Network Non-Duplication and Syndicated Exclusivity Rules, 19849-19860 [2014-08114]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 79, Number 69 (Thursday, April 10, 2014)]
[Proposed Rules]
[Pages 19849-19860]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-08114]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[MB Docket No. 10-71; FCC 14-29]


Network Non-Duplication and Syndicated Exclusivity Rules

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this document, the Commission seeks comment on whether to 
eliminate or modify the network non-duplication and syndicated 
exclusivity rules in light of changes in the video marketplace in the 
more than 40 years since these rules were adopted. The Commission seeks 
comment on whether the exclusivity rules are still needed to protect 
broadcasters' ability to compete in the video marketplace and to ensure 
that program suppliers have sufficient incentives to develop new and 
diverse programming and on the impact of eliminating of the exclusivity 
rules.

DATES: Comments for this proceeding are due on or before May 12, 2014; 
reply comments are due on or before June 9, 2014.

ADDRESSES: You may submit comments, identified by MB Docket No. 10-71, 
by any of the following methods:
     Federal Communications Commission's Web site: https://fjallfoss.fcc.gov/ecfs2/. Follow the instructions for submitting 
comments.
     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.
     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 
Further Notice of Proposed Rulemaking, FCC 14-29, adopted on March 31, 
2014 and released on March 31, 2014. The full text is available for 
public inspection and copying during regular business hours in the FCC 
Reference Center, Federal Communications Commission, 445 12th Street 
SW., CY-A257, Washington, DC 20554. This document will also be 
available via ECFS (https://www.fcc.gov/cgb/ecfs/). Documents will be 
available electronically in ASCII, Word 97, and/or Adobe Acrobat. The 
complete text may be purchased from the Commission's copy contractor, 
445 12th 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: 

I. Introduction

    1. We are issuing this FNPRM to solicit additional comment on 
whether we should eliminate or modify our network non-duplication and 
syndicated exclusivity rules. We received numerous comments on this 
issue in response to the NPRM. However, the record developed in this 
proceeding to date is not sufficient for us to yet make a determination 
whether the exclusivity rules are still needed in today's competitive 
video marketplace or to assess the potential impact on affected parties 
of eliminating these rules. Given the complex issues involved, we 
believe it is necessary and appropriate to undertake a more 
comprehensive review of the exclusivity rules and to compile a more 
complete record.

II. Background

    2. A broadcaster may carry network and syndicated programming on 
its local television station(s) only with the permission of the 
networks or syndicators that own or hold the rights to that 
programming, as reflected in network/affiliate agreements or 
syndication agreements. In addition, the ability of broadcasters to 
grant retransmission consent for MVPD carriage may be constrained by 
the network/affiliate agreement or by the syndication agreement because 
such agreements generally limit the geographical area in which the 
station holds exclusive rights to network or syndicated programming. 
The Commission's network non-duplication and syndicated exclusivity 
rules are designed to serve as a means of enforcing contractual 
exclusivity agreements entered into between broadcasters, which 
purchase the distribution rights to programming, and networks and 
syndicators, which supply the programming. Thus, the network non-
duplication and syndicated exclusivity rules require that the 
broadcaster have contractual exclusivity rights and provide proper 
notice to the relevant MVPD, requesting that an MVPD delete duplicative 
network or syndicated programming. The rules may be invoked by stations 
that elect retransmission consent in their local markets, even if they 
are not actually carried by the MVPD, to prevent an MVPD from carrying 
programming of a distant station that duplicates local broadcast 
station programming. By requiring MVPDs to delete duplicative network 
or syndicated programming

[[Page 19850]]

carried on any distant signals they import into a local market, the 
Commission's network non-duplication and syndicated exclusivity rules 
provide an extra-contractual mechanism for broadcasters to enforce 
their contractual exclusivity rights against MVPDs, which are not 
parties to those exclusivity agreements.

A. Network Non-Duplication

    3. The network non-duplication rules protect a local commercial or 
non-commercial broadcast television station's right to be the exclusive 
distributor of network programming within a specified zone, and require 
programming subject to the rules to be blacked out on request when 
carried on another station's signal imported by an MVPD into the local 
station's zone of protection. A television station's rights under the 
network non-duplication rules are governed by the terms of the 
contractual agreement between the station and the holder of the rights 
to the program. The Commission's rules allow commercial and non-
commercial television stations to protect the exclusive distribution 
rights they have negotiated with broadcast networks, not to exceed a 
specified geographic zone of 35 miles (55 miles for network programming 
in smaller markets). For purposes of these rules, it is these specified 
zones that distinguish between ``local'' and ``distant.''
    4. Cable. Network non-duplication rules for cable were first 
promulgated by the Commission in 1965. Throughout the 1960s and 1970s 
the Commission continually refined the rules, but the policy behind 
them remained the same. The purpose of the rules was to protect the 
exclusive contractual rights of local broadcasters in network 
programming from the importation of non-local network stations by cable 
systems, thereby protecting local stations from what was perceived as 
the potential harm from the growth of cable systems. In this regard, 
the Commission was concerned that because broadcasters and cable 
systems were on an unequal footing with respect to the market for 
programming, a cable system's duplication of local programming via the 
signals of distant stations was not a fair method of competition with 
broadcasters. Prior to 1988, network non-duplication protection applied 
only to programming being broadcast simultaneously in the local market 
by a distant signal. In 1988, the Commission modified the rule to 
extend exclusivity protection to any time period specified in the 
contractual agreement between the network and the affiliate.
    5. The Commission's rules contain several exceptions to application 
of the network non-duplication rules. First, because of the cost of the 
equipment necessary to delete programming, the Commission exempts cable 
systems having fewer than 1,000 subscribers. The rule also does not 
apply if the out-of-market station's signal is deemed ``significantly 
viewed'' in a relevant community. This latter exception was intended to 
prevent the deletion of programs on stations which the viewers could 
receive off-the-air.
    6. Satellite. The Satellite Home Viewer Improvement Act of 1999 
(``SHVIA'') directed the Commission to apply the cable network non-
duplication rules to direct broadcast satellite (``DBS''), but only 
with respect to the retransmission of nationally distributed 
superstations. These nationally distributed superstations may be 
offered to any satellite subscriber, without the ``unserved household'' 
restriction that applies to other distant network stations. SHVIA 
directed the Commission to implement new exclusivity rules for 
satellite that would be ``as similar as possible'' to the rules 
applicable to cable operators. In general, the network non-duplication 
rules apply when a satellite carrier retransmits a nationally 
distributed superstation to a household within a local broadcaster's 
zone of protection and the nationally distributed superstation carries 
a program to which the local station has exclusive rights. In contrast 
to the mileage-based specified zones used in the cable context, zip 
codes are used to determine the areas to which the zone of protection 
applies for satellite carriers. As in the cable context, the broadcast 
station licensees may exercise their network non-duplication rights in 
accordance with the terms specified in a contractual agreement between 
the network and its affiliate within the zone of protection. The rules 
for satellite carriers also have exceptions for significantly viewed 
stations and for areas in which the satellite carrier has fewer than 
1,000 subscribers in a protected zone.
    7. Open Video Systems. The Telecommunications Act of 1996 (the 
``1996 Act'') established the open video system as a new framework for 
entry into the video programming distribution market. 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, the 1996 Act provides for reduced regulatory 
burdens for open video systems subject to the systems' compliance with 
certain non-discrimination and other requirements. However, the 1996 
Act directed the Commission to extend its network non-duplication rules 
to the distribution of video programming over open video systems. 
Accordingly, the Commission amended its rules in 1996 to directly apply 
the existing network non-duplication rules to open video systems.

