Sports Blackout Rules, 4138-4149 [2014-01338]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 79, Number 16 (Friday, January 24, 2014)]
[Proposed Rules]
[Pages 4138-4149]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-01338]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[MB Docket No. 12-3; FCC 13-162]


Sports Blackout Rules

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this document, the Commission seeks comment on its proposal 
to eliminate the sports blackout rules. Elimination of the sports 
blackout rules alone likely would not end sports blackouts, but it 
would leave sports carriage issues to private solutions negotiated by 
the interested parties in light of current market conditions and 
eliminate unnecessary regulation.

DATES: Comments for this proceeding are due on or before February 24, 
2014; reply comments are due on or before March 25, 2014.

ADDRESSES: You may submit comments, identified by MB Docket No. 12-3, 
by any of the following methods:
    [ssquf] Federal Communications Commission's Web site: https://www.fcc.gov/cgb/ecfs/. Follow the instructions for submitting comments.
    [ssquf] Mail: Filings can be sent by hand or messenger delivery, by 
commercial overnight courier, or by first-class or overnight U.S. 
Postal Service mail (although the Commission continues to experience 
delays in receiving U.S. Postal Service mail). All filings must be 
addressed to the Commission's Secretary, Office of the Secretary, 
Federal Communications Commission.
    [ssquf] People with Disabilities: Contact the FCC to request 
reasonable accommodations (accessible format documents, sign language 
interpreters, CART, etc.) by email: FCC504@fcc.gov or phone: (202) 418-
0530 or TTY: (202) 418-0432.
    For detailed instructions for submitting comments and additional 
information on the rulemaking process, see the SUPPLEMENTARY 
INFORMATION section of this document.

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 Notice 
of Proposed Rulemaking, FCC 13-162, adopted on December 17, 2013 and 
released on December 18, 2013. 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 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 proposed information collection 
requirements.

Summary of the Notice of Proposed Rulemaking

I. Introduction

    1. In this Notice of Proposed Rulemaking, we propose to eliminate 
the Commission's sports blackout rules, which prohibit certain 
multichannel video programming distributors (MVPDs) 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.\1\ The 
sports blackout rules were originally adopted nearly 40 years ago when 
game ticket sales were the main source of revenue for sports leagues. 
These rules were intended to address concerns that MVPDs' importation 
of a distant signal carrying a blacked-out sports event could result in 
lost revenue from ticket sales, which might cause sports leagues to 
expand the reach of blackouts by refusing to sell their rights to 
sports events to all distant stations. The rationale underpinning the 
rules was to ensure to the greatest extent possible the continued 
availability of sports telecasts to the public. Changes in the sports 
industry in the last four decades have called into question whether the 
sports blackout rules remain necessary to ensure the overall 
availability of sports programming to the general public. In this 
proceeding, we will determine 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. We 
recognize that elimination of our sports blackout rules alone might not 
end sports blackouts, but it would leave sports carriage issues to 
private solutions negotiated by the interested parties in light of 
current market conditions and eliminate unnecessary regulation.
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    \1\ See 47 CFR 76.111 (cable operators), 76.127 (satellite 
providers), 76.128 (application of sports blackout rules), 
76.1506(m) (open video systems).
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II. Background

A. History of the Sports Blackout Rules

    2. Prior to 1953, National Football League (NFL) bylaws prohibited 
member teams from, among other things, (i) telecasting their games into 
the home territory of another team that was playing at home, and (ii) 
telecasting their games into the home territory of another team that 
was playing away from home and was telecasting its game into its home 
territory. In 1953, a federal court held that the NFL's prohibition on 
the telecast of outside games into the home territory of a team that 
was playing at home was a reasonable method of protecting the home 
team's gate receipts and was not illegal under the antitrust laws. The 
court found, however, that restricting the telecast of outside games 
into the home territory of a team not playing at home was an 
unreasonable restraint on trade because, when the home team was playing 
away, there was no gate to protect.
    3. In 1961, the NFL entered into an agreement with the CBS 
television network under which the NFL's member teams pooled the 
television rights to their games and authorized the league to sell the 
rights to the network as a package, with the revenue from the league 
sales to be distributed equally among the member teams. Under this 
agreement, CBS was permitted to determine which games would be 
televised and where the games would be televised. The NFL then 
petitioned the court for a ruling on whether the terms of its contract 
with CBS violated the court's 1953 final judgment. The court concluded 
that the provision giving CBS the power to determine which games would 
be televised and where was contrary to the final judgment and that 
execution and performance of the contract was therefore prohibited. 
This ruling did not, however, apply to a similar contract between the 
newly formed American Football League (AFL) and the ABC television 
network, because the AFL was not a party to the court's 1953 final 
judgment. Concerned

[[Page 4139]]

that the court's ruling placed it at a disadvantage to the AFL, the NFL 
petitioned Congress for relief, arguing that packaged network contracts 
were desirable because they allowed the member teams to negotiate for 
the sale of television rights with a single voice and equalized revenue 
among the member teams.
    4. Congress responded to the NFL's plea for relief with its passage 
of the Sports Broadcasting Act of 1961. The Sports Broadcasting Act 
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. This statute also expressly permits 
these four professional sports leagues to black out television 
broadcasts of home games within the home territory of a member team. At 
the time the Sports Broadcasting Act was enacted, television blackouts 
were believed to be necessary to protect gate receipts, and the 
packaging of individual teams' television rights was thought to be 
necessary to enhance the financial stability of the leagues by assuring 
equal distribution of revenues among all teams. The NFL subsequently 
instituted a practice of blacking out the television broadcast of all 
home games of its member teams in their home territory, irrespective of 
whether the games were sold out.
    5. In August 1971, the Commission sent a letter to Congress seeking 
guidance on the Commission's proposed regulatory scheme for the then-
nascent cable television industry, which included several proposals 
relating to sports programming. The Commission noted the exemptions 
from the anti-trust laws granted to professional sports leagues under 
the Sports Broadcasting Act and stated that ``cable systems should not 
be permitted to circumvent the purpose of th[is] law by importing the 
signal of a station carrying the home game of a professional team if 
that team has elected to black out the game in its home territory.'' 
The Commission indicated that it would follow the ``spirit and letter'' 
of the Sports Broadcasting Act ``since it represents Congressional 
policy in this important area'' and stated that it intended to initiate 
a rulemaking proceeding on this issue in the near future. The 
Commission commenced a rulemaking proceeding proposing a sports 
blackout rule for cable television systems in February 1972.
    6. In 1973, during the pendency of the Commission's rulemaking 
proceeding, Congress enacted Public Law 93-107 in response to 
complaints from dissatisfied football fans who were unable to view the 
sold out home games of their local teams on the public airwaves due to 
the NFL's blackout policy. Public Law 93-107 added new section 331 to 
the Communications Act of 1934, as amended (Communications Act), which 
prohibited professional sports leagues from blacking out the television 
broadcast of a home game in a team's home territory if the game was 
televised elsewhere pursuant to a league television contract and the 
game sold out 72 hours in advance of game time. Public Law 93-107 was 
intended as a limited experiment to allow all affected parties to 
assess the impact of the statute and expired by its own terms effective 
December 31, 1975. Although the statute was not renewed, the NFL 
subsequently continued to follow the practice of blacking out the 
television broadcast of home games in a team's home territory only if 
the game was not sold out 72 hours in advance of game time.
    7. In the meantime, the Commission adopted the cable sports 
blackout rule in 1975 to address concerns that cable systems could 
frustrate sports leagues' blackout policies by importing the distant 
signal of a television station carrying the home game of a sports team 
that has elected to black out the game in its home territory. 
Specifically, the Commission found that

    [g]ate receipts are the primary source of revenue for sports 
clubs, and 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. 
If cable television carriage of the same game that is being played 
locally is allowed to take place, the 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. If this were to result, the overall 
availability of sports telecasts would be significantly reduced.

