benefits similar to those found in adopting the Arbitron Metro 
market standard in the radio context. Finally, unlike Arbitron Metro 
markets, which do not cover large portions of the United States and its 
territories, the DMA-based approach covers the entire country and 
includes all television stations. In instances where a station's 
community of license is located in one DMA but the station is assigned 
by Nielsen to another DMA the station will be considered to be within 
the DMA assigned by Nielsen for purposes of this rule. In addition, 
Puerto Rico, Guam, and the U.S. Virgin Islands, which are not assigned 
a DMA by Nielsen, each will be considered a single DMA.
    39. The Commission recognizes, however, that a DMA-based approach 
may disproportionately impact certain DMAs that have unique 
characteristics. For instance, in a geographically large DMA two 
stations may be so far removed from one another that the stations do 
not actually compete over-the-air (though they are both carried by 
MVPDs throughout the DMA). While the Grade B provision of the existing 
rule allowed common ownership of those stations, a DMA-based approach 
could prohibit common ownership. Therefore, the Commission seeks 
comment on whether and how to accommodate such a situation and other 
types of situations in which the Grade B provision allowed ownership of 
stations but a DMA-based rule would prohibit common ownership. The 
Commission seeks comment on how frequently such situations arise. The 
Commission tentatively concludes to grandfather ownership of existing 
combinations of television stations that would exceed the ownership 
limit under the proposed local television ownership rule by virtue of 
the change to a DMA-based approach. Compulsory divestiture is 
disruptive to the industry and a hardship for individual owners, and 
any benefits to the Commission's policy goals would likely be 
outweighed by these countervailing considerations. Consistent with the 
Commission's previous decisions, the Commission seeks comment regarding 
whether to allow the sale of combinations only if the station groups 
comply with the local television ownership rule in place at the

[[Page 2874]]

time the transfer of control or assignment application is filed. The 
Commission would continue to allow pro-forma changes in ownership and 
involuntary changes of ownership due to death or legal disability of 
the licensee. Are the Commission's policy goals served by allowing 
grandfathered combinations to be freely transferable in perpetuity, 
irrespective of whether the combination complies with the local 
television ownership rule? What is the effect on the stations if they 
are sold separately? Is it possible that such a rule could have the 
unintended consequence of causing a station to close? The Commission 
seeks comment on these tentative conclusions.
    40. Top-Four Prohibition. The top-four prohibition prevents mergers 
between two of the top-four-rated stations in a local market, subject 
to the other provisions of the local television ownership rule. In the 
previous media ownership proceeding, the Commission retained the top-
four prohibition because mergers between these stations ``would be the 
most deleterious to competition.'' Such mergers would often result in a 
single firm obtaining a significantly larger market share than other 
firms in the market and would reduce incentives for local stations to 
improve programming that appeals to mass audiences. The Commission also 
found that a significant ``cushion'' of audience share continued to 
separate the top-four stations from the fifth-ranked station. The 
Commission also found that mergers involving two top-four stations 
would harm competition in the local broadcast television advertising 
market. The Commission tentatively concludes that this market does not 
have a direct impact on consumers and should not be a focus of the 
Commission's inquiry. The Commission seeks comment on these tentative 
conclusions. The Commission tentatively concludes that retaining the 
top-four prohibition is necessary to promote competition for the 
reasons set forth in the 2006 Quadrennial Review Order. The Commission 
continues to believe that this rationale supports retention of the top-
four prohibition, and the Commission seeks comment on these tentative 
conclusions.
    41. The Commission seeks comment also on the impact of the top-four 
prohibition on its localism goal. NAB supports mergers among the top-
four stations in a local market because it argues that many of these 
stations cannot afford to produce local news independently. Allowing 
these stations to combine, they argue, could lead to increased news 
offerings. The Commission notes, however, that evidence suggests that 
the majority of top-four stations are already originating substantial 
amounts of local news. Moreover, there is generally a drop off between 
the fourth- and fifth-rated station in the market in the amount of 
local news broadcast. Based on this evidence, it is not clear that 
permitting mergers among top-four stations generally would result in 
additional local news or other local programming. The Commission seeks 
comment on these issues. The Commission also seeks information 
regarding whether the amount of local news provided between the top 
four stations and any others depends upon the size of the market and a 
community's ability to support multiple news outlets. As discussed in 
greater detail below, with respect to a potential waiver standard 
applicable to small markets, the Commission seeks comment on whether 
permitting common ownership in small markets, even between top-four 
stations, would promote additional local news.