B. Syndicated Exclusivity

    8. The syndicated exclusivity rules are similar in operation to the 
network non-duplication rules, but they apply to exclusive contracts 
for syndicated programming, rather than for network programming. In 
addition, the syndicated exclusivity rules apply only to commercial 
stations. The syndicated exclusivity rules allow a local commercial 
broadcast television station or other distributor of syndicated 
programming to protect its exclusive distribution rights within a 35-
mile geographic zone surrounding a television station's city of 
license, although the zone may not be greater than that provided for in 
the exclusivity contract between the station and syndicator. Unlike the 
network non-duplication rule, however, the zone of protection is the 
same for smaller markets as it is for the top-100 markets. With only a 
few exceptions, a station that has obtained syndicated exclusivity 
rights in a program may request a cable operator to black out that 
program as broadcast by any other television station, and may request a 
satellite operator to provide such protection against any nationally 
distributed superstation. The cable or satellite system must comply if 
properly notified in accordance with the rules.
    9. Cable. The Commission adopted the first syndicated exclusivity 
rules in 1972, consistent with a ``Consensus Agreement'' that was 
negotiated among the cable, broadcast, and program production 
industries in order to facilitate the passage of copyright legislation. 
These rules were considered necessary to ``protect local broadcasters 
and to ensure the continued supply of television programming.'' Shortly 
after Congress established a copyright compulsory license system in 
1976, the Commission began an inquiry to review the ``purpose, effect, 
and desirability of'' the syndicated exclusivity rules. In 1979, the 
Commission adopted the Report on Cable Television Syndicated

[[Page 19851]]

Exclusivity Rules, which performed a cost-benefit analysis to determine 
whether retaining the syndicated exclusivity rules would be in the 
public interest. The Commission found that eliminating the rules would 
have negligible effects on the size of local station audiences and 
consequently would not significantly harm any broadcaster. The 
Commission concluded that, when weighed against the minimal negative 
impact on broadcasters and program supply, the increase in diversity 
and number of new cable systems that the rules' elimination would allow 
supported their repeal. Therefore, in 1980, the Commission repealed the 
syndicated exclusivity rules.
    10. In 1988, however, the Commission reversed its decision, finding 
that the reasoning that shaped the 1980 decision to repeal the 
syndicated exclusivity rules was flawed in two significant respects. 
First, the Commission found that its prior inquiry had incorrectly 
examined the effects of repeal or retention on individual competitors 
rather than how the competitive process operates. Second, the 
Commission found that it had failed to analyze the effects on the local 
television market of denying broadcasters the ability to enter into 
contracts with enforceable exclusive exhibition rights when they had to 
compete with cable operators, who could enter into such contracts. The 
Commission concluded that the absence of syndicated exclusivity rules 
both hurt the supply of programs to broadcasters and unfairly 
handicapped competition between broadcasters and cable systems to meet 
viewers' preferences in the distribution of existing programming. The 
Commission therefore reinstated its syndicated exclusivity rules.
    11. The Commission's current cable syndicated program exclusivity 
rules allow commercial stations to protect their exclusive distribution 
rights for syndicated programming against local cable systems in a 
local market. Distributors of syndicated programming are allowed to 
seek protection for one year from the initial licensing of such 
programming anywhere in the United States, except where the relevant 
programming has already been licensed. The exceptions to application of 
the syndicated program exclusivity rules are similar to those that 
apply to the network non-duplication rules. Cable systems with fewer 
than 1,000 subscribers are exempt because of the cost of the equipment 
necessary to carry out deletions. The rules also do not apply if the 
distant station's signal is ``significantly viewed'' in a relevant 
cable community. In addition, the syndicated programming of a distant 
station need not be deleted if that station's Grade B signal 
encompasses the relevant cable community.
    12. Satellite. SHVIA directed the Commission to apply its cable 
syndicated exclusivity rules to DBS providers only with respect to 
retransmission of nationally distributed superstations. The Commission 
implemented this using zip codes rather than community units to 
determine zones of protection. The rules for satellite carriers also 
provide exceptions for significantly viewed stations and for areas in 
which the satellite carrier has fewer than 1,000 subscribers in a 
protected zone.
    13. Open Video Systems. The 1996 Act also directed the Commission 
to apply its cable syndicated exclusivity rules to the distribution of 
video programming over open video systems. The Commission amended its 
rules in 1996 to apply the existing cable syndicated exclusivity rules 
directly to open video systems.

C. The Compulsory Copyright License

    14. Under the Copyright Act, unlicensed retransmission of the 
copyrighted material in a broadcast signal constitutes copyright 
infringement. At the time the Commission initially adopted the 
exclusivity rules, cable systems were permitted under the Copyright Act 
to retransmit the signals of broadcast television stations without 
incurring any copyright liability for the copyrighted programs carried 
on those signals. In 1976, Congress enacted amendments to the Copyright 
Act which impose copyright liability on cable systems for 
retransmission of broadcast signals, but also create a permanent 
compulsory license under which cable systems may retransmit the signals 
of all local broadcast stations and distant broadcast stations to the 
extent that carriage of such distant stations is permitted under FCC 
rules. In 1988, Congress amended the Copyright Act to create a 
temporary compulsory license for satellite carriers. In 1999, a new 
temporary compulsory license was enacted to permit satellite carriers 
to retransmit the signals of local stations to any subscriber within a 
station's local market (``local-into-local'' service). The temporary 
compulsory license granted to satellite carriers under the Copyright 
Act for distant stations is more limited than that granted to cable 
systems. Satellite carriers may retransmit signals of nationally 
distributed superstations to any household but may retransmit the 
signals of distant network stations to subscribers only if local 
network stations are unavailable to the subscribers as part of a 
satellite carrier's local-into-local package and over the air, and only 
to the extent that carriage of such superstations and distant stations 
is permitted under the FCC rules.

D. Petitions for Rulemaking

    15. In 2005, ACA filed a rulemaking petition asserting that 
broadcasters use exclusivity and network affiliation agreements to 
extract ``supracompetitive prices'' for retransmission consent from 
small companies, and that this practice harms competition and 
consumers. Similarly, the 2010 Petition argued that the network non-
duplication and syndicated exclusivity rules provide broadcasters with 
a ``one-sided level of protection'' that is no longer justified. The 
NPRM in this proceeding sought comment on the potential benefits and 
harms of eliminating the Commission's rules concerning network non-
duplication and syndicated programming exclusivity. While the 
Commission received numerous comments on this issue, the record in this 
proceeding to date does not provide a sufficient basis on which to make 
a determination whether the exclusivity rules are still needed in 
today's video marketplace and whether these rules should be eliminated. 
Accordingly, we are issuing this FNPRM to compile a more complete 
record on whether the exclusivity rules should be eliminated.