    The Commission emphasized that its concern was not in ensuring the 
profitability of organized sports, but rather in ensuring the overall 
availability of sports telecasts to the general public, which it found 
was ``of vital importance to the larger and more effective use of the 
airwaves.'' The cable sports blackout rule adopted by the Commission, 
which was originally codified in Sec.  76.67 and later renamed, 
slightly revised, and renumbered as Sec.  76.111, is designed to allow 
the holder of the exclusive distribution rights to the sports event 
(i.e., a sports team, league, promoter, or other agent, rather than a 
broadcaster) to control, through contractual agreements, the display of 
that event on local cable systems. Under this rule, the rights holder 
may demand that a cable system located within the specified zone of 
protection of a television broadcast station licensed to a community in 
which a sports event is taking place black out the distant importation 
of the sports event if the event is not being carried live by a 
television broadcast station in that community. The zone of protection 
afforded by the cable sports blackout rule is generally 35 miles 
surrounding the reference point of the broadcast station's community of 
license in which the live sporting event is taking place. The cable 
sports blackout rule applies to all sports telecasts in which the event 
is not exhibited on a local television station, including telecasts of 
high school, college, and professional sports, and individual as well 
as team sports.
    8. The Telecommunications Act of 1996 (1996 Act) added a new 
section 653 to the Communications Act, which established a new 
framework for entry into the video programming distribution market, the 
open video system. Congress's intent in establishing the open video 
system framework was ``to encourage telephone companies to enter the 
video programming distribution market and to deploy open video systems 
in order to `introduce vigorous competition in entertainment and 
information markets' by providing a competitive alternative to the 
incumbent cable operator.'' As an incentive for telephone company entry 
into the video programming distribution market, section 653 provides 
for reduced regulatory burdens for open video systems subject to the 
systems' compliance with certain non-discrimination and other 
requirements set forth in Section 653(b)(1). Section 653(b)(1)(D) 
directed the Commission to extend to the distribution of video 
programming over open video systems the Commission's rules on sports 
blackouts, network nonduplication, and syndicated exclusivity. The 
Commission amended its rules in 1996 to directly apply the existing 
cable sports blackout rule to open video systems.\2\
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    \2\ We note that the sports blackout rule for OVS, which is 
codified at 47 CFR 76.1506(m), references 47 CFR 76.67, which has 
been renumbered as 47 CFR 76.111. If the sports blackout rule for 
OVS is retained, we propose to update 47 CFR 76.1506(m) to cite the 
appropriate rule section, 47 CFR 76.111.
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    9. In November 1999, Congress enacted the Satellite Home Viewer 
Improvement Act of 1999 (SHVIA), which provides statutory copyright 
licenses for satellite carriers to provide additional local and 
national broadcast programming to subscribers. In enacting

[[Page 4140]]

SHVIA, Congress sought to place satellite carriers on an equal footing 
with cable operators with respect to the availability of broadcast 
programming. Section 1008 of SHVIA added a new Section 339 to the 
Communications Act. Section 339(b) directed the Commission to apply the 
cable network nonduplication, syndicated exclusivity, and sports 
blackout rules to satellite carriers' retransmission of nationally 
distributed superstations and, to the extent technically feasible and 
not economically prohibitive, to extend the cable sports blackout rule 
to satellite carriers' retransmission of network stations to 
subscribers.
    10. The Commission adopted a sports blackout rule for satellite 
carriers in November 2000. This rule provides that, on the request of 
the holder of the rights to a sports event, a satellite carrier may not 
retransmit a nationally distributed superstation or a network station 
carrying the live television broadcast of the sports event to 
subscribers if the event is not being carried live by a local 
television broadcast station. This rule applies within the same 35-mile 
zone of protection that applies to cable systems applies to satellite 
carriers; that is, 35 miles surrounding the reference point of the 
broadcast station's community of license in which the live sporting 
event is taking place.
    11. The Commission last examined the sports blackout rules more 
than seven years ago, in a 2005 report to Congress required by the 
Satellite Home Viewer Extension and Reauthorization Act of 2004 
(SHVERA). 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 also directed the 
Commission to ``include such recommendations for changes in any 
statutory provisions relating to such rules as the Commission deems 
appropriate.'' The Commission concluded in its report that the sports 
blackout rules do not affect competition among MVPDs, that commenters 
failed to advance any link between the blackout rules and competition 
among MVPDs, and that no commenter pressed the case for repeal or 
modification of the sports blackout rules. The Commission therefore 
declined to recommend any regulatory or statutory revisions to modify 
the protections afforded to the holders of sports programming rights.
    12. Today, sports leagues' blackout policies determine which games 
are blacked out locally. These policies are given effect primarily 
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 MVPDs. The Commission's rules, described above, supplement these 
contractual relationships by requiring MVPDs to black out games that 
are required by the sports leagues or individual teams to be blacked 
out on local television stations.

B. Petition for Rulemaking

    13. In November 2011, the Sports Fan Coalition, Inc., National 
Consumers League, Public Knowledge, League of Fans, and Media Access 
Project (collectively, Petitioners or SFC) filed a joint Petition for 
Rulemaking urging the Commission to eliminate the sports blackout 
rules. The Petitioners assert that, at a time when ticket prices for 
sports events are at historic highs and high unemployment rates 
persist, making it difficult for many consumers to afford attending 
local sports events, the Commission should not support the ``anti-
consumer'' blackout policies of professional sports leagues. The 
Petitioners also argue that the sports leagues' blackout policies are 
no longer needed to protect gate receipts and therefore should not be 
facilitated by the Commission's sports blackout rules. The Petitioners 
maintain that, ``without a regulatory subsidy from the federal 
government in the form of the [sports blackout rules], sports leagues 
would be forced to confront the obsolescence of their blackout policies 
and could voluntarily curtail blackouts.'' On January 12, 2012, the 
Media Bureau issued a Public Notice seeking comment on the Petition. 
Comments in support of the petition were filed by SFC, a group of nine 
sports economists, several members of Congress, and thousands of 
individual consumers. The NFL, the Office of the Commissioner of 
Baseball (Baseball Commissioner), the National Association of 
Broadcasters, and a group of network television affiliates filed 
comments opposing the Petition.