    42. In addition, the Commission seeks comment on whether it should 
retain the top-four prohibition to also promote the Commission's 
viewpoint diversity goal. Media Ownership Study 9's theoretical 
analysis shows that a market structure with four firms--two firms 
presenting each viewpoint--provides efficient information transmission, 
and the experimental work confirms the value of competition among 
outlets with similar viewpoints. Although the Commission recognizes the 
limitations of this finding for the Commission's analysis, since a top-
four prohibition does not guarantee the theoretical result, Media 
Ownership Study 9 provides some support for maintaining at least four 
strong independent outlets. Furthermore, the Commission recognizes 
that, in some instances, there may be other significant sources of 
viewpoint diversity in a market (e.g., local newspapers or local radio 
stations). Nonetheless, because evidence suggests a link between more 
independent television outlets and increased viewpoint diversity in a 
market and given the significance of television as a source of local 
news and information, retaining the top-four prohibition should advance 
the Commission's viewpoint diversity goal. The Commission seeks comment 
on Media Ownership Study 9's findings, as well has how the top-four 
prohibition impacts the Commission's viewpoint diversity goal.
    43. Furthermore, the Commission invites commenters to provide 
evidence demonstrating why a different criterion might be more 
appropriate. For example, would it be more appropriate to impose a top-
five or the top-six prohibition in all markets or in certain markets? 
If so, why?
    44. Unlike the other ownership rules discussed here, the top-four 
component of the Commission's local television ownership rule relies on 
the in-market ranking of the stations to be commonly owned, and this is 
subject to change over time. Accordingly, the rule specifies that the 
ranks of the stations are to be determined ``[a]t the time of 
application to acquire or construct the station(s) * * *.'' If, at that 
time, both stations are ranked among the top-four stations in the 
market, common ownership would not be permitted. The Commission's local 
television ownership rule intends, then, to prohibit an entity from 
acquiring two top-four stations. However, a broadcaster that owns two 
television stations located in the same market will not be required to 
divest a station ``if the two merged stations subsequently are both 
ranked among the top four stations in the market.'' The Commission 
adopted this approach to encourage licensees to improve the quality of 
the programming and operations of their stations and so not to 
constrain commercial activity that is designed to effect such 
improvements.
    45. The point of applicability of the top-four prohibition at the 
time of an application to the Commission creates a potential for 
evading the intent of the rule. Accordingly, the Commission seeks 
comment on whether and, if so, how it should address circumstances in 
which a licensee obtains two in-market stations, both of which are 
ranked among the top-four stations in the market through agreements 
that may be considered the functional equivalent of a transfer of 
control or assignment of license in the context of this rule, but that 
do not require an application or prior Commission approval. For 
example, an existing licensee with two stations, one of which is among 
the top four stations in the market, purchases the network affiliation 
of another top-four-ranked market station and airs that network's 
programming on its second, lower-ranked station. The licensees party to 
this transaction also exchange call signs. As a consequence, the 
second, lower-ranked station becomes a top-four-ranked station and the 
licensee now controls two top-four-ranked stations in the market, but 
no application has been filed and none was required. How, if at all, 
should the Commission address such circumstances? Should the Commission 
amend the top-four prohibition to apply to these types of transactions? 
Should the Commission focus on instances

[[Page 2875]]

where licensees swap network affiliations, regardless of whether other 
types of agreements that impact station operation are also executed? 
How, if at all, should the Commission address situations where a 
network offers an existing duopoly owner (one top-four station and one 
station ranked outside the top four) a top-four-rated affiliation for 
the lower-rated station, perhaps because the network is no longer 
satisfied with the existing affiliate station and the duopoly owner has 
demonstrated superior station operation (i.e., earned the affiliation 
on merit)? Does such a transaction undermine the Commission's local 
ownership rules or goals? If so, how would the Commission craft a rule 
to address such circumstances, while at the same time not unduly 
constraining beneficial commercial activities?
