Retransmission Consent Negotiations, 28615-28630 [2014-11058]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 79, Number 96 (Monday, May 19, 2014)]
[Rules and Regulations]
[Pages 28615-28630]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-11058]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

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


Retransmission Consent Negotiations

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: The Federal Communications Commission (``Commission'') adopts 
a rule providing that it is a violation of the duty to negotiate 
retransmission consent in good faith for a television broadcast station 
that is ranked among the top four stations as measured by audience 
share to negotiate retransmission consent jointly with another such 
station, if the stations are not commonly owned and serve the same 
geographic market. The rule is intended to promote competition among 
Top Four broadcast stations for carriage of their signals by 
multichannel video programming distributors and facilitate the fair and 
effective completion of retransmission consent negotiations.

DATES: Effective June 18, 2014.

FOR FURTHER INFORMATION CONTACT: Raelynn Remy, Raelynn.Remy@fcc.gov, 
Diana Sokolow, Diana.Sokolow@fcc.gov, or Kathy Berthot, 
Kathy.Berthot@fcc.gov, Federal Communications Commission, Media Bureau, 
(202) 418-2120.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order, FCC 14-29, adopted and released on March 31, 2014. The full 
text of this document is available for public inspection and copying 
during regular business hours in the FCC Reference Center, Federal 
Communications Commission, 445 12th Street SW., Room CY-A257, 
Washington, DC 20554. This document will also be available via ECFS at 
https://fjallfoss.fcc.gov/ecfs/. Documents will be available 
electronically in ASCII, Microsoft Word, 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. Alternative 
formats are available for people with disabilities (Braille, large 
print, electronic files, audio format), by sending an email to 
fcc504@fcc.gov or calling the Commission's Consumer and Governmental 
Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (TTY).

Paperwork Reduction Act of 1995 Analysis

    This document does not contain new or modified information 
collection requirements subject to the Paperwork Reduction Act of 1995 
(PRA), Public Law 104-13. In addition, therefore, it does not contain 
any new or modified ``information collection burden for small business 
concerns with fewer than 25 employees,'' pursuant to the Small Business 
Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 
3506(c)(4).

Synopsis

I. Introduction

    In this Report and Order (``Order''), we revise our 
``retransmission consent'' rules, which govern carriage negotiations 
between broadcast television stations and multichannel video 
programming distributors (``MVPDs''),\1\ to provide that joint 
negotiation by stations that are ranked among the top four stations in 
a market as measured by audience share (``Top Four'' stations) and are 
not commonly owned constitutes a violation of the statutory duty to 
negotiate retransmission consent in good faith.\2\ In March 2010, 14 
MVPDs and public interest groups filed a rulemaking petition arguing 
that changes in the marketplace, and the increasingly contentious 
nature of retransmission consent negotiations, justify revisions to the 
Commission's rules governing retransmission consent. The Commission 
initiated this proceeding \3\ and a robust record developed. Our action 
today addresses MVPDs' argument that competing broadcast television 
stations (``broadcast stations'' or ``stations'') obtain undue 
bargaining leverage by negotiating together when

[[Page 28616]]

they are not commonly owned. It is our intention that this action will 
facilitate the fair and effective completion of retransmission consent 
negotiations.\4\ In addition, in the Further Notice of Proposed 
Rulemaking (``FNPRM'') published at 79 FR 19849, April 10, 2014, we 
seek comment on whether to modify or eliminate the Commission's network 
non-duplication and syndicated exclusivity rules in light of changes in 
the video marketplace since these rules were first adopted more than 
forty years ago.
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    \1\ 47 U.S.C. 325(b)(1)(A).
    \2\ The statutory duty to negotiate retransmission consent in 
good faith applies to both broadcasters and MVPDs. See 47 U.S.C. 
325(b)(3)(C).
    \3\ Amendment of the Commission's Rules Related to 
Retransmission Consent, Notice of Proposed Rulemaking, 76 FR 17071 
(2011) (``NPRM'').
    \4\ The NPRM sought comment on additional issues related to 
retransmission consent, including strengthening the per se good 
faith negotiation standards in other specific ways, clarifying the 
totality of the circumstances good faith negotiation standard, 
revising the notice requirements related to dropping carriage of a 
television station, and application of the sweeps prohibition to 
retransmission consent disputes. See NPRM, 76 FR 17071 (2011). This 
Order addresses only joint negotiation and the record remains open 
on the other issues discussed in the NPRM. We realize that the views 
of both broadcasters and MVPDs may have evolved since we last sought 
comment in 2011 and they are free to provide additional comment on 
the remaining issues to the extent they so desire.
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II. Background

    Congress created the retransmission consent regime in 1992. It 
stated that it intended ``to establish a marketplace for the 
disposition of the rights to retransmit broadcast signals,'' but not 
``to dictate the outcome of the ensuing marketplace negotiations.'' In 
recent years, the marketplace has changed in two significant ways. 
First, broadcasters have increasingly sought and received monetary 
compensation in exchange for retransmission consent. Second, while 
consumers seeking to purchase video programming service typically 
formerly had only one option--a cable operator--today consumers may 
choose among several MVPDs. In addition to MVPD services, today's 
consumers also access video programming on the Internet. Against this 
backdrop, the petitioners filed the Petition, asking the Commission to 
impose mandatory interim carriage while retransmission consent disputes 
are pending, and to impose dispute resolution mechanisms. After stating 
that the Commission did ``not believe that [it has] authority to 
require either interim carriage requirements or mandatory binding 
dispute resolution procedures'' in light of ``the statutory mandate in 
section 325 and the restrictions imposed by the [Administrative Dispute 
Resolution Act],'' the NPRM sought comment ``on other ways the 
Commission can protect the public from, and decrease the frequency of, 
retransmission consent negotiation impasses within [its] existing 
statutory authority.''
    Section 325 of the Act prohibits broadcast television stations and 
MVPDs from ``failing to negotiate [retransmission consent] in good 
faith,'' and it provides that entering ``into retransmission consent 
agreements containing different terms and conditions, including price 
terms'' is not a violation of the duty to negotiate in good faith ``if 
such different terms and conditions are based on competitive 
marketplace considerations.'' \5\ Beginning in 2000, the Commission 
implemented the good faith negotiation statutory provisions through a 
two-part framework for determining whether retransmission consent 
negotiations are conducted in good faith. First, the Commission 
established a list of seven objective good faith negotiation standards, 
the violation of which is considered a per se breach of the good faith 
negotiation obligation.\6\ Second, even if the seven specific standards 
are met, the Commission may consider whether, based on the totality of 
the circumstances, a party failed to negotiate retransmission consent 
in good faith.\7\
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    \5\ 47 U.S.C. 325(b)(3)(C).
    \6\ 47 CFR 76.65(b)(1).
    \7\ See 47 CFR 76.65(b)(2).
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    In the NPRM, the Commission sought comment on potential revisions 
to the Commission's framework for evaluating whether parties negotiate 
retransmission consent in good faith. Specifically, the Commission 
sought comment on several specific ways it could strengthen the good 
faith negotiation requirement, including ``whether it should be a per 
se violation for a station to grant another station or station group 
the right to negotiate or the power to approve its retransmission 
consent agreement when the stations are not commonly owned.'' The 
Commission's goal was to identify ways to ``increase certainty in the 
marketplace, thereby promoting the successful completion of 
retransmission consent negotiations and protecting consumers from 
impasses or near impasses.''
    In addition, the NPRM sought comment on the potential benefits and 
harms of eliminating the Commission's rules concerning network non-
duplication and syndicated programming exclusivity. When a network 
provides a station with exclusive rights to the network's programming 
within a certain geographic area, the Commission's network non-
duplication rules permit the station to assert those rights through 
certain notification procedures.\8\ In such circumstances, the rules 
permit a station to assert its contractual rights to network 
exclusivity within a specific geographic zone to prevent a cable system 
from carrying the same network programming aired by another station. 
Similarly, the syndicated exclusivity rules permit a station to assert 
its contractual rights to exclusivity within a specific geographic zone 
to prevent a cable system from carrying the same syndicated programming 
aired by another station.\9\ We refer to the network non-duplication 
and syndicated exclusivity rules collectively as the ``exclusivity 
rules.''
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    \8\ See 47 CFR 76.92 et seq.
    \9\ See 47 CFR 76.101 et seq.
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III. Discussion