III. Notice of Proposed Rulemaking

    14. We propose to eliminate the sports blackout rules. The sports 
blackout rules were first adopted nearly four decades ago 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 the public. 
The rules were extended to open video systems and then to satellite 
carriers to provide parity between cable and newer video distributors. 
The sports industry has changed dramatically in the last 40 years, 
however, and the Petitioners argue that the economic rationale 
underlying the sports blackout rules may no longer be valid. Below we 
seek comment on whether we have authority to repeal the sports blackout 
rules. Next, we examine whether the economic considerations that led to 
adoption of the sports blackout rules continue to justify our 
intervention in this area. Finally, we propose to eliminate the sports 
blackout rules and seek comment on the potential benefits and harms of 
that proposed action on interested parties, including sports leagues, 
broadcasters, and consumers.

A. Legal Authority

    15. We seek comment on whether we have the authority to repeal the 
sports blackout rules. As discussed above, Congress did not explicitly 
mandate that the Commission adopt the cable sports blackout rule. 
Rather, the Commission adopted the cable sports blackout rule as a 
regulatory measure premised on the policy established by Congress in 
the Sports Broadcasting Act, 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. 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 Communications 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.'' Reflecting 
the language used in these

[[Page 4141]]

statutory provisions, the legislative history of Section 339(b) states 
that Congress's intent was to place satellite carriers on an equal 
footing with cable operators with respect to the availability of 
television programming. Petitioners argue that the Commission has the 
authority to repeal the sports blackout rules for both cable and DBS 
because Congress never directed the Commission to issue the sports 
blackout rules in the first instance and only directed the Commission 
to establish parity between the cable and DBS regimes. Senators 
Blumenthal and McCain likewise assert that ``[i]t is important to note 
that Congress never instructed the Commission to promulgate the Sports 
Blackout Rule in the first place. The Commission therefore possesses 
ample authority to amend the Sports Blackout Rule sua sponte, without 
any action by Congress.'' Several commenters opposing elimination of 
the sports blackout rules assert that Congress mandated the sports 
blackout rule for DBS. These commenters do not, however, expressly 
argue that the Commission does not have authority to eliminate the 
sports blackout rules, either for cable or for DBS and OVS. We 
tentatively conclude that repeal of the cable sports blackout rule is 
authorized by the Communications Act, which grants the Commission 
general rulemaking power, including the authority to revisit its rules 
and modify or repeal them where it concludes such action is 
appropriate. We seek comment on this tentative conclusion. We also seek 
comment on whether we have the authority to repeal the sports blackout 
rules for DBS and OVS. We observe that when Congress enacted the sports 
blackout provisions in Sections 339(b) and 653(b)(1)(D) of the Act, 
Congress directed the Commission to apply to DBS and OVS the sports 
blackout protection applied to cable, set forth in 47 CFR 76.67, rather 
than simply directing the adoption of sports blackout rules for those 
services. The statute does not withdraw the Commission's authority to 
modify its cable rule at some point in the future, nor is there any 
indication in the legislative history that Congress intended to 
withdraw this authority. Given that the DBS and OVS provisions are 
expressly tied to the cable sports blackout rule, does this evince an 
intent on the part of Congress that the Commission should accord the 
same regulatory treatment to DBS and OVS as cable, i.e., if the 
Commission modifies or repeals the cable rule it should also modify or 
repeal the DBS and OVS rules? Would Congress's intent to subject open 
video systems to reduced regulatory burdens as an incentive for their 
entry into the video market support an assertion of authority to 
eliminate the sports blackout rule for OVS if we determine that the 
cable sports blackout rule is no longer needed? Alternatively, are 
Congress's directives to the Commission regarding application of sports 
blackout protection to open video systems and to satellite carriers 
more appropriately interpreted to mean that the Commission does not 
have the authority to repeal the sports blackout rules for these types 
of entities, even if it does so for cable? If we determine that we do 
not have the authority to repeal the satellite sports blackout rule 
and/or the OVS sports blackout rule, would it nevertheless be 
appropriate to repeal the cable sports blackout rule? Would eliminating 
the sports blackout rule for cable but not for DBS and/or OVS create 
undue disparities or unintended consequences for any of these entities?

B. Assessing the Continued Need for Sports Blackout Rules

    16. We request comment on whether the economic rationale underlying 
the sports blackout rules remains valid in today's marketplace. 
Specifically, we invite commenters to submit information, and to 
comment on information currently in the record, regarding (i) the 
extent to which sports events continue to be blacked out locally as a 
result of the failure of the events to sell out, (ii) the relative 
importance of gate receipts vis-[agrave]-vis other revenues in 
organized sports today, and (iii) whether local blackouts of sports 
events significantly affect gate receipts. We invite commenters also to 
submit any other information that may be relevant in assessing whether 
the sports blackout rules are still needed to ensure the overall 
availability of sports telecasts to the public. We ask commenters to 
assess whether this information, as updated and supplemented, supports 
retaining or eliminating the sports blackout rules.
1. Blackouts of Sports Events
    17. We seek comment on the extent to which sports events are 
blacked out locally today due to the failure of the events to sell out. 
The record indicates that professional football continues to be the 
sport most affected by blackouts. Under the NFL's longstanding blackout 
policy, the television broadcast of home games in a team's home 
territory has been blacked out if the game was not sold out 72 hours in 
advance of game time. In 1974, just prior to the Commission's adoption 
of the cable sports blackout rule, 59 percent of regular season NFL 
games were blacked out due to failure of the games to sell out. During 
the 2011 NFL season, only 16 out of 256 regular season games, or six 
percent of games, were blacked out. These 16 blackouts occurred in just 
four cities: Buffalo, Cincinnati, San Diego, and Tampa Bay. Thus, the 
percentage of NFL games that are blacked out today has dropped 
substantially since the sports blackout rules were adopted, and 
blackouts of NFL games are relatively rare. Does this substantial 
reduction in the number of blacked out NFL games suggest that the 
sports blackout rules are no longer needed? Conversely, does the 
relatively small number of blackouts of NFL games argue against the 
need to eliminate the sports blackout rules? To what extent are 
blackouts of NFL games averted when teams and local businesses work 
together to ``sell'' outstanding tickets, thereby allowing local 
coverage of games? Has the cable sports blackout rule had any impact on 
the number of NFL blackouts? How should this affect our analysis?
    18. We note that in 2012, after the petition for rulemaking in this 
proceeding was put out for comment, the NFL modified its blackout 
policy to allow its member teams the option of avoiding a blackout in 
their local television market if the team sold at least 85 percent of 
game tickets at least 72 hours prior to the game. Specifically, under 
this new policy, individual teams are required to determine their own 
blackout threshold--anywhere from 85 percent to 100 percent--at the 
beginning of the season and adhere to that number throughout that 
season. If ticket sales exceed the threshold set by the team, the team 
must share a higher percentage of the revenue from those ticket sales 
than usual with the visiting team. We seek comment on the extent to 
which this new policy has impacted blackouts of NFL games. According to 
SFC, there were 15 NFL games blacked out affecting five NFL franchises 
during the 2012 season. Which teams opted to take advantage of the 
NFL's new blackout policy and what effect, if any, did the NFL's 
relaxation of its blackout policy have on ticket sales for the home 
games of these teams? Does the NFL's recent relaxation of its sports 
blackout policy weigh in favor of or against elimination of the 
Commission's sports blackout rules?
    19. We note that the record is largely silent on the prevalence of 
blackouts affecting sports other than the NFL; thus we invite comment 
on the extent to which these sports events are blacked out locally 
today. As noted above, the sports blackout rules apply to all sports