    46. Eight-Voices Test. Under the eight-voices test, a merger 
between two in-market stations will not be permitted unless there are 
at least eight independently owned commercial and noncommercial 
televisions stations remaining in the market post merger, subject also 
to the top-four prohibition. The Commission, in the previous media 
ownership proceeding, determined that it was necessary to retain the 
eight-voices test in order to promote competition. Specifically, the 
Commission determined that maintaining a minimum of eight independently 
owned-and-operated television stations in a market would ensure that 
each market includes the four major networks (i.e., ABC, NBC, CBS, and 
Fox) and four independent competitors, and thus would spur competition 
in program offerings, including local news and public affairs 
programming. The Commission found that maintaining four independent 
competitors was necessary to offset the competitive advantage generally 
held by the top four stations in a market. In addition, the Commission 
continued to count only full-power television stations as voices 
``because the local television ownership rule is designed to preserve 
competition in the local television market.'' The Commission proposes 
to retain the eight-voices test for the reasons set forth in the 2006 
Quadrennial Review Order and seeks comment on this proposal. The 
Commission notes that the current eight-voices test relies on Grade B 
contour overlap to determine whether a voice is counted. Consistent 
with the Commission's decision to eliminate the Grade B contour overlap 
provision from the local television ownership rule, the Commission 
proposes to also eliminate the Grade B contour overlap criterion from 
the eight-voices test and rely instead on stations' inclusion in the 
same DMA as a basis for applying the rule. The Commission seeks comment 
on this proposal. Do any changes in the television marketplace warrant 
modification of the eight-voices test? For example, would adopting a 
six- or seven-voices test better promote the Commission's competition 
goal while allowing for additional common ownership?
    47. Though the Commission proposes to retain the eight-voices test, 
including the decision to exclude nonbroadcast television media from 
the voice count, in the event the Commission determines it is 
appropriate to consider alternative sources of video programming in the 
local television ownership rule, the Commission seeks comment 
specifically on whether market conditions have changed since the 2006 
quadrennial proceeding such that the Commission should consider 
alternative sources of video programming in the voice count. If the 
Commission should consider additional sources of video programming, how 
should the Commission account for those sources in the local market? 
Should noncommercial stations be included in figuring out the number of 
voices in the market? Or should the Commission consider as an 
additional voice video programming delivered via MVPDs or Internet 
video programming if such programming is available to a certain portion 
of the local market? If so, what should the threshold be and what 
source or sources of data should the Commission rely on in determining 
whether the threshold is met? Should the Commission consider adoption 
rates? Should the Commission consider, and if so how, the local or non-
local nature of the voice?
    48. As an alternative to the eight-voices test, the Commission 
seeks comment on whether to adopt a different framework for determining 
whether to permit common ownership in a local market. For example, the 
Commission could adopt a tiered approach, similar to the local radio 
ownership rule, in which numerical ownership limits are based on market 
rankings, such as the number of full-power television stations in the 
DMA or the Nielsen DMA rank (based on television households). As 
discussed below, the Commission tentatively proposes to retain the 
duopoly rule; therefore, any tiered approach the Commission may adopt 
would be limited to two tiers (i.e., markets where an entity could own 
up to two stations and markets where an entity could own only one 
station). Under such a tiered approach, how should the Commission 
determine the number of stations/Nielsen DMA rank associated with each 
tier? Do markets with similar numbers of television stations share 
particular characteristics and, if so, what are those characteristics? 
Do DMAs of a similar Nielsen rank share certain characteristics even 
though there may be a significant difference in the number of 
television stations? For example, the Commission has previously 
determined that the top 20 DMAs are more vibrant and have more media 
outlets than lower-ranked DMAs. What would be the benefits and/or 
drawbacks of such an approach in the television ownership rule?
    49. If the Commission were to adopt an approach other than the 
eight-voices test and determine that it is appropriate to consider 
alternative sources of video programming, should the Commission include 
alternative sources of video programming in the new test, and, if so, 
how? For example, could video programming delivered via MVPDs or the 
Internet be considered an additional market participant (i.e., the same 
as an additional broadcast television station) so long as a certain 
portion of the market has access to one or more of these services? In 
that case, what should that threshold be and what source or sources of 
data should the Commission rely on in determining whether the threshold 
is met? Should adoption also be considered? If the Commission were to 
rely on Nielsen DMA rank, how would the Commission incorporate these 
alternative sources into the rule, as Nielsen's ranking system does not 
take such sources into account? Do DMAs of a certain size share certain 
characteristics with respect to deployment and adoption of MVPDs and 
broadband Internet service?