    We amend our rules to provide that it is a violation of the duty to 
negotiate in good faith under section 325(b)(3)(C)(ii) of the 
Communications Act of 1934, as amended, for a television broadcast 
station that is ranked among the top four stations as measured by 
audience share to negotiate retransmission consent jointly with another 
such station, if the stations are not commonly owned \10\ and serve the 
same geographic market (``joint negotiation''). We conclude that 
adopting a prohibition on joint negotiation is authorized by section 
325 of the Act and serves the public interest by promoting competition 
among Top Four broadcast stations for MVPD carriage of their signals 
and the associated retransmission consent revenues. For the purpose of 
applying this rule, we further: (i) Define ``joint negotiation'' to 
encompass specified coordinated activities related to negotiation for 
retransmission consent between or among Top Four stations; (ii) confirm 
that stations that are deemed to be ``commonly owned'' based on the 
Commission's attribution rules are permitted to negotiate jointly; 
(iii) deem that Top Four stations that are licensed to operate in the 
same Designated Market Area (``DMA'') \11\ serve the same geographic 
market; and (iv) define Top Four stations consistently with how we 
define such stations in our local television ownership rule. In 
addition, we conclude that stations subject to this rule are prohibited 
from engaging in

[[Page 28617]]

joint negotiation as of the effective date of rules we adopt in this 
Order, regardless of whether they are subject to existing agreements, 
formal or informal, obligating them to negotiate retransmission consent 
jointly.\12\
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    \10\ We use the phrases ``separately owned'' and ``not commonly 
owned'' interchangeably in referring to television broadcast 
stations that are subject to the prohibition on joint negotiation we 
adopt in this Order. For ease of reference, we use these terms to 
refer to Top Four stations that are not commonly owned, operated, or 
controlled under the Commission's attribution rules. See 47 CFR 
73.3555 Notes.
    \11\ A DMA is a local television market area designated by 
Nielsen Media Research. There are 210 DMAs in the United States. See 
www.nielsenmedia.com (visited on January 14, 2014).
    \12\ The rule does not apply to joint negotiation by same 
market, separately owned Top Four stations that has been completed 
prior to the effective date of the rules, and it does not invalidate 
retransmission consent agreements concluded through such 
negotiation.
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    The record in this proceeding reflects divergent views about 
whether a rule prohibiting joint negotiation advances the public 
interest. In general, parties supporting such a rule, principally MVPDs 
and consumer groups, assert that joint negotiation enables broadcast 
stations to charge supra-competitive retransmission consent fees to 
MVPDs which, in turn, are passed along to consumers in the form of 
higher rates for MVPD services. ACA argues that joint negotiation harms 
consumers in additional ways, such as by heightening the disruption 
caused by negotiating breakdowns and depleting capital that MVPDs 
otherwise could use to deploy broadband and other advanced services. 
Proponents of a prohibition also claim that joint negotiation is a 
widespread and growing industry practice that warrants immediate 
remedial action, and that the Commission is empowered under section 325 
of the Act and its legislative history to bar joint negotiation to stem 
further harm to consumers.
    Parties opposing a rule barring joint negotiation, principally 
broadcasters, generally argue that there is no sound legal or policy 
basis for prohibiting joint negotiation, and that doing so is beyond 
the Commission's statutory authority, inconsistent with congressional 
intent, and contrary to Commission precedent. In addition, parties 
opposing a joint negotiation prohibition argue that joint negotiation 
enhances efficiency and reduces transaction costs, thereby facilitating 
agreements and resulting in lower retransmission consent rates. These 
parties also contend, among other things, that: (i) Joint negotiation 
does not give broadcast stations undue negotiating leverage relative to 
MVPDs, which do have such leverage, and in fact helps small 
broadcasters to reduce their operating costs and devote more resources 
to local programming; (ii) a prohibition on joint negotiation would 
arbitrarily inflict greater harm on some broadcasters based on spectrum 
allocation and market size; (iii) barring joint negotiation by 
broadcasters while allowing MVPDs to coordinate their negotiations 
would be inconsistent and inequitable; (iv) a rule proscribing joint 
negotiation is unnecessary because joint negotiation does not result in 
negotiating delays or other complications; and (v) joint negotiation 
does not equate to collusive or anticompetitive conduct, and antitrust 
law is better suited to address any such concerns. In the paragraphs 
below, we discuss the need for the prohibition on joint negotiation 
that we adopt today and then discuss the various elements of the rule. 
In so doing, we explain why we reject the above assertions.

A. Need for the Prohibition on Joint Negotiation

    Based on our review of the record,\13\ and pursuant to our 
authority in section 325 of the Act,\14\ we revise section 76.65(b) of 
our rules to provide that it is a violation of the section 
325(b)(3)(C)(ii) duty to negotiate in good faith for a Top Four 
television broadcast station (as measured by audience share) to 
negotiate retransmission consent jointly with another such station if 
the stations serve the same geographic market and are not commonly 
owned. We find persuasive the arguments of MVPDs and public interest 
groups who uniformly assert that adopting a rule prohibiting joint 
negotiation is necessary to prevent the competitive harms resulting 
from such negotiation.
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    \13\ In this Order, we do not address arguments that are more 
appropriately considered in other Commission proceedings, such as 
those relating to possible attribution of agreements that provide 
for joint negotiation of retransmission consent under the 
Commission's ownership rules. See 2014 Quadrennial Regulatory 
Review--Review of the Commission's Broadcast Ownership Rules and 
Other Rules Adopted Pursuant to Section 202 of the 
Telecommunications Act of 1996, MB Docket No. 14-50, Further Notice 
of Proposed Rulemaking and Report and Order, FCC 14-28 (adopted Mar. 
31, 2014).
    \14\ Section 325(b)(3)(C)(ii) of the Act, which imposes on 
television broadcast stations a duty to negotiate retransmission 
consent in good faith, provides, in relevant part, that:
    The Commission shall . . . revise the regulations governing the 
exercise by television broadcast stations of the right to grant 
retransmission consent. . . . Such regulations shall . . . prohibit 
a television broadcast station that provides retransmission consent 
from . . . failing to negotiate in good faith, and it shall not be a 
failure to negotiate in good faith if the television broadcast 
station enters into retransmission consent agreements containing 
different terms and conditions, including price terms, with 
different multichannel video programming distributors if such 
different terms and conditions are based on competitive marketplace 
considerations.
    In addition, section 325(b)(3)(A) of the Act directs the 
Commission, among other things:
    to establish regulations to govern the exercise by television 
broadcast stations of the right to grant retransmission consent. . . 
. The Commission shall consider in such proceeding the impact that 
the grant of retransmission consent by television stations may have 
on the rates for the basic service tier and shall ensure that the 
regulations prescribed under this subsection do not conflict with 
the Commission's obligation . . . to ensure that the rates for the 
basic service tier are reasonable.
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    In the NPRM, the Commission broadly sought comment on whether it 
should be a violation for any television broadcast station to grant 
another station or station group the right to negotiate or the power to 
approve its retransmission consent agreement when the stations are not 
commonly owned. However, the evidence in this proceeding persuades us 
to take a more limited approach, prohibiting outright only television 
broadcast stations that are ranked among the top four stations as 
measured by audience share from negotiating retransmission consent 
jointly with another such station, if the stations are not commonly 
owned and serve the same geographic market. Although economic theory 
supports a conclusion that joint negotiation among any two or more 
separately owned broadcast stations serving the same DMA will 
invariably tend to yield retransmission consent fees that are higher 
than those that would have resulted if the stations competed against 
each other in seeking fees, the record amassed in this proceeding is 
centered largely around evidence regarding the impact of joint 
negotiation by Top Four broadcast stations. With regard to Top Four 
broadcasters, we can confidently conclude that the harms from joint 
negotiation outstrip any efficiency benefits identified and that such 
negotiation on balance hurts consumers. Because the record lacks 
similar evidence with respect to other stations, we decline to adopt a 
prohibition that applies to all separately owned broadcast stations 
serving the same geographic market (i.e., regardless of market share).
    Our decision to adopt a rule addressing joint negotiation by Top 
Four stations is consistent with the Commission's previous 
determination, in implementing section 325(b)(3)(C) of the Act, that 
agreements not to compete or to fix prices are ``inconsistent with 
competitive marketplace considerations and the good faith negotiation 
requirement.'' In the Good Faith Order, the Commission stated:

    It is implicit in section 325(b)(3)(C) that any effort to stifle 
competition through the negotiation process would not meet the good 
faith negotiation requirement. Considerations that are designed to 
frustrate the functioning of a competitive market are not 
`competitive marketplace considerations.' Conduct that is violative 
of national policies favoring competition--that is, for example . . 
. an agreement not to compete or to fix prices * * * is not within 
the competitive

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marketplace considerations standard included in the statute.\15\
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    \15\ See Good Faith Order, 64 FR 15559-02 (2000).

    Although complaints about joint negotiation between or among same 
market, separately owned Top Four stations could be addressed under our 
existing rules pursuant to the ``totality of circumstances'' test, we 
believe that adopting a rule specifically directed at such negotiation 
is more effective in preventing the competitive harms derived therefrom 
than case-by-case adjudication, and is more administratively 
efficient--particularly because parties entering a negotiation will be 
advantaged by advance notice of the appropriate process for such 
negotiation.
    We conclude that joint negotiation by same market, separately owned 
Top Four stations is not consistent with ``competitive marketplace 
considerations'' within the meaning of section 325(b)(3)(C) because it 
eliminates price rivalry between and among stations that otherwise 
would compete directly for carriage on MVPD systems and the associated 
retransmission consent revenues.\16\ Specifically, we find that joint 
negotiation gives such stations both the incentive and the ability to 
impose on MVPDs higher fees for retransmission consent than they 
otherwise could impose if the stations conducted negotiations for 
carriage of their signals independently.\17\ Because same market, Top 
Four stations are considered by an MVPD seeking carriage rights to be 
at least partial substitutes for one another,\18\ their joint 
negotiation prevents an MVPD from taking advantage of the competition 
or substitution between or among the stations to hold retransmission 
consent payments down.\19\ The record also demonstrates that joint 
negotiation enables Top Four stations to obtain higher retransmission 
consent fees because the threat of simultaneously losing the 
programming of the stations negotiating jointly gives those stations 
undue bargaining leverage in negotiations with MVPDs.\20\ This leverage 
is heightened because MVPDs may be prohibited from importing out-of-
market broadcast stations carrying the same network programming as the 
broadcast stations at issue in the negotiations.
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    \16\ Our decision to adopt a rule proscribing joint negotiation 
is not premised on a finding that joint negotiation by separately 
owned, same market Top Four stations could lead to negotiating 
delays and other complications, but rather on our conclusion that 
such negotiation diminishes competition and thus leads to supra-
competitive increases in retransmission consent fees. Thus, we do 
not address the merits of arguments that joint negotiation does not 
result in negotiating delays or other complications.
    \17\ See Joint Control or Ownership of Multiple Big 4 
Broadcasters in the Same Market and Its Effects on Retransmission 
Consent Fees, William P. Rogerson, May 18, 2010, at 3 (attached to 
ACA's Comments in response to PN) (stating that, in a number of 
local television markets, multiple Top Four stations act as a single 
entity in retransmission consent negotiations because such stations 
enter into agreements to jointly negotiate retransmission consent, 
and that such coordinated activity permits broadcasters to negotiate 
higher retransmission consent fees) (``Rogerson Joint Control 
Analysis'').
    \18\ In this context, the term ``substitute'' means that ``the 
marginal value to the MVPD of either network is lower conditional on 
already carrying the other network.'' See id. at 7-8. In his 
analysis, Rogerson emphasizes that, even when this condition holds, 
the MVPD still would desire to carry both networks and would make 
higher profits from carriage of both. The numerical example 
proffered by Rogerson reflects this condition--the MVPD is assumed 
to earn a profit of $1.00 per subscriber if it carries only one of 
the two networks and a profit of $1.50 per subscriber if it carried 
both of the networks. Rogerson observes that ``[t]o the extent that 
customers appreciate and are willing to pay for increases in variety 
at a diminishing rate as variety increases, we would expect this 
condition to hold.'' See id. at 8-9. A good, although limited, 
example of partial substitution in this context would be local news 
and weather, which would typically be available on all Top Four 
broadcast stations in a market.
    \19\ See An Economic Analysis of Consumer Harm from the Current 
Retransmission Consent Regime, Michael L. Katz, et al., Nov. 12, 
2009, at 26-29, paras 38-43 (asserting that, ``to the extent 
broadcast stations entering into local marketing agreements are 
substitutes, such agreements eliminate competition and raise 
stations' bargaining power, which result in higher fees and harm 
consumers'') (``Katz Analysis of Consumer Harm''); Economic Analysis 
of Broadcasters' Brinksmanship and Bargaining Advantages in 
Retransmission Consent Negotiations, Steven C. Salop, et al., June 
3, 2010, at 53, para 108 (``[J]oint negotiation eliminates 
competition between [local broadcast stations serving the same 
market], and the MVPD is unable to gain a bargaining advantage by 
playing one broadcaster off against another.'') (``Salop 
Brinksmanship Analysis'').
    \20\ See Coordinated Negotiation of Retransmission Consent 
Agreements by Separately Owned Broadcasters in the Same Market, 
William P. Rogerson, May 27, 2011, at 11 (attached to ACA's Comments 
in response to NPRM) (``Rogerson Coordinated Negotiation 
Analysis''). A 2007 Congressional Research Service report on 
retransmission consent made a similar observation with regard to top 
network affiliates:
    [W]here a broadcaster * * * controls two stations that are 
affiliated with major networks, that potentially gives that 
broadcaster control over two sets of must-have programming and 
places a distributor * * * in a very weak negotiating position since 
it would be extremely risky to lose carriage of both signals.
    See ACA Comments at 9, citing Charles B. Goldfarb, CRS Report 
for Congress, Retransmission Consent and Other Federal Rules 
Affecting Programmer-Distributor Negotiations: Issues for Congress, 
at CRS-70 (July 9, 2007), available at https://www.policyarchive.org/handle/10207/bitstreams/19204.pdf.
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    We therefore disagree with assertions that joint negotiation does 
not result in increases in retransmission consent compensation paid by 
MVPDs. Analyses in the record draw on basic economic principles to 
explain why coordinated conduct such as joint negotiation results in 
higher retransmission consent fees:

    [I]f two broadcasters can collectively threaten to withdraw 
their signals unless they are each satisfied, then they will be able 
to negotiate higher fees for everyone than if each broadcaster can 
only threaten to withdraw its own signal unless the broadcaster is 
satisfied. * * * [I]t is the ability to threaten collective 
withdrawal that creates the power to raise retransmission consent 
fees.\21\
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    \21\ See Rogerson Coordinated Negotiation Analysis at 3, 11. See 
also ACA Comments at 9, citing 2010 Rogerson Joint Control Analysis 
at 7-8. In his analyses, Rogerson presents a bilateral bargaining 
model to analyze the impact of joint negotiation on retransmission 
consent fees. The model considers a hypothetical example of two 
television broadcast stations negotiating for carriage with a cable 
operator, and compares the outcomes on the assumption of separate 
negotiations and on the assumption of joint negotiation. The model, 
illustrated by a numerical example, reflects the assumption that the 
two stations are partial substitutes. See Rogerson Joint Control 
Analysis at 7-8. See also Aviv Nevo, Deputy Assistant Att'y Gen. for 
Economics, Antitrust Div., Dep't of Justice, Remarks at the Stanford 
Institute for Economic Policy Research and Cornerstone Research 
Conference on Antitrust in Highly Innovative Industries: Mergers 
that Increase Bargaining Leverage 3-5 (Jan. 22, 2014) (employing a 
similar model and assumptions to support an assertion that joint 
negotiation by two input providers leads to increases in the prices 
paid by a distributor).