[[Page 4142]]

telecasts in which the event is not available live on a local 
television station, including telecasts of high school, college, and 
professional sports, and individual as well as team sports. The Sports 
Economists assert, however, that ``major professional sports leagues in 
the U.S. [other than the NFL] generally do not use blackout rules to 
prevent a game from being televised in the locality in which it is 
being played'' because they ``sell television rights to only some games 
through national broadcast agreements.'' The Sports Economists explain 
that

    [t]he FCC's rules currently have little relevance with respect 
to television rights that are sold by a team rather than the league. 
The FCC's rules apply only to games in the local area where they are 
being played. Thus, the FCC's blackout rules bear no relation to 
league policies that prevent telecasts in a team's home market of a 
game being played elsewhere. For games that are played locally, the 
vast majority of teams choose to sell television rights to all or 
most of their games. * * *

    To what extent are the sports blackout rules still relevant for 
sports other than professional football, where individual teams, rather 
than the league, hold and sell the distribution rights for all or most 
of the games? In this regard, we seek comment on the importance of 
retaining the sports blackout rules to protect the viability of any 
nascent sports leagues that may emerge in the future.
    20. Professional baseball is the only other sport for which 
commenters provided any information on blackouts. Commenters indicate 
that the number of MLB games blacked out is relatively small because 
individual MLB teams, rather than the league, negotiate with local 
broadcast television flagship stations or RSNs for exclusive rights to 
televise most of the teams' games, both home and away games, in the 
teams' home territories. According to the Baseball Commissioner, in 
2011, 151 of 162 regular season games of each MLB team, on average, 
were televised on the team's local broadcast television station or RSN. 
Therefore, the Baseball Commissioner asserts, at most eleven of 162 
regular season games of each MLB team were affected by the sports 
blackout rules. To the extent that more specific data are available 
regarding the number of home games of MLB teams blacked out pursuant to 
the Commission's sports blackout rules, as opposed to MLB's blackout 
policies, we request that commenters provide those data. Specifically, 
for each MLB team, we seek current data on whether exclusive rights to 
televise most of the teams' games have been granted to local broadcast 
flagship stations or RSNs and the number of home games that are blacked 
out pursuant to the Commission's rules. Does the number of games 
blacked out argue in favor of or weigh against repeal of the sports 
blackout rules? In addition, for home games that are blacked out under 
our rules, we seek information as to why they are blacked out. In this 
regard, the Baseball Commissioner states that ``[t]he vast majority of 
MLB games are not sold out. While there are specific instances in which 
MLB clubs do take account of gate attendance in making decisions about 
telecasting patterns (and invoking the [Commission's sports blackout 
rules]), MLB clubs do not routinely black out games that are not sold 
out.'' Accordingly, what factors other than attendance are taken into 
account in determining which MLB games are blacked out locally? How 
many MLB games were blacked out due to failure to sell out and how many 
were blacked out for other reasons? If, as reported, few MLB games are 
blacked out due to failure to sell out, does this support the 
conclusion that the sports blackout rules are not needed to promote 
attendance at sports events?
    21. We likewise request specific data detailing the extent to which 
any other sports events, including games of other major professional 
sports leagues (e.g., the NBA and NHL), and any other professional, 
collegiate, or high school sports events, are blacked out locally. To 
the extent that these other sports events are blacked out, are they 
blacked out due to failure of the event to sell out or for some other 
reason?
2. Gate Receipts and Other Revenues
    22. We seek comment on the relative importance of gate receipts 
vis-[agrave]-vis other revenues in sports today. As discussed above, 
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 record before us indicates, however, that the 
importance of gate receipts has diminished dramatically for NFL clubs 
in the past four decades, particularly in relation to television 
revenues. The Sports Economists state that in 1970 the estimated 
average revenue of an NFL team was approximately $5 million and the 
estimated average operating income was less than $1 million, whereas in 
2009 the estimated average revenue of an NFL team was about $250 
million and the estimated average operating income was $33 million. The 
Sports Economists further state that ticket sales today account for 
around 20 percent of NFL revenues, while television revenues account 
for around 60 percent. According to SFC, television revenues, which are 
shared equally among teams, are 80 times what they were in 1970 and now 
account for 50 percent of the NFL's total revenues. SFC asserts that 
gate receipts, which are split 60/40 between the home team and visiting 
team, account for only 21.6 percent of the NFL's total revenues. These 
figures indicate that television revenues have replaced gate receipts 
as the most significant source of revenue for NFL clubs. Does this 
shift in the source of revenue for NFL clubs undermine the economic 
rationale for the sports blackout rules? We invite commenters to 
supplement the record with more current data on NFL revenues, including 
total revenues, gate receipts, and television revenues, to the extent 
that such data are available. If gate receipts are no longer the 
primary or most significant source of revenue for NFL clubs, are the 
sports blackout rules still necessary to promote attendance at games 
and to ensure the overall availability of telecasts of these sports to 
the public? If so, why?
    23. There is scant information in the record regarding the 
significance of gate receipts in relation to other sources of revenue 
for sports other than professional football. The Baseball Commissioner 
states only that, ``in any given year, ticket sales and television 
revenues account for roughly the same portion of [MLB's] revenues and 
both are critically important to an MLB club's economic health.'' To 
the extent that commenters assert that the sports blackout rules remain 
necessary to ensure the overall availability of telecasts of particular 
sports to the public, we request that they provide current revenue data 
for such sports, including total revenues, television revenues, and 
gate receipts. We note that, during recent years, MLB has entered into 
other revenue-generating ventures, such as the MLB Channel, a baseball-
related programming channel available to MVPD subscribers, and Extra 
Innings, which offers regular season game premium (pay) packages 
through MVPDs to their subscribers. MLB also offers regular season game 
packages directly to customers through MLB.tv. Such programming is 
streamed over the Internet and can be viewed on computers and mobile 
devices, as well as on televisions using devices such as Apple TV. 
Moreover, many teams either own the RSNs that carry their game 
telecasts or have obtained ownership interests in RSNs. Does the 
emergence of these additional revenue sources impact the relative 
importance of gate receipts and, accordingly, the continued