III. Discussion

    16. We seek further comment on whether we should eliminate or 
modify the network non-duplication and syndicated exclusivity rules. 
Settled case law confirms that the Commission has jurisdiction under 
the Communications Act to impose the cable exclusivity rules. We 
tentatively conclude that Congress has not withdrawn from the 
Commission the authority to amend or repeal the cable rules. In 
addition, we tentatively conclude that the Commission has the authority 
to eliminate the exclusivity rules for satellite carriers and open 
video systems. We request comment on whether the exclusivity rules are 
still needed to protect broadcasters' ability to compete in the video 
marketplace and to ensure that program suppliers have sufficient 
incentives to develop new and diverse programming. We seek comment on 
whether the Commission should eliminate these rules as an unnecessary 
regulatory intrusion in the marketplace if we determine that they are 
no longer needed to serve their intended purposes. In particular, we 
seek comment on the impact that elimination

[[Page 19852]]

of the exclusivity rules would have on all interested parties, 
including broadcasters, MVPDs, program suppliers, and consumers.

A. Legal Authority

    17. We tentatively conclude that the Commission has authority to 
eliminate the exclusivity rules for cable operators, satellite 
carriers, and open video systems. As discussed above, Congress did not 
explicitly mandate that the Commission adopt the network non-
duplication and syndicated exclusivity rules for cable. Rather, the 
Commission adopted these rules to provide a mechanism for broadcasters 
to enforce their exclusive contractual rights in network and syndicated 
programming by preventing cable systems from importing distant network 
station programming. Case law confirms that the Commission has the 
authority to impose exclusivity rules on cable operators under its 
broad grant of authority under the Communications Act. Section 
653(b)(1)(D) of the Act, as codified by the 1996 Act, directed the 
Commission to extend to open video systems ``the Commission's 
regulations concerning . . . network non-duplication (47 CFR 76.92 et 
seq.), and syndicated exclusivity (47 CFR 76.151 et seq.).'' Similarly, 
Section 339(b) of the Communications Act, as codified by SHVIA in 1999, 
directed the Commission to ``apply network nonduplication protection 
(47 CFR 76.92) [and] syndicated exclusivity protection (47 CFR 76.151) 
. . . to the retransmission of the signals of nationally distributed 
superstations by satellite carriers.'' Reflecting the language used in 
these 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.
    18. Some broadcasters argue that eliminating the exclusivity rules 
for cable operators would be inconsistent with congressional intent and 
beyond the Commission's authority, given the longstanding Commission 
precedent involving the rules and a statement in the legislative 
history of the Cable Television Consumer Protection and Competition Act 
of 1992 (``1992 Act'') that the exclusivity rules were integral to 
achieving congressional objectives. As the Commission has previously 
stated, however, ``[i]f the [exclusivity] rules should ultimately prove 
unnecessary or need modification in light of the passage of time, 
congressional action or other factors, they can be modified or 
rescinded.'' And we see no statutory provision that requires the 
Commission to keep the exclusivity rules on the books. Indeed, over the 
years, the Commission has made significant adjustments to the 
exclusivity regulatory scheme based on changed circumstances, for 
example, promulgating the syndicated exclusivity rules in 1972, 
repealing the syndicated exclusivity rules in 1980, and then 
reinstating the syndicated exclusivity rules in 1988. We tentatively 
conclude that, with full knowledge of these regulatory shifts, Congress 
nonetheless left intact the Commission's general rulemaking power with 
respect to the cable exclusivity rules, including the authority to 
revisit its rules and modify or repeal them should it conclude such 
action is appropriate. We seek comment on this tentative conclusion. We 
also tentatively conclude that we have the authority to eliminate the 
exclusivity rules for DBS and OVS and seek comment on this tentative 
conclusion. We note that, in enacting Sections 339(b) and 653(b)(1)(D) 
of the Act, Congress directed the Commission to apply to DBS and OVS 
the non-duplication and syndicated exclusivity protections that the 
Commission applied to cable, set forth in 47 CFR 76.92 and 76.151, 
rather than simply enacting exclusivity protection for those services 
or even directing the Commission to adopt exclusivity rules for those 
services. The statute does not withdraw the Commission's authority to 
modify its cable exclusivity rules 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 exclusivity rules, we tentatively conclude 
that this evinces an intent on the part of Congress that the Commission 
should accord the same regulatory treatment to DBS and OVS as cable, 
and seek comment on that tentative conclusion. Alternatively, are 
Congress's directives to the Commission regarding the application of 
network non-duplication and syndicated exclusivity protections to open 
video systems and to satellite carriers best interpreted to mean that 
the Commission does not have the authority to repeal the exclusivity 
rules for these types of entities, even if we decide to eliminate these 
rules for cable? Would elimination of the exclusivity rules for cable 
but not for DBS and/or OVS create undue regulatory disparities or 
disadvantages for these entities?

B. Assessing the Continued Need for Network Non-Duplication and 
Syndicated Exclusivity Rules

    19. In this section, we seek comment on the extent to which the 
network non-duplication and syndicated exclusivity rules are still 
needed to serve their intended purposes in light of changes in the 
video marketplace and the legal landscape in the decades since their 
adoption. As discussed above, the network non-duplication and 
syndicated exclusivity rules were both intended in part to facilitate 
broadcasters' ability to compete in the video marketplace by protecting 
their exclusive contractual rights in network and syndicated 
programming from cable systems' importation of distant stations. We 
seek comment on how changes in the video marketplace have impacted 
local broadcasters' ability to compete fairly with cable operators and 
other MVPDs. At the time the exclusivity rules were adopted, the 
Commission was concerned that cable systems' importation of distant 
stations carrying network or syndicated programming would adversely 
impact local broadcast stations by diverting the station's audience to 
the distant station, resulting in a reduction of the local station's 
advertising revenues, essentially the only source of revenue for the 
stations at the time. To what extent would local broadcast stations' 
audiences likely be diverted to distant stations carried on cable 
systems if the exclusivity rules were eliminated? In this regard, we 
note that when the exclusivity rules were initially adopted, the 
Communications Act prohibited a broadcast station from rebroadcasting 
another station's signal without permission, but did not prohibit cable 
retransmission of broadcast stations without permission. In the 1992 
Cable Act, Congress extended this restriction on unauthorized 
retransmission of broadcast stations to cable operators. The 
restriction on unauthorized retransmission of broadcast stations was 
later extended to all MVPDs. Thus, in general, an MVPD may not carry a 
broadcast station's signal today without the consent of the 
broadcaster. We seek comment on whether, given the extension of the 
prohibition on unauthorized retransmission of broadcast stations to 
MVPDs, the exclusivity regulations continue to be necessary or whether 
the retransmission consent requirement adequately addresses the 
Commission's regulatory goals and thus undercuts the basis for the 
exclusivity rules. Commenters argue that MVPDs are unlikely to seek to 
import a distant station's signal today unless they are