    50. Numerical Limits. Under the current rule, a licensee can own up 
to two stations (i.e., a duopoly) in a market, subject to the 
requirements discussed above. The Commission concluded in the 2006 
Quadrennial Review Order that the duopoly rule remained necessary in 
the public interest to protect competition despite the increase in 
media outlets within the last decade. The Commission also declined to 
tighten the ownership limits, finding that the potential significant 
benefits from joint ownership permitted under the current rule 
outweighed claims of harm to diversity and competition.
    51. The Commission proposes to retain the current numerical limits. 
Based on the record in this proceeding, the Commission has not observed

[[Page 2876]]

sufficient changes in the marketplace to allow an entity to own more 
than two television stations in a local market. Moreover, the 
Commission notes that not every licensee owns the maximum number of 
stations permissible under the existing duopoly rule. Therefore, if the 
owner of a single station (or, singleton) believes the potential 
benefits of common ownership are necessary to compete effectively in a 
market where additional duopolies are permitted; there are 
opportunities to combine with other singletons under the existing rule. 
In addition, the Commission does not believe that the record in this 
proceeding supports limiting ownership to a single station in all local 
television markets. The Commission seeks comment on these tentative 
conclusions. For example, is there evidence that the current rule has 
produced actual harms to the Commission's policy goals such that 
tightening the numerical ownership limits would be justified? 
Alternatively, is there evidence that existing duopolies in the largest 
markets require additional common ownership to compete effectively, or 
that there are additional benefits in allowing existing duopolies to 
acquire additional stations?
    52. Market Size Waivers. Commenters have raised concerns that 
prohibiting all mergers in small markets could prevent broadcasters in 
these markets that may be facing severe competitive pressures from 
realizing potential efficiencies that could be achieved through 
allowing common ownership, even of top-rated stations, which could in 
turn promote the Commission's fundamental policy goals. Therefore, the 
Commission seeks comment on whether it should adopt a waiver standard 
for stations in markets where the proposed rule would limit station 
ownership to a single station for all licensees in the market and how 
such a standard would affect the Commission's policy goals. In the 
event the Commission determines such a waiver standard is appropriate, 
the Commission seeks comment below on how such a standard should be 
structured.
    53. The Commission seeks comment specifically on whether allowing 
certain combinations in small markets, even between top-four stations, 
would promote additional local news. The Local TV Coalition asserts 
that outside of the largest markets often only a few dominant stations 
can afford an independent news operation because stations in these 
markets earn less revenue than stations in large markets. Sainte 
Sepulveda, which owns one station in a small market and entered into 
sharing agreements with another in-market station, asserts that the 
savings generated by these sharing agreements are insufficient to 
implement a local newsgathering and production facility. According to 
NAB, stations in small markets are earning less profit than stations in 
large markets. In addition, NAB provides data that stations in small- 
and medium- sized markets spend less on their news operations than 
stations in large markets both in absolute terms and as a percentage of 
total station budget. NAB also submits data demonstrating that these 
stations provide less local news content and devote less station staff 
to news production than stations in large markets. The Commission seeks 
comment on whether adopting a waiver standard for small markets would 
promote more news offerings in these markets. In particular, the 
Commission notes that there is some evidence to suggest that markets 
with six or fewer stations may be less able to support four local 
television news operations. Should a market size waiver standard take 
this information into account? Would allowing mergers under this 
proposed standard result in a loss of viewpoint diversity in those 
markets? If so, would such mergers produce sufficient gains in 
competition and/or localism to overcome the reduction in viewpoint 
diversity?
    54. The Commission requests comment also on the criteria it should 
adopt for any market size waiver standard. Should the Commission adopt 
some or all of the current failed/failing station waiver policy? What 
financial documentation should the Commission require? Alternatively, 
should the Commission adopt a standard based simply on structural 
considerations--the size of the market and the number of outlets? For 
example, should the Commission permit a combination if the number of 
independent media owners in the market post merger would be at least 
two or three? If so, what independent media owners should the 
Commission consider? Would this approach create a race to merge that 
would reward the first to do so and foreclose other market stations 
from achieving similar competitive advantages? Should the Commission 
consider the combined market share of the stations seeking to combi