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need for the sports blackout rules? If gate receipts are not the 
primary or most significant source of revenue for these sports, why are 
the sports blackout rules necessary to ensure the overall availability 
of telecasts of these sports to the public?
3. Effect of Blackouts on Gate Receipts
    24. We seek comment on the extent to which local blackouts of 
sports events affect attendance and gate receipts at those events and 
the extent to which the cable sports blackout rule itself affects 
attendance and gate receipts at sports events. As discussed above, the 
sports blackout rules are intended to address concerns that MVPDs' 
importation of a distant signal carrying a blacked-out sports event 
could lead to lost revenue from ticket sales, which might cause sports 
leagues to expand the reach of blackouts by refusing to sell their 
rights to sports events to all distant stations. The objective of the 
sports blackout rules is not to ensure the profitability or financial 
viability of sports leagues, but rather to ensure the overall 
availability of sports programming to the general public. Thus, we are 
interested in gate receipts and other revenues of sports leagues only 
to the extent that such revenues are relevant to this objective. 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, the Sports 
Economists conclude that there is no evidence that local blackouts of 
NFL games significantly affect either ticket sales or no-shows at those 
games. We seek comment on the Sports Economists' conclusion and the 
underlying studies on which it relies. Do these studies support the 
conclusion that our sports blackout rules are no longer needed? For 
example, if local blackouts of NFL games do not significantly affect 
either ticket sales or no-shows at those games, does it follow that the 
cable sports blackout rule has no significant effect on attendance? 
Additionally, we invite commenters to submit any additional studies or 
evidence showing the extent to which local blackouts of NFL games 
impact gate receipts at those games and the extent to which the cable 
sports blackout rule itself impacts gate receipts. In particular, we 
note that the NFL asserts that its blackout policy, as supported by the 
Commission's sports blackout rules, is designed to promote high 
attendance at games. We invite the NFL and other interested commenters 
to submit any available data or evidence indicating that the NFL's 
blackout policy in fact has the intended effect of promoting attendance 
at games. As noted above, only four cities were affected by local 
blackouts of NFL games in 2011: Buffalo, Cincinnati, San Diego, and 
Tampa Bay; in 2012, local blackouts of NFL games were limited to 
Buffalo, Cincinnati, Oakland, San Diego, and Tampa Bay. We seek comment 
on whether certain teams or cities are routinely disproportionately 
affected by local blackouts of NFL games and, if so, why. For example, 
some commenters suggest that certain cities are more severely impacted 
by blackouts because of conditions in the local economy (e.g., locally 
high unemployment) or a large stadium capacity in a city with a 
relatively small population. If these are the factors that lead to 
failure to sell out games, does blacking out a game promote attendance 
at future games in those cities? Are any cities affected by these 
factors able to sellout games on a regular basis? If so, why? To what 
extent does a team's performance lead to poor attendance and blackouts? 
For example, are blackouts more common when a team is not in playoff 
contention? Should this affect our analysis? If so, how?
    25. Are the sports blackout rules necessary to sustain gate 
receipts and other revenues for NFL clubs? Commenters who assert that 
eliminating the sports blackout rules would result in a significant 
reduction in gate receipts or other revenues for NFL clubs should 
quantify or estimate the anticipated reduction and explain the basis 
for their estimates. We also seek comment on the connection between any 
such lost revenues and the willingness of teams to enter into 
agreements allowing broadcast coverage of their games, maximizing the 
availability of such broadcasts to the public.
    26. There is no specific information in the record regarding the 
effect of blackouts on gate receipts for any other sports events. We 
seek comment on whether blackouts have any significant effect on gate 
receipts for any sports events other than NFL games. Commenters should 
provide any available data or evidence to support their positions. What 
impact, if any, would elimination of the sports blackout rules be 
expected to have on gate receipts and other revenues for these sports? 
To the extent that commenters argue that eliminating the sports 
blackout rules would result in a significant reduction in gate receipts 
or other revenues for these sports, we request that they quantify or 
estimate the anticipated reduction and explain the basis for their 
estimates.
    27. Some commenters suggest that blacking out games may actually 
harm, rather than support, ticket sales. We seek comment on whether 
blacking out sports events may have the unintended effect of alienating 
sports fans and discouraging their attendance at home games. According 
to the Petitioners, recent empirical studies suggest that televising 
professional sports may actually have a positive effect on attendance 
at home games. Does televising sports events serve to generate interest 
among sports fans and thereby promote higher attendance at home games 
in the long run? If this is the case, then why would a professional 
sports league, such as the NFL, ever seek to black out games? For 
example, do commenters believe that the NFL is operating pursuant to a 
mistaken understanding of the relationship between blackouts and 
attendance? Or do commenters believe that the NFL has reason for 
maintaining its blackout policy other than attendance? Commenters are 
invited to submit any studies or evidence supporting the view that 
televising sports events encourages attendance at home games.
4. Other Relevant Data
    28. We invite commenters to submit any other information or data 
that they believe is relevant to our assessment of whether the sports 
blackout rules remain necessary to ensure the overall availability of 
sports telecasts to the public. For example, are changes in the video 
distribution market in the 40 years since the sports blackout rules 
were originally adopted, such as those described above, relevant to our 
assessment? To what extent do sports leagues distribute games via such 
premium services today and what impact do such premium services have on 
the leagues' revenues and blackout policies? Commenters should explain 
how any such information supports or undercuts the economic basis for 
the sports blackout rules.

C. Elimination of the Sports Blackout Rules

    29. We propose to eliminate the sports blackout rules. With respect 
to professional football, the sport most affected by the sports 
blackout rules, it appears from the existing record that television 
revenues have replaced gate receipts as the most significant source of 
revenue for NFL clubs in the 40 years since the rules were first 
adopted. Moreover, the record received thus far indicates no direct 
link between blackouts and increased attendance at NFL games. The 
record also suggests that the sports blackout rules have little 
relevance for sports other than professional football, because the 
distribution rights for most of the games

[[Page 4144]]