[[Page 19853]]

faced with the blackout of a local station as a result of a 
retransmission dispute, and that any such importation would likely be 
limited in duration. We seek comment on this view, and we request that 
commenters quantify or estimate any costs associated with importation 
of a distant station's signal and submit data supporting their 
positions. If MVPDs are unlikely to import distant stations except 
during an impasse in retransmission consent negotiations, does this 
support the view that the exclusivity rules are no longer needed? We 
further note that, given the prohibition on unauthorized retransmission 
of broadcast stations, a distant station would have to agree to be 
imported in such circumstances and that contractual arrangements 
between networks and their affiliates may bar a broadcaster from 
agreeing to the importation of its distant signal. To what extent do 
existing network/affiliate agreements prohibit a local broadcaster from 
allowing its signal to be imported by a distant cable operator without 
reference to the existence of a Commission prohibition? Similarly, we 
seek comment on whether judicial enforcement of an exclusivity 
provision in a network affiliation or syndication agreement would be 
sufficient to protect the interests of local broadcasters and whether 
the public interest would be served by requiring such enforcement to 
proceed through normal contractual means, subject to the normal grounds 
on which the enforcement of exclusive contracts can be challenged. 
Additionally, broadcasters have increasingly sought and received 
monetary compensation in exchange for retransmission consent. Would 
such demands for compensation or higher copyright license fees 
associated with carrying distant stations discourage an MVPD from 
importing duplicative programming? To the extent that an MVPD can 
import a distant station in an adjacent market for a lower 
retransmission consent fee, is the MVPD likely to carry that station 
instead of the local station? If an MVPD did choose to import 
duplicative programming, to what extent would such duplication likely 
result in diversion of the local station's audience?
    20. We also seek comment on the likely impact that any diversion of 
a local station's audience to a distant station would have on the 
station's advertising revenues. Would any such impact be different for 
a distant station in an adjacent market than for a distant station in a 
market that is very far away and with no connection to the local area? 
To the extent possible, we request that commenters quantify or estimate 
the likely effect of any such audience diversion on a station's 
advertising revenues and provide data supporting their positions. 
Moreover, we seek comment on the extent to which changes in the sources 
of local broadcast station revenues may impact the need for retaining 
the exclusivity rules. At the time the exclusivity rules were adopted, 
on-air advertising revenues were essentially the only source of revenue 
for broadcasters. Today, on-air advertising revenues still constitute 
about 85 percent of broadcasters' revenues, but they are increasingly 
turning to additional revenue sources, including retransmission consent 
fees from MVPDs and advertising sold on their Web sites. Do the 
existence of those alternative revenue sources provide any new basis 
for either the abolition or retention of the exclusivity rules? That 
is, what effect, if any, do these changes in local broadcasters' 
sources of revenue have on the need for the exclusivity rules? What 
effect would repeal of the exclusivity rules have on the retransmission 
consent fees received by broadcasters and what are the public interests 
implications of any such effect?
    21. As discussed above, the exclusivity rules were based in part on 
the Commission's concern that a cable system's duplication of local 
programming via the signals of distant stations was not a fair method 
of competition with broadcasters because broadcasters and cable systems 
were on an unequal footing with respect to the market for programming. 
Is this reasoning still valid today, given that MVPDs now do compete 
with broadcasters for access to programming? Additionally, we invite 
comment on whether and how the growth in the number of video 
programming options available to consumers since the exclusivity rules 
were first adopted impacts the need for the exclusivity rules. 
Specifically, while a consumer seeking to purchase video programming 
service previously had one cable operator as the only video service 
option, today consumers may choose among several MVPDs and also may 
access video programming on the Internet. Do broadcasters' demands for 
larger retransmission consent fees from the MVPDs in their market 
suggest a significant increase in their leverage in the marketplace? 
Would such an increase in broadcasters' leverage and market power 
suggest that the exclusivity rules are no longer needed to protect 
broadcasters' ability to compete with MVPDs? Why or why not? Would 
broadcasters' increase in leverage and market power be attributed to 
the exclusivity rights broadcasters have with respect to network and 
syndicated programming? Are there any other changes in the video 
marketplace that are relevant to whether the exclusivity rules are 
still needed to ensure fair and open competition between broadcasters 
and MVPDs?
    22. Further, we seek comment on the extent to which the exclusivity 
rules are still needed to provide incentives for program suppliers to 
produce syndicated and network programming and promote program 
diversity. In reinstating the syndicated exclusivity rules in 1988, the 
Commission concluded that financial incentives for program suppliers to 
develop new programming are greater with syndicated exclusivity rules 
than they are without them. Specifically, the Commission found that 
duplication of syndicated programming diverts a substantial portion of 
the local broadcast audience to a distant station carried on a cable 
system, thereby lessening the value of syndicated programming to 
broadcast stations and lowering the price that syndicated program 
suppliers receive for their programming, which in turn reduces 
incentives for syndicated program suppliers to develop new programs. 
Such reduced incentives, the Commission stated, translate into a 
reduction in the diversity of programming available to the public. Are 
the Commission rules still necessary to the effectuation of that goal, 
or are alternative remedies available to private parties?
    23. Commenters have argued that MVPDs would be unlikely to seek to 
import a distant station's signal unless they are faced with a blackout 
situation during an impasse in retransmission consent negotiations and 
that any such importation would probably be of limited duration. If 
this argument is valid, we would not expect to see significant 
duplication of syndicated programming if we repeal our exclusivity 
rules. We seek comment on this view and the extent to which it should 
inform the Commission's decision. To the extent that duplication of 
syndicated and network programming is unlikely in today's competitive 
marketplace, are the exclusivity rules still needed to provide 
incentives for program suppliers to produce syndicated and network 
programming? In particular, we seek input from suppliers of syndicated 
programming on how elimination of our exclusivity rules would affect 
their incentives to develop new and diverse programming. One

[[Page 19854]]

commenter notes that, unlike when the exclusivity rules were adopted, 
some program suppliers today ``dilute'' broadcasters' exclusive rights 
by selling DVDs or downloads of popular programs, by making programming 
available on mobile devices and online, in some cases at no charge to 
the audience but with associated advertising, and by licensing programs 
for distribution over cable networks at the same time they are 
distributed through broadcast stations. We seek comment on the extent 
to which program suppliers currently dilute broadcasters' exclusive 
rights by making their programming available through multiple outlets. 
Does this existing duplication of programming undercut arguments that 
repeal of the exclusivity rules would adversely affect program 
suppliers' incentives to produce new and diverse programming? Are there 
other factors that we should consider in determining whether 
eliminating the exclusivity rules would adversely impact the diversity 
and supply of syndicated and network programming? Are there any factors 
or theories that would support retention of one set of exclusivity 
rules and not the other?
    24. We note that the Commission previously relied in part on 
economic studies and other empirical data in considering the need for 
the syndicated exclusivity rules. We seek evidence to assist in our 
determination as to whether the exclusivity rules are still needed 
today and to assess the potential impact of eliminating the exclusivity 
rules. To the extent commenters support repealing or maintaining the 
rules, we seek empirical data and other evidence to support elimination 
or retention of the exclusivity rules. To the extent that economic 
studies or other empirical data relevant to our inquiries in this 
proceeding are available, we urge commenters to submit such data.