    The proposition that, when providers of inputs that are at least 
partial substitutes for one another bargain jointly with a downstream 
user of the inputs, the returns to the input providers are higher than 
if the input providers negotiated separately with the downstream user, 
has been validated in other economic contexts.\22\ This general 
proposition is also reflected in the Federal Trade Commission (``FTC'') 
and Department of Justice (``DoJ'') merger \23\

[[Page 28619]]

and collaboration \24\ guidelines. DoJ has recognized that 
collaboration by competing broadcast stations could ``harm competition 
by increasing the potential for firms to coordinate over price or other 
strategic dimensions, and/or by reducing incentives of firms to compete 
with one another.'' \25\
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    \22\ The quintessential example of joint negotiation by input 
providers is collective bargaining by union members. A paper by Horn 
and Wolinsky addresses the question whether, if a firm employs 
workers of two types, it is better for the workers to form two 
separate unions or one ``encompassing'' union. See Henrik Horn & 
Asher Wolinsky, Worker Substitutability and Patterns of 
Unionisation, 98 The Economic Journal 484-497 (1988). The paper 
``developed a bargaining model for the case in which two groups of 
workers face a single employer . . . [and] pointed out a fairly 
general principle whose implication . . . was that, when the two 
types of workers are substitute factors, they would benefit from 
coordinating their bargaining with the employer.'' Id. at 496. The 
paper begins with a bargaining model that involves two workers (one 
of each type) who negotiate with a single employer. The model shows 
that, when the workers are substitutes, total wages are higher if 
they negotiate jointly. The paper goes on to extend the model to the 
case of two groups of workers, with analogous results, but the base 
model has the same structure as that in the Rogerson Joint Control 
Analysis.
    \23\ See U.S. Department of Justice and the Federal Trade 
Commission Horizontal Merger Guidelines, issued August 19, 2010 
(available at https://www.ftc.gov/sites/default/files/attachments/merger-review/100819hmg.pdf.) (``Merger Guidelines''). Section 6.2 
of the Merger Guidelines reads, in pertinent part:
    In many industries, especially those involving intermediate 
goods and services, buyers and sellers negotiate to determine prices 
and other terms of trade. In that process, buyers commonly negotiate 
with more than one seller, and may play sellers off against one 
another. * * * A merger between two competing sellers prevents 
buyers from playing those sellers off against each other in 
negotiations. This alone can significantly enhance the ability and 
incentive of the merged entity to obtain a result more favorable to 
it, and less favorable to the buyer, than the merging firms would 
have offered separately absent the merger.
    Id. at 22. The Merger Guidelines note that the mechanism and the 
magnitude of the effect on price can vary with certain structural 
characteristics, and the specific discussion refers to situations 
when the products are complete substitutes, e.g., the buyer would 
not necessarily purchase from both providers separately. 
Nevertheless, the ``collective withdrawal'' mechanism of the 
Rogerson model is analogous to the ability of two merged, formerly 
competing sellers to prevent a buyer from playing one against the 
other. And the result is the same as in the Rogerson model--enhanced 
ability and incentive of the merged entity ``to obtain a result more 
favorable to it, and less favorable to the buyer.'' Id. Thus, the 
cited proposition from the Merger Guidelines also applies to joint 
negotiation by entities that are not seeking to merge. In a recent 
ex parte filing in the Quadrennial Review proceeding, DoJ stated 
that, ``[w]here a proposed cooperative agreement essentially 
combines the operations of two rivals and eliminates all competition 
between them . . ., [DoJ] analyzes the agreement as it would analyze 
a merger, regardless of how the arrangement has been labeled. . . 
.'' See Ex Parte Filing of the Department of Justice, MB Docket Nos. 
09-182, 07-294, 04-256, February 20, 2014, at 10 (``DoJ Feb. 20, 
2014 Ex Parte filing'').
    \24\ See Federal Trade Commission and U.S. Department of 
Justice, Antitrust Guidelines for Collaborations Among Competitors 
(Apr. 2000) (available at https://www.ftc.gov/sites/default/files/documents/public_events/joint-venture-hearings-antitrust-guidelines-collaboration-among-competitors/ftcdojguidelines-2.pdf.) 
(``Collaboration Guidelines''). The Collaboration Guidelines state, 
in relevant part, that:
    Competitor collaborations may involve agreements jointly to 
sell, distribute, or promote goods or services that are either 
jointly or individually produced. Such agreements may be 
procompetitive, for example, where a combination of complementary 
assets enables products more quickly and efficiently to reach the 
marketplace. However, marketing collaborations may involve 
agreements on price, output, or other competitively significant 
variables, or on the use of competitively significant assets, such 
as an extensive distribution network, that can result in 
anticompetitive harm. Such agreements can create or increase market 
power or facilitate its exercise by limiting independent decision 
making; by combining in the collaboration, or in certain 
participants, control over competitively significant assets or 
decisions about competitively significant variables that otherwise 
would be controlled independently; or by combining financial 
interests in ways that undermine incentives to compete 
independently. For example, joint promotion might reduce or 
eliminate comparative advertising, thus harming competition by 
restricting information to consumers on price and other 
competitively significant variables.
    Id. at 14.
    \25\ See DoJ Feb. 20, 2014 Ex Parte filing at 17.
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    In its review of the Comcast-NBCU transaction, the Commission 
stated that this theory of harm ``is a well-established concern in 
antitrust enforcement'' and concluded that coordinated negotiations of 
carriage rights for two blocks of ``must have'' programming (in that 
case, an NBC owned and operated station (O&O) and a Comcast Regional 
Sports Network (``RSN'')) would give increased bargaining leverage to 
the programmer and lead to higher prices for an MVPD buyer, who would 
be at risk of losing two highly desirable signals if negotiations 
failed to yield an agreement.\26\ In particular, the Commission found 
that common ``ownership of these two types of programming assets in the 
same region allowed the joint venture to charge a higher price for the 
RSN relative to what would be observed if the RSN and local broadcast 
affiliate were separately-owned.'' Although the Commission in that 
context was considering the competitive effects of combining a 
broadcast network and an RSN, we believe that two (or more) broadcast 
stations that are ranked among the top four stations in a market by 
audience share offer at least a comparable level of substitution to an 
MVPD bargaining for carriage rights.\27\ Furthermore, Rogerson's 
bargaining model suggests that the more valuable the stations' 
programming is, the greater is the increase in retransmission consent 
fees resulting from joint negotiation.\28\ We thus find it reasonable 
to infer that the magnitude of fee increases derived from joint 
negotiation is larger for Top Four station combinations than for other 
stations.
---------------------------------------------------------------------------