in these sports are sold by individual teams, rather than the leagues. 
Finally, it appears that the sports blackout rules are unnecessary 
because sports leagues can pursue local blackout protection through 
private contractual negotiations. Thus, it appears that the sports 
blackout rules have become obsolete. Accordingly, if the record in this 
proceeding, as updated and supplemented by commenters, confirms that 
the sports blackout rules are no longer necessary to ensure the overall 
availability to the public of sports telecasts, we propose to repeal 
these rules. We seek comment on this proposal.
    30. We seek comment on how elimination of the sports blackout rules 
would affect sports leagues and teams and their ability, as holders of 
the exclusive distribution rights to their games, to control the 
distribution of home games in the teams' home territories. As discussed 
above, the sports leagues, not the Commission, are the source of sports 
blackouts. And the Commission's rules supplement the contractual 
relationships between the leagues or individual teams that hold the 
rights to the games and the entities to which they grant distribution 
rights by requiring MVPDs to black out games that are required by the 
sports leagues or individual teams to be blacked out on local 
television stations. To the extent that the Commission's rules are no 
longer needed to assure the continued availability of sports 
programming to the public, does the Commission have any continued 
interest in supplementing these contractual relationships? Should it 
instead be left to the sports leagues and individual teams to negotiate 
in the private marketplace whatever local blackout protection they 
believe they need?
    31. Several commenters argue that the compulsory copyright licenses 
granted to MVPDs under Sections 111 and 119 of the Copyright Act would 
make it difficult or impossible for sports leagues or teams to 
negotiate the protection provided by the sports blackout rules through 
private contracts. The compulsory licenses permit cable systems and, to 
a more limited extent, satellite carriers to retransmit the signals of 
distant broadcast stations without obtaining the consent of the sports 
leagues whose games are carried on those stations, when the carriage of 
such stations is permitted under FCC rules. Absent the sports blackout 
rules, these commenters argue, an MVPD would be able to take advantage 
of the compulsory license to retransmit the signal of a distant station 
carrying a game that has been blacked out locally by a sports league or 
team.
    32. We seek comment on how the compulsory licenses would affect the 
ability of sports leagues and sports teams to obtain through market-
based negotiations the same protection that is currently provided by 
the sports blackout rules. The NFL contends that, since it contracts 
with the CBS, NBC, and FOX networks for broadcast distribution of its 
games, it lacks privity with the local network affiliates that carry 
the games and with the MVPDs that retransmit the broadcast signals. 
Thus, it claims that ensuring that all of the other parties involved in 
the distribution of its games are contractually bound to honor the 
NFL's sports blackout policy would require rewriting hundreds of 
contracts, including contracts between the NFL and the CBS, NBC, and 
FOX networks, contracts between the networks and their affiliates, and 
contracts between the network affiliates and the MVPDs. The Petitioners 
assert that this argument ignores the direct privity of contract the 
sports leagues have with the MVPDs themselves, noting that virtually 
all MVPDs carry networks or game packages owned directly by the sports 
leagues, such as the NFL Network, MLB Network, NBA TV, NHL Network, and 
NFL Sunday Ticket (DIRECTV). We seek comment on the extent to which the 
sports leagues contract directly with MVPDs for carriage of networks or 
game packages owned directly by the sports leagues. Do such contracts 
already include some form of blackout protection and, if so, what 
protection do these contracts provide? In this connection, the 
Commission has previously found that sports leagues routinely negotiate 
with MVPDs greater blackout protection than that afforded by the sports 
blackout rules, and the comments in the record support this finding. 
For example, sports leagues and teams contractually negotiate with 
MVPDs blackouts of games throughout the teams' home territories, which 
generally extend well beyond the limited 35-mile zone of protection 
afforded by our sports blackout rules. In addition, the sports blackout 
rules afford blackout protection only to the home teams, whereas sports 
leagues or teams often negotiate blackout protection for both the home 
and away teams. Accordingly, if sports leagues and teams are able to 
obtain greater protection than that afforded under the sports blackout 
rules in arm's length marketplace negotiations, why do they need the 
sports blackout rules to avoid the impact of the compulsory licenses?
    33. Moreover, the Commission has found that ``[s]ports leagues 
control both broadcast carriage and MVPD retransmission of their 
programming.'' It observed that a broadcaster cannot carry a sports 
event without the permission of the sports leagues or clubs that hold 
the rights to the event and, under the retransmission consent rules, 
MVPDs, with limited exceptions, cannot carry a broadcaster's signal 
without the permission of the broadcaster. Thus, the Commission 
reasoned that a sports league could prevent unwanted MVPD 
retransmission through its contracts with broadcasters by requiring, as 
a term of carriage, the deletion of specific sports events. Because the 
sports leagues could obtain local blackout protection through their 
contracts with broadcast stations, the Commission suggested that the 
sports leagues may not need the sports blackout rules to prevent MVPDs 
from using the compulsory licenses to carry blacked-out games. Instead, 
it stated that the sports blackout rules may serve primarily as an 
enforcement mechanism for existing contracts between broadcasters and 
sports leagues. We seek comment on this analysis. Could sports leagues 
or teams prevent MVPDs from retransmitting certain sports events 
through their contracts with broadcasters? If so, especially given the 
popularity of certain sports programming, would leagues such as the NFL 
be well positioned to secure blackout protection through private 
contractual negotiations? Would leagues need to renegotiate existing 
contracts with broadcasters to secure such protection? If so, should 
that affect our analysis? What effect, if any, would the NFL's lack of 
direct privity with the local network affiliates that carry the games 
have on its ability to control MVPD retransmission? What are the costs 
and benefits to sports leagues and teams of our elimination of the 
sports blackout rules? To the extent possible, we encourage commenters 
to quantify any costs and benefits and to submit supporting data.
    34. We seek comment also on whether and how repeal of the sports 
blackout rules would affect consumers. We received more than 7,500 
comments on the Petition from individual consumers who support 
elimination of the sports blackout rules. These comments indicate that 
sports blackouts, while less frequent now than when the sport blackout 
rules were first adopted, are still a significant source of frustration 
for consumers. Some of these consumers are disabled or elderly sports 
fans who are physically unable to attend games in