C. Impact of Eliminating Network Non-Duplication and Syndicated 
Exclusivity Rules

    25. If we determine that the network non-duplication and syndicated 
exclusivity rules are no longer needed to ensure fair competition 
between local broadcasters and MVPDs and to ensure the diversity and 
supply of syndicated programming, would there be any reason to retain 
these rules? In particular, we seek comment on the costs and benefits 
of eliminating the exclusivity rules on all interested parties, 
including broadcasters, MVPDs, and program suppliers, and, of course, 
consumers. To the extent possible, commenters are requested to quantify 
any costs or benefits and submit supporting data. How should we weigh 
the costs and benefits of eliminating the exclusivity rules? Would any 
costs associated with eliminating the exclusivity rules outweigh the 
benefits of eliminating unnecessary or obsolete rules?
    26. We seek comment on the impact of eliminating the exclusivity 
rules on retransmission consent negotiations. Would eliminating the 
rules merely eliminate a government-imposed barrier to free market 
negotiations? We note, in this regard, that broadcasters assert that 
eliminating the exclusivity rules would give MVPDs unfair leverage in 
retransmission consent negotiations. The Commission has previously 
found that ``Congress intended that local stations electing 
retransmission consent should be able to invoke network nonduplication 
protection and syndicated exclusivity rights, whether or not these 
stations are actually carried by a cable system.'' In support of this 
finding, the Commission cited the legislative history of the 1992 Act, 
which states that

the Committee has relied on the protections which are afforded local 
stations by the FCC's network non-duplication and syndicated 
exclusivity rules. Amendments or deletions of these rules in a 
manner which would allow distant stations to be submitted [sic] on 
cable systems for carriage or [sic] local stations carrying the same 
programming would, in the Committee's view, be inconsistent with the 
regulatory structure created in [the 1992 Act].

We seek comment on the relationship between exclusivity protection and 
the retransmission consent regime and whether elimination of the 
exclusivity rules would be ``inconsistent with the regulatory structure 
created in [the 1992 Act].'' As discussed above, Congress appeared to 
be concerned with the importation of distant programming that would 
compete with local programming carried by the cable system. Arguably, 
that concern does not extend to retransmission consent negotiation 
impasses, where the local broadcaster pulls its station from a cable 
system or other MVPD. We seek comment on this proposition. What effect 
would the compulsory licenses have on broadcasters' ability to obtain 
through market-based negotiations the same exclusivity protection 
currently provided by our rules? One commenter suggests that, because 
most broadcast network affiliation and syndicated exclusivity 
agreements grant exclusivity in the entire Designated Market Area, 
which is beyond the scope of exclusivity protected by the FCC rules, 
elimination of the exclusivity rules would likely result in a 
substantial expansion of exclusivity. We seek comment on this view. If 
elimination of the exclusivity rules would likely result in expansion 
of exclusivity, does this argue in favor of or against elimination?
    27. We seek comment on how elimination of the exclusivity rules 
would affect existing exclusivity contracts and broadcasters' ability 
to enforce those contracts. We note that upon elimination of our 
exclusivity rules, free market negotiations between broadcasters and 
networks or syndicated program suppliers would continue to determine 
the exclusivity terms of affiliation and syndicated programming 
agreements, and broadcasters and MVPDs would continue to conduct 
retransmission consent negotiations in light of these privately 
negotiated agreements, but without Commission intrusion in the form of 
a regulatory enforcement mechanism. Thus, parties seeking to enforce 
contractual network non-duplication and syndicated exclusivity 
provisions would need to seek recourse from the courts (or, if 
contracts permit, alternative dispute resolution mechanisms) rather 
than the Commission. While some commenters assert that judicial 
enforcement of exclusive arrangements would be too difficult or costly, 
they have not provided specific, detailed data in support of their 
assertions. To the extent that commenters assert that judicial 
enforcement of exclusivity agreements would be too difficult or costly, 
we request that they quantify or estimate any costs associated with 
judicial enforcement and submit data supporting their positions. We 
also specifically request comment on the impact that broadcasters' lack 
of direct privity of contract with MVPDs with respect to the 
exclusivity rights arising from network affiliation or syndication 
agreements would likely have on broadcasters' judicial recourse. As a 
practical matter, in the absence of the exclusivity rules, how would a 
local station seeking to enforce an exclusivity agreement proceed 
against an MVPD that is importing the duplicative programming of a 
distant station, and how difficult and costly would that be? In this 
regard, one commenter suggests that a local station seeking to enforce 
an exclusivity agreement would have to proceed against the network or 
distant station (assuming that all network affiliates are made parties 
to all affiliation agreements with that network), which in turn would 
have to proceed against the MVPD. Is this accurate? What costs would 
the local station incur? Could the local station instead, if made a 
party to

[[Page 19855]]