    \26\ See Applications of Comcast Corporation, General Electric 
Company and NBC Universal, Inc. For Consent to Assign Licenses and 
Transfer Control of Licensees, Memorandum Opinion and Order, 26 FCC 
Rcd 4238, 4294 paras 135-136 (2011) (``Comcast-NBCU Order''). The 
Commission stated:
    If failing to reach an agreement with the seller will result in 
a worse outcome for the buyer--if its alternatives are less 
attractive than they were before the transaction--then the buyer's 
bargaining position is weakened and it can expect to pay more for 
the products. * * * If not carrying either the NBC [O&O] or the RSN 
places the MVPD is a worse competitive position than not carrying 
one but still being able to carry the other, the MVPD will have less 
bargaining power after the transaction, and is at risk of having to 
pay higher rates.
    The Commission employed the type of bargaining model proposed by 
Rogerson to analyze this situation and then validated its 
theoretical analysis by examining the impact of the integration of a 
Fox O&O station with a Fox RSN. Using a control group of Fox RSNs 
not jointly owned with a local television station, the empirical 
analysis indicated that integration allowed Fox to charge a higher 
price for the RSN than it could have realized without the 
integration. Id. at 4398, Appendix B,--54. The Commission approved 
the transaction, but only on the condition that the newly combined 
entity not discriminate against competitor MVPDs or raise their 
costs by charging them higher programming fees. The Commission also 
imposed a ``baseball-style'' arbitration to enforce this non-
discrimination requirement. Id. at 4259-50.
    \27\ We thus disagree with NAB's suggestion that same market, 
separately owned Top Four stations are not substitutes for one 
another.
    \28\ Because Rogerson's model assumes that the percentage split 
between the broadcast stations and the MVPD of the joint profits of 
carriage does not vary as the value of the stations' programming 
increases, it follows as a matter of arithmetic that as the value of 
the stations' programming increases, so does the magnitude of the 
retransmission consent fee.
---------------------------------------------------------------------------

    Empirical data in the record lends support to the theory that joint 
negotiation by Top Four stations leads to increases in retransmission 
consent fees. In particular, ACA references an example indicating that, 
where a single entity controls retransmission consent negotiations for 
more than one Top Four station in a single market, the average 
retransmission consent fees paid for such stations was more than twenty 
percent higher than the fees paid for other Top Four stations in those 
same markets.\29\ Data filed in the record from three cable operators 
also lends support to our conclusion that joint negotiation between or 
among separately owned, same market Top Four stations leads to supra-
competitive increases in retransmission consent fees.\30\ We find these 
empirical data to be persuasive evidence of how joint negotiation can 
affect the level of retransmission consent fees in cases involving Top 
Four stations operating in the same market. In view of the apparent 
widespread nature of joint negotiation involving Top Four stations \31\ 
and the expected growth of retransmission consent fees,\32\ we find 
that the record provides ample support for our decision to adopt a rule 
barring joint negotiation

[[Page 28620]]

by same market, separately owned Top Four stations.
---------------------------------------------------------------------------

    \29\ Rogerson Joint Control Analysis at 11-12, citing Ex Parte 
Comments of Suddenlink Communications in Support of Mediacom 
Communications Corporation's Retransmission Consent Complaint, 
Mediacom Communications Corp., Complainant v. Sinclair Broadcast 
Group, Inc., Defendant, CSR No. 8233-C, 8234-M, at 5.
    \30\ See Letter from Scott Ulsaker, Pioneer Telephone 
Cooperative, to Marlene H. Dortch, Secretary, FCC, at 1 (Feb. 20, 
2014); Letter from Christopher A. Dyrek, Cable America Missouri LLC, 
to Marlene H. Dortch, Secretary, FCC, at 1-2 (Feb. 20, 2014); Letter 
from Stuart Gilbertson, USA Communications, to Marlene H. Dortch, 
Secretary, FCC, at 1 (Feb. 24, 2014).
    \31\ See ACA Comments at 7; ACA Reply at 33-35; Letter from 
Barbara S. Esbin, Counsel to the American Cable Association, to 
Marlene H. Dortch, Secretary, FCC, at 2 (Nov. 20, 2012). See also 
DIRECTV Dec. 6, 2013 Ex Parte Letter and Attachment.
    \32\ See Rogerson Coordinated Negotiation Analysis at 23; Salop 
Brinksmanship Analysis at 16-18.
---------------------------------------------------------------------------

    We believe that a rule barring joint negotiation may, by preventing 
supra-competitive increases in retransmission consent fees, tend to 
limit any resulting pressure for retail price increases for 
subscription video services.\33\ While there is an argument that at 
least a part of retransmission fee increases likely will be passed on 
to consumers, our decision to adopt a prohibition on joint negotiation 
is not premised on rate increases at the retail level. Cable operators 
are not required to pass through any savings derived from lower 
retransmission consent fees, and fee increases resulting from joint 
negotiation may not compare in magnitude to other costs that MVPDs 
incur. But artificially higher retransmission rates do increase input 
costs for MVPDs, and anticompetitive harm can be found at any level of 
distribution. Nor is the possibility that supra-competitive 
retransmission consent fees derived from joint negotiation might enable 
broadcasters to invest in higher quality programming, as some parties 
assert, a valid basis for permitting an anticompetitive arrangement 
that generates those fees. We reject the suggestion that the public 
interest is served merely because an arrangement generally increases 
the funds available to broadcasters, if that arrangement otherwise is 
anticompetitive and potentially harmful to consumers.
---------------------------------------------------------------------------

    \33\ See DoJ Feb. 20, 2014 Ex Parte filing at 9.
---------------------------------------------------------------------------

    We are not persuaded by opponents of a prohibition on joint 
negotiation who argue that joint negotiation promotes efficiency by 
reducing transaction costs, and that the cost savings, in turn, lead to 
lower retransmission consent rates. NAB further asserts that, to the 
extent joint negotiation lowers transaction costs, broadcasters are 
able to devote resources to programming and services that more directly 
serve the viewing public. Moreover, NAB asserts that joint negotiation 
permits retransmission consent agreements to be completed expeditiously 
by reducing the total number of agreements that must be negotiated, 
thus decreasing the administrative burdens for both broadcast stations 
and MVPDs. The claimed efficiencies are not ongoing operational 
efficiencies, but rather asserted savings of transaction costs in 
connection with isolated transactions that occur for any broadcaster at 
three-year or even longer intervals.\34\ We therefore believe that any 
such efficiencies are likely to be modest and outweighed by the harm 
from an anticompetitive practice that the record indicates generates 
supra-competitive retransmission consent fees.
---------------------------------------------------------------------------

    \34\ As ACA notes, the costs that are spared by allowing 
stations to engage in joint negotiation likely are limited to the 
cost of hiring a negotiator and related administrative expenses. See 
ACA Reply at 36. In addition, these costs are borne by stations 
relatively infrequently because retransmission consent negotiations 
typically occur only every three years. Rogerson Coordinated 
Negotiation Analysis at 18.
---------------------------------------------------------------------------

    Sinclair contends that prohibiting joint negotiation would 
arbitrarily harm certain broadcasters based on spectrum allocation and 
market size. In particular, Sinclair asserts that, because common 
ownership is permitted in markets with a sufficient number of stations 
(thereby allowing a broadcaster to negotiate on behalf of two co-owned 
stations), a ban on joint negotiation would unfairly single out 
broadcasters located in markets having too few broadcast stations to 
permit common ownership under the Commission's rules. We find that 
unpersuasive. We note that the local television ownership rule 
prohibits Top Four stations from being commonly owned in markets of any 
size. Therefore, the rule that we adopt today will not, as Sinclair 
suggests, have a disparate adverse impact on separately owned Top Four 
stations in small markets.
    We reject assertions that the Commission should permit joint 
negotiation because it promotes a level playing field for stations in 
small and medium sized markets where an MVPD has significant bargaining 
leverage. The size and bargaining power of individual broadcasters and 
MVPDs vary significantly from market to market, depending on market 
size, concentration, popularity of programming, and many other factors. 
We do not consider it the Commission's role in the retransmission 
consent process to adjust bargaining power between suppliers and their 
customers by countenancing anti-competitive practices. But we do see it 
as our role to prohibit arrangements among competitors that eliminate 
competition among them and thereby generate supra-competitive 
retransmission consent fees, because ``any effort to stifle competition 
through the negotiation process would not meet the good faith 
negotiation requirement'' imposed by Congress.
    We disagree with NAB's assertion that the Commission previously has 
found that joint negotiation is consistent with competitive marketplace 
considerations. In particular, NAB contends that adopting a prohibition 
on joint negotiation is inconsistent with the Commission's statement in 
the Good Faith Order that ``[p]roposals for carriage conditioned on 
carriage of any other programming, such as . . . another broadcast 
station either in the same or a different market'' are ``presumptively 
. . . consistent with competitive marketplace considerations and the 
good faith negotiation requirement.'' However, the cited language in 
the Good Faith Order can reasonably be read to address the issue of 
whether broadcasters may lawfully seek in-kind retransmission consent 
compensation in the form of carriage of other programming owned by the 
broadcaster itself, not programming owned by other entities. 
Interpreting that language to permit a broadcast station to tie 
carriage of its signal to carriage of a signal transmitted by a 
separately owned broadcast station in the same market would be at odds 
with the Commission's statement later in the Good Faith Order that ``an 
agreement not to compete or to fix prices . . . is not within the 
competitive marketplace considerations standard included in the 
statute.'' We thus reject NAB's reading of the Good Faith Order.
    We believe that prohibiting joint negotiation is harmonious with 
antitrust law, which generally prohibits contracts or combinations in 
restraint of trade.\35\