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person and rely on television (either broadcast or pay TV) to watch 
their favorite teams. Others complain that they can no longer afford to 
attend games due to high ticket prices, the economy, or reduced income 
following retirement; that they already subsidize professional sports 
through publicly funded stadiums and should be able to watch the games 
at home; or that they pay a substantial premium to watch their favorite 
NFL team on DIRECTV's NFL Sunday Ticket but are sometimes unable to 
watch due to a blackout, even though they may live 150 miles or more 
from the team's stadium. We seek comment on what impact, if any, repeal 
of the Commission's sports blackout rules would have on these and other 
consumers.
    35. The Petitioners acknowledge that eliminating the Commission's 
sports blackout rules alone likely would not end local sports blackouts 
as sports fans may wish. We note that the leagues' underlying blackout 
policies would remain, and, as discussed above, the leagues may be able 
to obtain the same blackout protection provided under our rules through 
free market negotiations. The leagues could still require local 
television stations to black out games; thus, consumers that rely on 
over-the-air television would still be unable to view blacked-out 
games. Moreover, repeal of our sports blackout rules alone would not 
provide relief to consumers that are subject to blackouts resulting 
from the leagues' use of expansive home territories. Nevertheless, the 
Petitioners assert that, ``unless and until the Commission eliminates 
the [sports blackout rules], the sports leagues will be under no 
pressure to contractually negotiate for the protection that they claim 
is necessary.'' The Petitioners suggest that, if the leagues find that 
such negotiations would be too daunting, eliminating the sports 
blackout rules may compel the leagues to lower ticket prices until all 
seats are sold out or perhaps to end blackouts altogether. We seek 
comment on whether there is any benefit to consumers of repealing the 
sports blackout rules if the sports leagues' underlying blackout 
policies remain. Is removing unnecessary or obsolete regulations in 
itself a sufficient justification for eliminating the sports blackout 
rules, even if there is no direct or immediate benefit to consumers? If 
the evidence in this proceeding, including any data or studies 
submitted by commenters, suggests that there are no tangible benefits 
to retaining the sports blackout rules but that these rules also do not 
cause any tangible harms, should the Commission repeal the sports 
blackout rules? Would removing the Commission's tacit endorsement of 
the leagues' blackout policies serve the public interest? Are the 
leagues more likely to relax or reconsider their blackout policies if 
the Commission's sports blackout rules are repealed? How does our 
analysis of the issues differ between professional sports leagues which 
have been granted exemptions from the antitrust laws and sports leagues 
which have not been granted antitrust protections?
    36. Further, we invite comment on any potential harm to consumers 
of eliminating the sports blackout rules. Some commenters express 
concern that eliminating the sports blackout rules could accelerate the 
migration of sports from free over-the-air television to pay TV, which 
would be harmful to consumers who cannot afford pay TV. As noted above, 
the compulsory copyright licenses granted to MVPDs apply to the 
retransmission of broadcast signals, not to pay TV content. According 
to NAB, if the sports blackout rules are eliminated, ``sports leagues 
wishing to retain control over distribution of their content would have 
an incentive to move to pay platforms where the compulsory license 
would not undermine their private agreements.'' Similarly, the NFL 
asserts that eliminating the sports blackout rules ``would make 
broadcast television distribution more difficult, expensive and 
uncertain and accordingly would make cable network distribution a more 
appealing prospect.'' What percentage of consumers watch the sports 
programming they view on broadcast television channels rather than pay 
TV or via the Internet using premium services such as MLB.tv? Would 
repeal of the sports blackout rules hasten the migration of NFL games 
from broadcast television channels to pay TV? If so, is it appropriate 
for the Commission to have the objective of preventing such a 
migration? We note that the NFL recently extended its contracts with 
the CBS, FOX, and NBC television networks, ensuring that many NFL games 
will remain on broadcast television channels at least through the 2022 
season. In view of these contract extensions, it appears unlikely that 
NFL games would migrate further from broadcast television channels to 
pay TV in the near future. We nevertheless seek comment on whether 
repeal of the sports blackout rules would likely encourage migration of 
NFL games to pay TV in the immediate future or in the longer term. What 
effect, if any, would repeal of the sports blackout rules have on 
migration to pay TV of sports other than professional football? In this 
regard, the record suggests that other professional sports teams 
already distribute a majority of their regular season games via RSNs 
and other cable networks. Is elimination of the sports blackout rules 
likely to result in any further migration of these sports from 
broadcast television channels to pay TV? Are there any other potential 
harms to consumers from repealing the sports blackout rules? We 
encourage commenters to quantify, to the extent possible, any benefits 
and costs to consumers of eliminating the sports blackout rules and to 
submit supporting data.
    37. Some commenters argue that eliminating the sports blackout 
rules would undermine broadcasters' local program exclusivity and harm 
localism. These commenters assert that the sports blackout rules, 
together with the network non-duplication and syndicated exclusivity 
rules, support local broadcasters' investments in high quality, diverse 
informational and entertainment programming. By hindering the ability 
of local broadcast stations to obtain and enforce exclusive local 
program rights, they assert, elimination of the sports blackout rules 
would make it more difficult for the stations to attract advertising, 
which in turn would reduce their ability to invest in local information 
programming and popular programming. Would elimination of the sports 
blackout rules have a negative impact on localism? What, if any, costs 
and benefits would repeal of the sports blackout rules have on 
broadcasters? To the extent possible, we encourage commenters to 
quantify any costs and benefits and to submit data supporting their 
positions.
    38. We seek comment also on whether and how elimination of the 
sports blackout rules would affect any other entities. Some commenters 
assert that under the Copyright Act any change in the sports blackout 
rules will trigger a proceeding before the Copyright Royalty Tribunal 
to adjust the compulsory licensing rates that cable systems pay. Would 
such a rate adjustment proceeding be mandatory or discretionary on the 
part of the Copyright Royalty Tribunal? In this regard, we note that 
the Copyright Act provides that, if the sports blackout rules are 
changed, the compulsory licensing rates ``may be adjusted to assure 
that such rates are reasonable in light of the changes.'' What burdens 
and costs would a rate adjustment proceeding impose on the Copyright 
Royalty Tribunal and any other entities? Are there any other entities 
that would be impacted by elimination of the sports

[[Page 4146]]

blackout rules? If so, what are the benefits and costs of elimination 
for those entities? We request that commenters quantify any benefits 
and costs to the extent possible and submit supporting data.
    39. Finally, we seek comment on whether, as an alternative to 
outright repeal of the sports blackout rules, we should make 
modifications to these rules. If so, what modifications should we make, 
and why would such modifications be preferable to repeal of the sports 
blackout rules? Commenters that propose any such modifications should 
quantify the benefits and costs of their proposals and provide 
supporting data.

IV. Procedural Matters

A. Initial Regulatory Flexibility Act Analysis

    40. As required by the Regulatory Flexibility Act, as amended 
(RFA), the Commission has prepared this Initial Regulatory Flexibility 
Analysis (IRFA) of the possible significant economic impact on a 
substantial number of small entities by the policies and rules 
considered in the attached Notice of Proposed Rulemaking (NPRM). 
Written public comments are requested on this IRFA. Comments must be 
identified as responses to the IRFA and must be filed by the deadlines 
for comments on the NPRM as indicated on the first page of the NPRM. 
The Commission will send a copy of the NPRM, including this IRFA, to 
the Chief Counsel for Advocacy of the Small Business Administration 
(SBA). In addition, the NPRM and the IRFA (or summaries thereof) will 
be published in the Federal Register.
Need for, and Objectives of, the Proposed Rules
    41. The NPRM proposes to eliminate the sports blackout rules, which 
prohibit certain multichannel video programming distributors (MVPDs) 
(cable, satellite, and open video systems (OVS)) from retransmitting, 
within a protected local blackout zone, the signal of a distant 
broadcast station carrying a live sports event if the event is not 
available live on a local television broadcast station. The sports 
blackout rules were originally adopted nearly 40 years ago, when the 
primary source of revenue for sports leagues was game ticket sales. The 
sports blackout rules were intended to ensure that the potential loss 
of ticket sales resulting from MVPD retransmission of distant stations 
did not cause sports leagues to refuse to sell their rights to sports 
events to the distant stations, thereby reducing the overall 
availability of sports telecasts to the public. The sports industry has 
changed dramatically in the past four decades, however, and it appears 
that the sports blackout rules may no longer be necessary to assure the 
overall availability of sports programming.
    42. The NPRM tentatively concludes that the Commission has the 
authority to eliminate the cable sports blackout rule under its general 
rulemaking power, given that Congress did not explicitly mandate that 
the Commission adopt the cable sports blackout rule. Because Congress 
directed the Commission to extend the sports blackout protection 
applied to cable to satellite and OVS, the NPRM seeks comment on 
whether the Commission also has the authority to repeal the sports 
blackout rules for satellite and OVS. In addition, the NPRM seeks 
comment on whether there is a continued need for the sports blackout 
rules. In particular, the NPRM seeks comment on whether the economic 
rationale underlying the sports blackout rules is still valid. Finally, 
the NPRM proposes to repeal the sports blackout rules and seeks comment 
on the benefits and costs of such repeal on interested parties, 
including the sports leagues, broadcasters, and consumers.
Legal Basis
    43. This NPRM is adopted pursuant to the authority found in 
Sections 1, 4(i), 4(j), 303(r), 339(b), 653(b) of the Communications 
Act of 1934, as amended, 47 U.S.C. 151, 154(i), 154(j), 303(r), 339(b), 
and 573(b).
Description and Estimate of the Number of Small Entities to Which the 
Proposed Rules Will Apply
    44. The RFA directs agencies to provide a description of, and, 
where feasible, an estimate of the number of small entities that may be 
affected by the proposed rules, if adopted. 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.
    45. 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.'' All establishments listed 
above are 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.
    46. 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