other stations' affiliation agreements, bring a court action against 
the distant station that allowed its signal to be carried in the local 
station's market? If the record demonstrates that judicial enforcement 
of exclusivity agreements is too unwieldy and expensive, is there some 
other enforcement mechanism that could serve in the Commission's stead? 
Is there any legitimate reason that the Commission should provide a 
regulatory mechanism for enforcement of private exclusivity agreements?
    28. Time Warner Cable suggests that exclusivity agreements could be 
viewed as unreasonable restraints on trade under traditional antitrust 
principles if subjected to judicial scrutiny. We seek comment on how 
application of antitrust principles might impact exclusivity 
agreements. Would the prospect of antitrust review of exclusivity 
agreements make broadcasters reluctant to seek recourse from the 
courts? And, if so, should this be a factor in our consideration of 
whether to retain these rules? Or should the possibility that 
exclusivity agreements could be anti-competitive in some circumstances 
militate against providing an enforcement mechanism that bypasses 
judicial review?
    29. The NBC Affiliates assert that exclusivity rights are not free-
standing rights that affiliates could enforce in the courts because 
network affiliation agreements grant exclusivity rights in terms of the 
Commission's rules. Specifically, the NBC Affiliates state that its 
standard affiliation agreement provides that an affiliate is ``entitled 
to invoke protection against the simultaneous duplication of NBC's 
network programming . . . to the maximum geographic extent from said 
community of license permitted under the present Sections 76.92 and 
73.658(m) of the FCC's Rules and in accordance with the terms and 
conditions of said Rules.'' The NBC Affiliates note, in this regard, 
that the Commission requires specific language referencing its rules in 
order for broadcasters to obtain network non-duplication and syndicated 
exclusivity rights with respect to DBS and to obtain syndicated 
exclusivity rights with respect to cable. We seek comment on the impact 
of eliminating the exclusivity rules on such language in existing 
exclusivity agreements. To what extent do contracts for network and 
syndicated programming include such language? To what extent do such 
contracts include change of law provisions? If we eliminate the 
exclusivity rules, would it be necessary or appropriate to grandfather 
existing exclusivity contracts to ensure that such contracts are 
enforceable by the Commission for a period of time sufficient to allow 
existing contracts to be reformed, if the parties wish to retain the 
exclusivity provisions? If we grandfather existing exclusivity 
contracts, what would be a reasonable period of time to accord such 
contracts grandfathered status? Should we allow a period of time for 
renegotiation of contracts before the rule goes into effect? On the 
other hand, does the reference to Commission rules signal an intent by 
the contracting parties that exclusivity provisions should not exist if 
the Commission concludes that the exclusivity rules should not be 
maintained? Additionally, we seek comment on whether network 
affiliation agreements typically grant broadcasters exclusive 
distribution rights for any multicast streams of network programming 
that they air and how these multicast streams should figure in our 
analysis of whether to eliminate the exclusivity rules.
    30. We also seek comment on whether and how our analysis of the 
issues should differ for any subset of the affected parties, such as 
small market stations. Should the costs and benefits of eliminating the 
exclusivity rules be weighed differently for different sized broadcast 
stations? Two commenters assert that elimination of the exclusivity 
rules would be particularly harmful to small market stations, many of 
which operate in communities adjacent to larger markets with powerful 
stations. We seek comment on the impact of elimination of the 
exclusivity rules on small market stations. We request that commenters 
quantify or estimate any costs of eliminating the exclusivity rules on 
small market stations and provide data supporting their submission. If 
we decide to eliminate the exclusivity rules, should the rules be 
retained, either permanently or for some period of time, for a class of 
smaller market stations? If so, how should we define that class and for 
what period of time should we retain the rules? Are there other classes 
of entities that warrant different treatment? We further note that the 
exclusivity rules currently exempt certain small MVPDs. Should those 
exemptions be retained if we decide to retain the exclusivity rules? We 
also seek comment on how these exemptions have worked in practice. Do 
small systems often import distant broadcast stations? Does the 
experience of small systems shed any light on what is likely to happen 
if we eliminate our exclusivity rules? If so, does that experience 
suggest that the rules should be eliminated or retained?
    31. In addition, we request comment on the impact of eliminating 
the exclusivity rules on localism. A number of broadcasters have 
suggested that eliminating the exclusivity rules would have a negative 
impact on localism. For example, the NBC Affiliates assert that ``the 
loss of exclusivity would severely impair local broadcasters' ability 
to underwrite the costs associated with providing news and other 
locally responsive programming. This, in turn, would harm local 
businesses and local economies generally, given the importance of local 
broadcasting in connecting businesses with potential customers.'' As 
discussed above, however, commenters claim MVPDs would be unlikely to 
seek to import a distant station's signal unless they are faced with a 
blackout situation in the context of a retransmission consent 
negotiation impasse. If this is the case, is localism likely or 
unlikely to suffer if we eliminate the exclusivity rules? We invite 
comment on arguments in the record that elimination of the exclusivity 
rules is unlikely to harm localism. We ask commenters to quantify as 
specifically as possible the economic impact, if any, of the 
elimination of the exclusivity rules on broadcasters' ability to 
provide news and other locally responsive programming. Moreover, we 
seek comment on whether elimination of the exclusivity rules would lead 
to migration of network and syndicated programming to non-broadcast 
networks and what that would mean in practical terms for local 
broadcasters, syndicators, networks, MVPDs, and consumers.
    32. We seek comment on whether there are any other entities that 
would be impacted by elimination of the exclusivity rules. If so, what 
are the benefits and costs of eliminating the rules for those entities? 
In particular, we seek comment on the potential impact on consumers of 
elimination of the exclusivity rules. We request that commenters 
quantify any benefits and costs to the extent possible and submit 
supporting data.
    33. Under the Satellite Home Viewer Extension and Reauthorization 
Act of 2004, Congress authorized satellite carriers to carry out-of-
market significantly viewed stations and applied the exclusivity rules 
insofar as local stations could challenge the significantly viewed 
status of the out-of-market station and thus prevent its carriage, just 
as in the cable context. We seek comment on whether new rules would be 
needed to permit local stations to challenge the significantly viewed 
status of an out-of-market station if the exclusivity rules are 
eliminated or modified. We also seek

[[Page 19856]]

comment on whether we should make any modifications to the process for 
obtaining or challenging significantly viewed status if we retain the 
exclusivity rules.
    34. Finally, we request comment on whether, as an alternative to 
elimination of the exclusivity rules, we should make modifications to 
these rules. ACA and BCI suggest that if we do not eliminate the 
exclusivity rules, we should harmonize these rules by applying the 
Grade B or noise limited service contour exception for syndicated 
exclusivity to the network non-duplication rules. Under the Grade B 
service contour exception, a station may not obtain syndicated 
exclusivity protection against another station if such station places a 
Grade B signal over the cable community. According to ACA, 
``[b]roadcast stations should have no reasonable expectation of 
exclusivity against adjacent-market stations receivable in the 
community over-the-air, as the Commission intended the exclusivity 
rules to prevent importing duplicative distant signals that are not 
available over-the-air in the community.'' We seek comment on this 
proposal. We also seek comment on whether we should modify the network 
non-duplication and syndicated exclusivity rules to apply only where 
the local station has granted retransmission consent to, and is carried 
by, the MVPD. Under this approach, a television station would only be 
permitted to assert network non-duplication or syndicated exclusivity 
protection if it is actually carried on the cable system. What effect 
would this approach have in situations where a cable system and 
broadcast station reach an impasse in retransmission consent 
negotiations? We observe that retransmission by an MVPD of the signal 
of certain superstations is not subject to retransmission consent 
requirements. Does the fact that the statute exempts this class of 
stations from retransmission consent requirements militate in favor of 
or against eliminating the network non-duplication and syndicated 
exclusivity rules? Should the Commission modify its exclusivity rules 
in light of the Middle Class Tax Relief and Job Creation Act of 2012, 
which provides full power and Class A television stations an 
opportunity to relinquish their existing channels by auction in order 
to channel share with another television licensee? Commenters that 
support these or any other such modifications should quantify the 
benefits and costs of the proposed modifications and provide supporting 
data. Are there any other modifications that we should consider if we 
decide to retain the exclusivity rules?