[[Page 28621]]

In particular, we find that joint negotiation between or among Top Four 
stations that are not commonly owned and that serve the same market is 
akin to the type of coordinated conduct disfavored by antitrust law 
because, as discussed above, the stations negotiating jointly are 
programming inputs for an MVPD that are at least partially 
substitutable. In other words, absent their coordination, such stations 
would compete head-to-head for distribution on MVPD systems and the 
associated retransmission consent revenues.
---------------------------------------------------------------------------

    \35\ Section 1 of the Sherman Act prohibits ``[e]very contract, 
combination . . . or conspiracy, in restraint of trade,'' including 
price fixing and collusive arrangements. See 15 U.S.C. 1. We note 
that DoJ has brought one antitrust action based on the theory that 
joint negotiation results in anticompetitive increases in 
retransmission consent fees. In U.S. v. Texas Television, Inc., et 
al., DoJ alleged that the ABC, NBC and CBS affiliates operating in 
the Corpus Christi, Texas market violated section 1 of the Sherman 
Act by entering into ``combinations and conspiracies in unreasonable 
restraint of interstate trade and commerce'' that consisted of 
``agreements, understandings and concerted actions . . . to increase 
the price of retransmission rights to cable companies.'' See 
Complaint, U.S. v. Texas Television, Inc., Gulf Coast Broadcasting 
Company, and K-Six Television, Inc., Civil Action No. C-96-64 (S.D. 
Texas, 1996) at 5, available at https://www.justice.gov/atr/cases/f0700/0745.htm. The court appended to its final judgment DoJ's 
Competitive Impact Statement, which identified alleged harms 
resulting from the defendants' joint negotiation. See U.S. v. Texas 
Television, Inc., Gulf Coast Broadcasting Company, and K-Six 
Television, Inc., Civil Action No. C-96-64, 1996 WL 859988 at *5 
(S.D. Texas, Feb. 15, 1996). The Competitive Impact Statement 
stated:
    The Supreme Court has long recognized that certain types of 
concerted refusals to deal or group boycotts [are] per se violations 
of the Sherman Act, even when they fall short of outright price-
fixing. The agreements between the broadcasters fell into this 
category because they had the purpose and effect of raising the 
price of retransmission rights.* * * Moreover, the Supreme Court has 
held that an agreement between rival companies that restrains 
competition between them is illegal when it lacks, as did the 
agreements among these broadcasters, any pro-competitive 
justification. Although the 1992 Cable Act gave broadcasters the 
right to seek compensation for retransmission of their television 
signals, the antitrust laws require that such rights be exercised 
individually and independently by broadcasters. When competitors in 
a market coordinate their negotiations so as to strengthen their 
negotiating positions against third parties and so obtain better 
deals . . . their conduct violates the Sherman Act.
    Id. at 6-8. While Texas Television addressed a specific factual 
scenario that is not before us here, DoJ's action supports our 
conclusion that joint negotiation by Top Four stations not commonly 
owned is harmful to competition. As noted above, DoJ, in its ex 
parte filing in the Quadrennial Review proceeding, reinforced this 
conclusion. See DoJ Feb. 20, 2014 Ex Parte filing at 14-15. Thus, 
antitrust principles point in the same direction as the prohibition 
we adopt today although, of course, our authority under section 325 
is not limited to the prohibition of conduct that falls within the 
scope of the Sherman Act and a showing that, in a particular case, 
joint negotiation would not be actionable under section 1 of the 
Sherman Act would not defeat the exercise of the statutory power 
that Congress separately and specifically has provided to the 
Commission. Although DoJ's action was targeted at coordinated 
behavior by broadcast stations with significant market share like 
the rule we adopt here, we find that the adoption of targeted, 
prescriptive rules is more efficient and effective in preventing the 
competitive harms derived from joint negotiation than case-by-case 
antitrust litigation, which Sinclair has suggested. See Sinclair 
Comments at 23.
---------------------------------------------------------------------------

    The Commission on multiple occasions has drawn on antitrust 
principles in exercising its responsibility under the Act to regulate 
broadcasting in the public interest. Indeed, the Commission's authority 
under Title III of the Act to regulate broadcasting in the public 
interest empowers us to prescribe regulation that not only prevents 
anticompetitive practices, but also affirmatively promotes competition. 
And we have concluded that conduct that violates our national policies 
favoring competition is ``not within the competitive marketplace 
considerations standard'' set forth in section 325(b)(3)(C) of the Act.

B. Elements of the Prohibition on Joint Negotiation

    Stations Not ``Commonly Owned.'' We conclude that we should apply 
the rule prohibiting joint negotiation only to same market, Top Four 
broadcast stations that are not ``commonly owned'' \36\ and that we 
will base the determination regarding whether stations are commonly 
owned on the Commission's broadcast attribution rules. Although those 
rules do not define the phrase ``commonly owned'' or similar phrases, 
they identify the interests that are deemed to be attributable for 
purposes of applying the Commission's media ownership restrictions.\37\ 
Stations that are not subject to the prohibition on joint negotiation 
thus include Top Four stations that are deemed to be under common 
ownership, operation or control pursuant to section 73.3555 of the 
Commission's rules.\38\ No party has suggested in this proceeding that, 
in applying a rule barring joint negotiation, we should define common 
ownership in a way that is different from how the concept currently is 
defined in our attribution rules.
---------------------------------------------------------------------------

    \36\ We do not apply the rule to stations that are commonly 
owned because we find that joint negotiation by such stations does 
not present the same competitive concerns as joint negotiation by 
separately owned stations. In cases of common ownership, the local 
television ownership rule has permitted a combination of interests 
that is consistent with the rule's goal of ensuring competition 
among television broadcast stations in a given local television 
market.
    \37\ Such interests are not limited to equity interests in a 
broadcast licensee. See 47 CFR 73.3555 Notes.
    \38\ See 47 CFR 73.3555 Notes. For example, Top Four stations 
that the Commission has permitted to be commonly owned, operated, or 
controlled pursuant to a waiver of the local television ownership 
rule will be permitted to engage in joint negotiation.
---------------------------------------------------------------------------

    Stations that Serve the Same Geographic Market. For the purpose of 
applying the rule prohibiting joint negotiation, we also conclude that 
broadcast stations are deemed to serve the same geographic market if 
they operate in the same DMA.\39\ Because a broadcast station that 
enters into a retransmission consent agreement with an MVPD is entitled 
to carriage of its signal within the DMA it serves, broadcast stations 
are considered to be programming substitutes for an MVPD only if they 
operate in the same DMA. In addition, section 76.55(e)(2) of the 
Commission's rules provides that ``a commercial broadcast television 
station's market . . . shall be defined as its [DMA] . . . as 
determined by Nielsen Media Research and published in its Nielsen 
Station Index Directory and Nielsen Station Index US Television 
Household Estimates or any successor publications.'' Defining the 
relevant geographic market as the DMA is consistent with our local 
television ownership rule, which, as noted above, prohibits an entity 
from owning, operating, or controlling two stations licensed in the 
same DMA, with certain exceptions. Parties that support a prohibition 
on joint negotiation generally seem to agree that the DMA is the 
relevant geographic market for purposes of a rule barring joint 
negotiation, and no party has suggested that the geographic market 
should be defined differently.
---------------------------------------------------------------------------