[[Page 4147]]

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.
    47. 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 1,141 cable companies at the end of June 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.
    48. 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 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.
    49. 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 $14 million or less in annual receipts. The Commission has 
estimated the number of licensed commercial television stations to be 
1,386. 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.
    50. 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.
    51. In addition, the Commission has estimated the number of 
licensed noncommercial educational (NCE) television stations to be 396. 
These stations are non-profit, and therefore considered to be small 
entities.
    52. 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.
    53. 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.
    54. 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

[[Page 4148]]

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 businesses can be considered small entities.
    55. 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.
    56. 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 $15 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.
Description of Projected Reporting, Recordkeeping, and Other Compliance 
Requirements
    57. The proposed rule changes discussed in the NPRM would affect 
compliance requirements. The proposed rule changes would eliminate the 
sports blackout rules, which prohibit certain MVPDs from televising the 
home game of a sports team within a specified geographic area 
surrounding a television broadcast station licensed to the community in 
which the game is being played if the game is not available live on a 
television broadcast station in that community.
Steps Taken To Minimize Significant Impact on Small Entities, and 
Significant Alternatives Considered
    58. The RFA requires an agency to describe any significant 
alternatives that might minimize any significant economic impact on 
small entities. Such alternatives 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.
    59. As discussed in the NPRM, repeal of the sports blackout rules 
would not eliminate the sports leagues' underlying blackout policies. 
Rather, it would simply remove Commission support for these policies. 
Sports leagues would still be able to require local television 
broadcast stations to black out games. In addition, sports leagues 
would likely be able to obtain the same protection afforded under the 
sports blackout rules either through market-based negotiations with 
MVPDs or through their contracts with broadcasters by requiring, as a 
term of carriage, the deletion of specific sports events. Accordingly, 
we believe that repeal of the sports blackout rules would impose only 
minimal burdens on any affected entities. For this reason, an analysis 
of alternatives to the proposed rule changes is unnecessary. We invite 
comment on whether there are any alternatives we should consider that 
would minimize any adverse impact on small entities, but which maintain 
the benefits of our proposal.
Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rules
    60. None.

B. Paperwork Reduction Act

    61. This Notice of Proposed Ruemaking proposes no new or modified 
information collection requirements. In addition, therefore, it does 
not propose 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. Ex Parte Rules

    62. Permit-But-Disclose. The proceeding this NPRM initiates shall 
be treated as a ``permit-but-disclose'' proceeding in accordance with 
the Commission's ex parte rules. Persons making ex parte presentations 
must file a copy of any written presentation or a memorandum 
summarizing any oral presentation within two business days after the 
presentation (unless a different deadline applicable to the Sunshine 
period applies). Persons making oral ex parte presentations are 
reminded that memoranda summarizing the presentation must (1) list all 
persons attending or otherwise participating in the meeting at which 
the ex parte presentation was made, and (2) summarize all data 
presented and arguments made during the presentation. If the 
presentation consisted in whole or in part of the presentation of data 
or arguments already reflected in the presenter's written comments, 
memoranda or other filings in the proceeding, the presenter may provide 
citations to such data or arguments in his or her prior comments,

[[Page 4149]]

memoranda, or other filings (specifying the relevant page and/or 
paragraph numbers where such data or arguments can be found) in lieu of 
summarizing them in the memorandum. Documents shown or given to 
Commission staff during ex parte meetings are deemed to be written ex 
parte presentations and must be filed consistent with rule Sec.  
1.1206(b). In proceedings governed by rule Sec.  1.49(f) or for which 
the Commission has made available a method of electronic filing, 
written ex parte presentations and memoranda summarizing oral ex parte 
presentations, and all attachments thereto, must be filed through the 
electronic comment filing system available for that proceeding, and 
must be filed in their native format (e.g., .doc, .xml, .ppt, 
searchable .pdf). Participants in this proceeding should familiarize 
themselves with the Commission's ex parte rules.

D. Filing Requirements

    63. Pursuant to Sec. Sec.  1.415 and 1.419 of the Commission's 
rules, 47 CFR 1.415, 1.419, interested parties may file comments and 
reply comments on or before the dates indicated on the first page of 
this document. Comments may be filed using the Commission's Electronic 
Comment Filing System (ECFS).
    [ssquf] Electronic Filers: Comments may be filed electronically 
using the Internet by accessing the ECFS: https://www.fcc.gov/cgb/ecfs/.
    [ssquf] Paper Filers: Parties who choose to file by paper must file 
an original and one copy of each filing. If more than one docket or 
rulemaking number appears in the caption of this proceeding, filers 
must submit two additional copies for each additional docket or 
rulemaking number.
    Filings can be sent by hand or messenger delivery, by commercial 
overnight courier, or by first-class or overnight U.S. Postal Service 
mail. All filings must be addressed to the Commission's Secretary, 
Office of the Secretary, Federal Communications Commission.
    1. All hand-delivered or messenger-delivered paper filings for the 
Commission's Secretary must be delivered to FCC Headquarters at 445 
12th St. SW., Room TW-A325, Washington, DC 20554. The filing hours are 
8:00 a.m. to 7:00 p.m. All hand deliveries must be held together with 
rubber bands or fasteners. Any envelopes and boxes must be disposed of 
before entering the building.
    2. Commercial overnight mail (other than U.S. Postal Service 
Express Mail and Priority Mail) must be sent to 9300 East Hampton 
Drive, Capitol Heights, MD 20743.
    3. U.S. Postal Service first-class, Express, and Priority mail 
should be addressed to 445 12th Street SW., Washington, DC 20554.
    64. People With Disabilities: To request materials in accessible 
formats for people with disabilities (braille, large print, electronic 
files, audio format), send an email to fcc504@fcc.gov or call the 
Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-
418-0432 (tty).
    65. 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

    66. 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), and 573(b) this Notice of Proposed Rulemaking is 
adopted.
    67. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Notice of Proposed Rulemaking in MB Docket No. 12-3, 
including the Initial Regulatory Flexibility Analysis, to the Chief 
Counsel for Advocacy of the Small Business Administration.

List of Subjects in 47 CFR Part 76

    Cable television.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Proposed Rules

    For the reasons discussed in the preamble, the Federal 
Communications Commission proposes to amend 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.


Sec.  76.111  [Removed]

0
2. Remove Sec.  76.111.
0
3. Amend Sec.  76.120 by removing paragraph (e)(3) and revising the 
section heading 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
4. Remove Sec. Sec.  76.127 and 76.128.
0
5. 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
6. Amend Sec.  76.1506 by removing paragraph (m) and redesignating 
paragraphs (n) and (o) as paragraphs (m) and (n).

[FR Doc. 2014-01338 Filed 1-23-14; 8:45 am]
BILLING CODE 6712-01-P