IV. Procedural Matters

A. Initial Regulatory Flexibility Act Analysis

    35. As required by the Regulatory Flexibility Act of 1980, as 
amended (``RFA'') the Commission has prepared this present Initial 
Regulatory Flexibility Analysis (``IRFA'') concerning the possible 
significant economic impact on small entities by the policies and rules 
proposed in this FNPRM). 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 provided on the first page of the 
FNPRM. The Commission will send a copy of the FNPRM, including this 
IRFA, to the Chief Counsel for Advocacy of the Small Business 
Administration (``SBA''). In addition, the FNPRM and IRFA (or summaries 
thereof) will be published in the Federal Register.
Need for, and Objectives of, the Proposed Rules
    36. The FNPRM seeks comment on whether the Commission should 
eliminate or modify the network non-duplication and syndicated 
exclusivity rules for cable systems, satellite carriers, and open video 
systems. The network non-duplication rules permit a station with 
exclusive rights to network programming to assert those contractual 
rights, using notification procedures set forth in the Commission's 
rules, to prohibit an MVPD from carrying within a specified geographic 
zone the same network programming as broadcast by any other station. 
Similarly, under the syndicated exclusivity rules, a station may assert 
its contractual rights to exclusivity within a specified geographic 
zone to prevent an MVPD from carrying the same syndicated programming 
aired by another station.
    37. Petitions for rulemaking filed in 2005 and in 2010 raised 
questions about the continued need for the exclusivity rules. The NPRM 
in this proceeding sought comment on the potential benefits and harms 
of eliminating the exclusivity rules. While the Commission received 
numerous comments on this issue, the record in this proceeding to date 
does not provide a sufficient basis on which to make a determination as 
to whether the exclusivity rules are still needed today and to assess 
the potential impact on affected parties of eliminating these rules. 
Accordingly, we have concluded that is necessary and appropriate to 
issue a FNPRM to undertake a more comprehensive review of the 
exclusivity rules and to compile a more complete record.
    38. The FNPRM requests comment on whether the exclusivity rules are 
still needed to protect broadcasters' ability to compete in the video 
marketplace. In particular, the FNPRM seeks comment on the extent to 
which local broadcast stations' audiences would likely be diverted to 
distant stations carried on MVPDs if the exclusivity rules were 
eliminated; the argument that MVPDs are unlikely to seek to import a 
distant station's signal today unless they are faced with the blackout 
of a local station as a result of a retransmission dispute and that any 
such importation would likely be limited in duration; the likely impact 
that any diversion of a local station's audience to a distant station 
would have on the local station's advertising revenues and the extent 
to which changes in the sources of local station revenues may impact 
the need for retaining the exclusivity rules; and concerns that an 
MVPD's duplication of local programming via the signals of distant 
stations was not a fair method of competition with broadcasters are 
still valid today, given that MVPDs now do compete with broadcasters 
for access to programming. The FNPRM also invites comment on the extent 
to which the exclusivity rules are still needed to provide incentives 
for program suppliers to produce syndicated and network programming and 
promote program diversity.
    39. The FNPRM seeks comment on the impact of eliminating the 
exclusivity rules on all interested parties, including broadcasters, 
MVPDs, program suppliers, and consumers. The FNPRM seeks comment on the 
impact of eliminating the exclusivity rules on retransmission consent 
negotiations. Additionally, the FNPRM invites comment on how 
elimination of the exclusivity rules would affect existing exclusivity 
contracts and broadcasters' ability to enforce those contracts. Upon 
elimination of the exclusivity rules, broadcasters and networks or 
syndicated program suppliers would continue to determine the 
exclusivity terms of affiliation and syndicated programming agreements 
through free market negotiations, but without a Commission enforcement 
mechanism. Instead, parties seeking to enforce contractual exclusivity 
provisions would need to seek recourse from the courts. The FNPRM seeks 
comment on the costs and difficulty of pursuing judicial enforcement of 
exclusive arrangements. Further, the FNPRM asks whether, if we 
eliminate the exclusivity rules, it would be necessary or

[[Page 19857]]

appropriate to grandfather existing exclusivity contracts to ensure 
that such contracts are enforceable by the Commission for a period of 
time sufficient to allow existing contracts to be reformed, if the 
parties wish to retain the exclusivity provisions. To the extent that 
we grandfather existing exclusivity contracts, the FNPRM invites 
comment on what would be a reasonable period of time to accord such 
contracts grandfathered status and whether we should allow a period of 
time for renegotiation of contracts before repeal of the rules takes 
effect.
    40. The FNPRM seeks comment on whether and how the Commission's 
analysis of the impact of eliminating the exclusivity rules should 
differ for any subset of the affected parties, such as small market 
stations. The FNPRM asks whether, if the Commission decides to 
eliminate the exclusivity rules, these rules be retained, either 
permanently or for some period of time, for a class of smaller market 
stations. If so, the FNPRM seeks comment on how we should define that 
class and for what period of time we should retain the rules. The FNPRM 
also asks whether the existing exemptions from of certain small MVPDs 
from the exclusivity rules should be retained if we decide to retain 
the exclusivity rules. In addition, the FNPRM requests comment on the 
impact of eliminating the exclusivity rules on localism.
    41. Finally, the FNPRM seeks comment on whether, as an alternative 
to elimination of the exclusivity rules, the Commission should make 
modifications to the rules. Specifically, the FNPRM invites comment on 
whether the Commission should (1) extend the Grade B service or noise 
limited service contour exception for syndicated exclusivity to the 
network non-duplication rules; (2) modify the network non-duplication 
and syndicated exclusivity rules to apply only where the local station 
has granted retransmission consent to, and is carried by, the MVPD; or 
(3) modify the exclusivity rules in light of the Middle Class Tax 
Relief and Job Creation Act of 2012, which provides full power and 
Class A television stations an opportunity to relinquish their existing 
channels by auction in order to channel share with another television 
licensee.
Legal Basis
    42. The proposed action is authorized pursuant to Sections 4(i), 
4(j), 301, 303(r), 307, 339, 340, and 653 of the Communications Act of 
1934, as amended, 47 U.S.C. 154(i), 154(j), 301, 303(r), 307, 339, 340, 
and 573.
Description and Estimate of the Number of Small Entities to Which the 
Proposed Rules Will Apply
    43. 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. Below, we 
provide a description of such small entities, as well as an estimate of 
the number of such small entities, where feasible.
    44. Cable Television Distribution Services. Since 2007, these 
services have been defined within the broad economic census category of 
Wired Telecommunications Carriers, which was developed for small 
wireline businesses. This category is defined as follows: ``This 
industry comprises establishments primarily engaged in operating and/or 
providing access to transmission facilities and infrastructure that 
they own and/or lease for the transmission of voice, data, text, sound, 
and video using wired telecommunications networks. Transmission 
facilities may be based on a single technology or a combination of 
technologies. Establishments in this industry use the wired 
telecommunications network facilities that they operate to provide a 
variety of services, such as wired telephony services, including VoIP 
services; wired (cable) audio and video programming distribution; and 
wired broadband Internet services.'' The SBA has developed a small 
business size standard for this category, which is: all such businesses 
having 1,500 or fewer employees. Census data for 2007 shows that there 
were 31,996 establishments that operated that year. Of this total, 
30,178 establishments had fewer than 100 employees, and 1,818 
establishments had 100 or more employees. Therefore, under this size 
standard, we estimate that the majority of such businesses can be 
considered small entities.
    45. Cable Companies and Systems. The Commission has also developed 
its own small business size standards, for the purpose of cable rate 
regulation. Under the Commission's rules, a ``small cable company'' is 
one serving 400,000 or fewer subscribers nationwide. Industry data 
shows that there were 1,100 cable companies at the end of December 
2012. Of this total, all but ten cable operators nationwide are small 
under this size standard. In addition, under the Commission's rate 
regulation rules, a ``small system'' is a cable system serving 15,000 
or fewer subscribers. Current Commission records show 4,945 cable 
systems nationwide. Of this total, 4,380 cable systems have less than 
20,000 subscribers, and 565 systems have 20,000 or more subscribers, 
based on the same records. Thus, under this standard, we estimate that 
most cable systems are small entities.
    46. 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.
    47. Television Broadcasting. This Economic Census category 
``comprises establishments primarily engaged in broadcasting images 
together with sound. These establishments operate television 
broadcasting studios and facilities for the programming and 
transmission of programs to the public.'' The SBA has created the 
following small business size standard for such businesses: those 
having $35.5 million or less in annual receipts. The 2007 U.S.