    \39\ Although we proposed to adopt a rule that was not limited 
in application to stations serving the same geographic market, we 
adopt a rule that is more narrow in scope because we conclude that 
the competitive concerns discussed above are present only in cases 
where joint negotiation involves stations that, absent such 
negotiation, would compete directly for retransmission consent 
revenues. Such stations are those that compete for carriage on MVPD 
systems in the same DMA.
---------------------------------------------------------------------------

    ``Top Four'' Station. For the purpose of applying the rule 
prohibiting joint negotiation, we conclude that a station is deemed to 
be a Top Four station if it is ranked among the top four stations in a 
DMA, based on the most recent all-day (9 a.m.-midnight) audience share, 
as measured by Nielsen Media Research or by any comparable 
professional, accepted audience ratings service. Defining Top Four 
stations in this manner is consistent with our local television 
ownership rule.

C. Prohibited Practices

    For the purpose of applying the rule barring joint negotiation, we 
define ``joint negotiation'' to encompass specified coordinated 
activities relating to retransmission consent between or among 
separately owned Top Four stations serving the same DMA. In the NPRM, 
we sought comment on ``whether it should be a per se violation for a 
station to grant another station or station group the right to 
negotiate or the power to approve its retransmission consent agreement 
when the stations are not commonly owned.'' We agree with parties 
asserting that a prohibition on joint negotiation must be crafted 
broadly enough to target collusive behavior effectively. For example, 
ACA argues that, although much of the existing coordination occurs 
among broadcast stations under the rubric of formal agreements, a 
prohibition should apply not only to agreements that are legally 
binding, but also to less formal methods of coordination, e.g., where 
broadcasters communicate with each other and follow a collective course 
of action that maximizes their joint profits, but where the arrangement 
is not enforceable through a legally binding agreement. We share ACA's 
concern that, even if coordination is currently accomplished largely 
through legally binding agreements, broadcast stations could readily 
switch to non-binding forms of collaboration if a rule prohibited only 
those that were legally binding. Thus,

[[Page 28622]]

consistent with antitrust precedent and ACA's suggestions,\40\ we 
conclude that joint negotiation includes the following activities:
---------------------------------------------------------------------------

    \40\ The Commission also has recognized that collusive behavior 
can take various forms and is not limited to formal agreements 
between or among market participants.
---------------------------------------------------------------------------

    (i) Delegation of authority to negotiate or approve a 
retransmission consent agreement by one Top Four broadcast television 
station (or its representative) to another such station (or its 
representative) that is not commonly owned and that serves the same 
DMA;
    (ii) delegation of authority to negotiate or approve a 
retransmission consent agreement by two or more Top Four broadcast 
television stations that are not commonly owned and that serve the same 
DMA (or their representatives) to a common third party;
    (iii) any informal, formal, tacit or other agreement and/or conduct 
that signals or is designed to facilitate collusion regarding 
retransmission terms or agreements between or among Top Four broadcast 
television stations that are not commonly owned and that serve the same 
DMA. This provision shall not be interpreted to apply to disclosures 
otherwise required by law or authorized under a Commission or judicial 
protective order.
    We believe that defining joint negotiation to encompass the 
practices above likely would cover all forms of joint negotiation 
agreements, whether legally binding or not. We note that the 
Commission, in another context, has adopted anti-collusion rules that 
proscribe a variety of coordinated activities, not merely those 
resulting from binding contracts. Although the criteria we adopt for 
defining joint negotiation are similar to those proposed by ACA, we 
find the fourth prong of ACA's proposed language to be overly broad in 
that it could be read to cover legally required disclosures and 
disclosures of information that is not competitively sensitive and 
would not facilitate collusion on the terms of retransmission consent. 
Instead, we adopt the third category of proscribed activities noted 
above relating to covert collaboration such as price signaling, which 
deviates from ACA's proposal, and which generally is consistent with 
antitrust precedent. Moreover, our definition of joint negotiation 
generally is consistent with the Texas Television decision, in which 
the court imposed restrictions on the defendant stations that were 
similarly broad in scope.\41\ No party in this proceeding specifically 
addressed the merits of ACA's proposed list of prohibited activities or 
suggested alternative criteria.
---------------------------------------------------------------------------

    \41\ In particular, the court prohibited each defendant from: 
(1) Directly or indirectly entering into, adhering to, maintaining, 
soliciting, or knowingly performing any act in furtherance of any 
contract, agreement, understanding or plan with any television 
broadcaster not affiliated with that defendant relating to 
retransmission consent or retransmission consent negotiations; (2) 
directly or indirectly communicating to any television broadcaster 
not affiliated with that defendant: (i) any information relating to 
retransmission consent or retransmission consent negotiations, 
including, but not limited to, the negotiating strategy of any 
television broadcaster, or the type or value of any consideration 
sought by any television broadcaster; or (ii) any information 
relating to the negotiating strategy of any television broadcaster, 
or to the type or value of any consideration sought by any 
television broadcaster relating to any actual or proposed 
transaction with any MVPD. See Final Judgment, U.S. v. Texas 
Television, Inc., Gulf Coast Broadcasting Company, and K-Six 
Television, Inc., Civil Action No. C-96-64 (S.D. Texas, 1996) at 2, 
available at https://www.justice.gov/atr/cases/f0700/0748.htm.
---------------------------------------------------------------------------

D. Authority To Adopt the Prohibition on Joint Negotiation

    We conclude that we are authorized under section 325 of the Act to 
adopt a rule barring joint negotiation by separately owned Top Four 
stations serving the same market. Some commenters assert that the 
Commission lacks authority to adopt a rule barring joint negotiation 
and that such a prohibition is inconsistent with congressional intent. 
For example, NAB argues that, when section 325 was enacted, operating 
agreements among separately owned broadcast stations were commonplace. 
According to NAB, the fact that Congress declined to establish any 
limitations on the number of markets, systems, stations or programming 
streams that could be addressed simultaneously in retransmission 
consent negotiations evinces its intent to permit joint negotiation. 
LIN points to language in section 325's legislative history that 
provides that ``[i]t is the Committee's intention to establish a 
marketplace for the disposition of the rights to retransmit broadcast 
signals; it is not the Committee's intention * * * to dictate the 
outcome of the ensuing marketplace negotiations,'' as evincing 
Congress's intent not to bar joint negotiation. Some parties assert 
that restricting joint negotiation would impose a bargaining limitation 
on broadcasters while allowing MVPDs to enter into similar 
relationships, and thus would be at odds with Congress's desire to make 
the good faith bargaining obligations reciprocal.
    We find these arguments to be unpersuasive. As noted above, section 
325(b)(3)(A) of the Act directs the Commission ``to establish 
regulations to govern the exercise by television broadcast stations of 
the right to grant retransmission consent.'' We conclude that this 
provision grants the Commission authority to adopt rules governing 
retransmission consent negotiations, including the rule barring joint 
negotiation we adopt in this Order. Moreover, we conclude that section 
325(b)(3)(C)(ii) of the Act provides an independent statutory basis for 
our rule. As noted, section 325(b)(3)(C)(ii) directs the Commission to 
adopt rules that ``prohibit a television broadcast station that 
provides retransmission consent from * * * failing to negotiate in good 
faith,'' and provides that ``it shall not be a failure to negotiate in 
good faith if the television broadcast station enters into 
retransmission consent agreements containing different terms and 
conditions, including price terms, with different multichannel video 
programming distributors if such different terms and conditions are 
based on competitive marketplace considerations.'' Because, as 
discussed above, joint negotiation undermines competition among Top 
Four, same market broadcast stations that otherwise would compete for 
carriage on MVPD systems, the terms and conditions resulting from such 
negotiation are not based on competitive marketplace considerations. 
Accordingly, we find that adopting a rule barring such practices is 
well within our authority under this provision.
    We find nothing in the legislative history of section 325 to 
support assertions that the Commission lacks authority to establish 
rules prohibiting joint negotiation. First, even if we were to credit 
NAB's assertion that Congress was aware of sharing agreements 
(including those providing for joint negotiation) when it enacted 
section 325, we are not persuaded that Congress's decision not to 
expressly bar such agreements in the statute indicates that it intended 
to require the Commission to permit them. Where, as here, Congress has 
granted the Commission broad discretion to adopt rules implementing 
section 325, including rules defining the scope of the good faith 
obligation, we find it reasonable to conclude that Congress did not 
identify in the statute every practice or arrangement that might 
violate that obligation, and instead relied on the Commission to make 
such determinations.
    Contrary to the assertions of LIN and Journal, we also do not 
believe that establishing a rule addressing joint negotiation by Top 
Four stations is inconsistent with Congress's desire in section 325 
merely to establish a marketplace for the rights to retransmit