[[Page 19858]]

Census indicates that 2,076 television stations operated in that year. 
Of that number, 1,515 had annual receipts of $10,000,000 dollars or 
less, and 561 had annual receipts of more than $10,000,000. Since the 
Census has no additional classifications on the basis of which to 
identify the number of stations whose receipts exceeded $35.5 million 
in that year, the Commission concludes that the majority of television 
stations were small under the applicable SBA size standard.
    48. Apart from the U.S. Census, the Commission has estimated the 
number of licensed commercial television stations to be 1,388. 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.
    49. 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.
    50. 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.
    51. 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.
    52. 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.
    53. Home Satellite Dish (HSD) Service. HSD or the large dish 
segment of the satellite industry is the original satellite-to-home 
service offered to consumers, and involves the home reception of 
signals transmitted by satellites operating generally in the C-band 
frequency. Unlike DBS, which uses small dishes, HSD antennas are 
between four and eight feet in diameter and can receive a wide range of 
unscrambled (free) programming and scrambled programming purchased from 
program packagers that are licensed to facilitate subscribers' receipt 
of video programming. Because HSD provides subscription services, HSD 
falls within the SBA-recognized definition of Wired Telecommunications 
Carriers. The SBA has developed a small business size standard for this 
category, which is: All such businesses having 1,500 or fewer 
employees. Census data for 2007 show that there were 31,996 
establishments that operated that year. Of this total, 30,178 
establishments had fewer than 100 employees, and 1,818 establishments 
had 100 or more employees. Therefore, under this size standard, the 
majority of such businesses can be considered small entities.
    54. 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.
    55. Cable and Other Subscription Programming. The Census Bureau 
defines this category as follows: ``This industry comprises 
establishments

[[Page 19859]]

primarily engaged in operating studios and facilities for the 
broadcasting of programs on a subscription or fee basis. . . . These 
establishments produce programming in their own facilities or acquire 
programming from external sources. The programming material is usually 
delivered to a third party, such as cable systems or direct-to-home 
satellite systems, for transmission to viewers.'' The SBA has developed 
a small business size standard for this category, which is: All such 
businesses having $35.5 million dollars or less in annual revenues. 
Census data for 2007 show that there were 659 establishments that 
operated that year. Of that number, 462 operated with annual revenues 
of $9,999,999 dollars or less. One hundred ninety-seven (197) operated 
with annual revenues of between $10 million and $100 million or more. 
Thus, under this size standard, the majority of such businesses can be 
considered small entities.
    56. Motion Picture and Video Production. These entities may be 
indirectly affected by our action. The Census Bureau defines this 
category as follows: ``This industry comprises establishments primarily 
engaged in producing, or producing and distributing motion pictures, 
videos, television programs, or television commercials.'' We note that 
establishments in this category may be engaged in various industries, 
including cable programming. The SBA has developed a small business 
size standard for this category, which is: All such businesses having 
$30 million dollars or less in annual revenues. Census data for 2007 
show that there were 9,478 establishments that operated that year. Of 
that number, 9,128 had annual receipts of $24,999,999 or less, and 350 
had annual receipts ranging from not less than $25,000,000 to 
$100,000,000 or more. Thus, under this size standard, the majority of 
such businesses can be considered small entities.
    57. Motion Picture and Video Distribution. The Census Bureau 
defines this category as follows: ``This industry comprises 
establishments primarily engaged in acquiring distribution rights and 
distributing film and video productions to motion picture theaters, 
television networks and stations, and exhibitors.'' We note that 
establishments in this category may be engaged in various industries, 
including cable programming. The SBA has developed a small business 
size standard for this category, which is: All such businesses having 
$29.5 million dollars or less in annual revenues. Census data for 2007 
show that there were 477 establishments that operated that year. Of 
that number, 448 had annual receipts of $24,999,999 or less, and 29 had 
annual receipts ranging from not less than $25,000,000 to $100,000,000 
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
    58. The FNPRM does not propose any recordkeeping requirements. The 
FNPRM seeks comment on whether the Commission should eliminate the 
network non-duplication and syndicated exclusivity rules. If the 
Commission eliminates the exclusivity rules, broadcasters and networks 
or syndicated program suppliers would continue to determine the 
exclusivity terms of affiliation and syndicated programming agreements 
through free market negotiations, but there would be no Commission 
enforcement mechanism for such exclusivity provisions. Instead, parties 
seeking to enforce contractual exclusivity provisions would need to 
seek recourse from the courts.
Steps Taken To Minimize Significant Impact on Small Entities, and 
Significant Alternatives Considered
    59. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its proposed approach, 
which may include the following four alternatives (among others): (1) 
The establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
(3) the use of performance, rather than design, standards; and (4) an 
exemption from coverage of the rule, or any part thereof, for small 
entities.
    60. The FNPRM seeks comment on whether, if we eliminate the 
exclusivity rules, it would be necessary or appropriate to grandfather 
existing exclusivity contracts to ensure that such contracts are 
enforceable by the Commission for a period of time sufficient to allow 
existing contracts to be reformed, if the parties wish to retain the 
exclusivity provisions. To the extent that the Commission grandfathers 
existing exclusivity contracts, the FNPRM asks what would be a 
reasonable period of time to accord such contracts grandfathered status 
and whether the Commission should allow a period of time for 
renegotiation of contracts before repeal of the rule takes effect. Such 
grandfathering might reduce any adverse economic impact of eliminating 
the exclusivity rules on broadcast stations, including small broadcast 
stations.
    61. The FNPRM also asks whether, if the Commission decides to 
eliminate the exclusivity rules, the rules should be retained, either 
permanently or for some period of time, for a class of smaller market 
broadcast stations. If so, the FNPRM seeks input on how we should 
define that class and for what period of time should we retain the 
exclusivity rules. Retaining the exclusivity rules permanently or for 
some period of time for small broadcast stations might reduce any 
adverse economic impact of eliminating the exclusivity rules on small 
broadcast stations.
    62. Further, the FNPRM notes that the exclusivity rules currently 
exempt certain small MVPDs and asks whether those exemptions should be 
retained if the Commission decides to retain the exclusivity rules. 
Retaining the existing exemption for small MVPDs might be appropriate 
to avoid any adverse economic impact on small MVPDs if the exclusivity 
rules are retained.
Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rules
    63. None.

C. Paperwork Reduction Act

    64. This FNPRM 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.

D. Ex Parte Rules

    65. Permit-But-Disclose. The proceeding this FNPRM 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

[[Page 19860]]

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, 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.

E. Filing Requirements

    66. 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).
     Electronic Filers: Comments may be filed electronically 
using the Internet by accessing the ECFS: https://fjallfoss.fcc.gov/ecfs2/.
     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.
     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.
     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.
     U.S. Postal Service first-class, Express, and Priority 
mail must be addressed to 445 12th Street SW., Washington, DC 20554.
    67. 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).
    68. 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

    69. Accordingly, it is ordered that, pursuant to the authority 
found in sections 1, 4(i), 4(j), 301, 303(r), 307, 339(b), 340, and 
653(b) of the Communications Act of 1934, as amended, 47 U.S.C. 151, 
154(i), 154(j), 301, 303(r), 307, 339(b), and 573(b) this Further 
Notice of Proposed Rulemaking is adopted.
    70. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Further Notice of Proposed Rulemaking in MB Docket No. 10-
71, including the Initial Regulatory Flexibility Analysis, to the Chief 
Counsel for Advocacy of the Small Business Administration.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 2014-08114 Filed 4-9-14; 8:45 am]
BILLING CODE 6712-01-P