[[Page 28623]]

broadcast signals. Rather, we believe that Congress's goal of a 
competitive marketplace is directly furthered by this rule, which is 
precisely designed to prevent a Top Four television broadcast station 
from obtaining undue leverage in its retransmission consent 
negotiations by virtue of an arrangement with a competing Top Four 
station. Thus, rather than ``dictating the outcome'' of the 
negotiation, our rule simply addresses the process of retransmission 
consent negotiations in a manner that protects the competitive working 
of the marketplace in which retransmission consent is negotiated. The 
rule neither compels negotiating parties to reach agreement nor 
prescribes the terms and conditions under which MVPDs may retransmit 
broadcast signals.
    We disagree with assertions that prohibiting joint negotiation by 
broadcasters without addressing joint negotiation by MVPDs is 
inconsistent with Congress's decision to impose a good faith bargaining 
obligation on both broadcast stations and MVPDs. MVPDs are obligated by 
the statute to negotiate retransmission consent in good faith. Where 
MVPDs that serve the same geographic market jointly negotiate for the 
right to retransmit broadcast signals, they may be subject to a 
complaint under the totality of circumstances test for a violation of 
that reciprocal duty and we may give close scrutiny to such joint 
negotiation. But although some commenters have provided anecdotal 
evidence of joint negotiation by MVPDs, the record does not establish 
that this is a widespread practice or the extent to which such joint 
negotiation affects retransmission consent fees obtained by 
broadcasters. Therefore, we decline to address at this time whether 
joint negotiation by same market MVPDs should be considered a violation 
of the duty to negotiate retransmission consent in good faith. Of 
course, should circumstances warrant, this issue can be considered by 
the Commission in the future as it protects and promotes competition.

E. Effect on Existing Agreements

    We conclude that Top Four stations subject to the rule prohibiting 
joint negotiation are barred from engaging in such negotiation as of 
the effective date of the rules we adopt in this Order, regardless of 
whether the stations are subject to existing agreements, formal or 
informal, written or oral, that obligate them to negotiate 
retransmission consent jointly. On the other hand, the rule does not 
apply to joint negotiation by same market, separately owned Top Four 
stations that has been completed prior to the effective date of the 
rules, and it does not invalidate retransmission consent agreements 
concluded through such negotiation. Thus, an MVPD that files a 
complaint pursuant to the rule would need to demonstrate that the 
alleged good faith violation occurred after the effective date of the 
rule. Applying the rule to existing agreements in this limited manner 
is not impermissibly retroactive because, simply put, the rule has no 
retroactive effect. Given the potential harm to competition and 
consumers that we have found stems from joint negotiation, we find that 
the public interest will be served by barring enforcement of agreements 
to negotiate jointly between or among separately owned Top Four 
stations serving the same DMA as of the effective date of rules adopted 
in this Order. As we have noted in other contexts, the law affords us 
broad authority to establish new rules prohibiting future conduct, 
including conduct pursuant to a pre-existing contract, where the public 
interest so requires.
    We conclude that the Takings Clause of the Fifth Amendment presents 
no obstacle to barring enforcement of existing agreements to negotiate 
jointly by separately owned Top Four stations that serve the same DMA. 
First, this action does not involve the permanent condemnation of 
physical property and thus does not constitute a per se taking.
    It also is not a regulatory taking. The Supreme Court has outlined 
the framework for evaluating regulatory takings claims as first 
established in Penn Central Transportation Co. v. New York City:

    In all of these cases, we have eschewed the development of any 
set formula for identifying a `taking' forbidden by the Fifth 
Amendment, and have relied instead on ad hoc, factual inquiries into 
the circumstances of each particular case. To aid in this 
determination, however, we have identified three factors which have 
particular significance: (1) The economic impact of the regulation 
on the claimant; (2) the extent to which the regulation has 
interfered with distinct investment-backed expectations; and (3) the 
character of the governmental action.\42\
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    \42\ See MDU Order, 73 FR 1080-01 (2008) (quoting Connolly v. 
Pension Ben. Guaranty Corp., 475 U.S. 211, 224-25 (1986) (citations 
and internal quotation marks omitted)).

    The Court has stated that a party challenging the governmental 
action bears a substantial burden because not every destruction or 
injury to property that results from economic regulation effects an 
unconstitutional taking. Rather, a regulation's constitutionality is 
evaluated ``by examining the governmental action's `justice and 
fairness.' ''
    The above factors counsel against finding a regulatory taking here. 
First, prohibiting the enforcement of agreements that contemplate joint 
negotiation by same market, separately owned Top Four stations would 
impact those stations economically only by denying them the supra-
competitive retransmission consent fees such joint negotiation might 
yield and whatever efficiencies joint negotiation might entail, which 
efficiencies we have found would likely be slight. As noted above, the 
rule we adopt is targeted only at coordinated activities among 
competitors that we find are harmful to competition and consumers. The 
fact that regulation might prevent the most profitable use of property 
is not dispositive of whether such regulation effects an 
unconstitutional taking. Thus, under the first prong of the takings 
analysis, any economic impact on stations subject to the rule is 
outweighed by our public interest objectives of promoting competition 
in local television markets and protecting consumers.
    Second, applying the rule only to prohibit future joint negotiation 
under existing agreements does not improperly interfere with distinct 
investment-backed expectations. As early as 2000, when the Commission 
initially adopted rules to implement section 325(b)(3)(C)(ii) of the 
Act, it concluded that ``[p]roposals that result from agreements not to 
compete or to fix prices'' are ``examples of bargaining proposals 
[that] presumptively are not consistent with competitive marketplace 
considerations and the good faith negotiation requirement.'' Several 
years prior to that, DoJ brought its antitrust suit against the top 
broadcast stations in the Corpus Christi, Texas, market, which led to 
the settlement in the Texas Television decision. In 2010, the 
Commission, in its Quadrennial Review proceeding, raised questions 
about the impact of broadcast sharing agreements on retransmission 
consent negotiations. In 2011, the Commission issued the NPRM in this 
proceeding, which proposed to adopt a prohibition targeted specifically 
at joint negotiation of retransmission consent. Thus, for many years 
now, stations subject to the rule prohibiting joint negotiation have 
been on notice that coordinated negotiation of retransmission consent 
is of concern to the Commission, and that any related investments had 
the potential to be affected by rules addressing such conduct. More 
fundamentally, the provisions of section 325 signal Congress's express 
authorization for the

[[Page 28624]]

Commission to scrutinize marketplace conduct and adopt proscriptive 
rules to safeguard competition in the marketplace. Consistent with our 
finding in MDU Order, we conclude that stations subject to the rule do 
not have a legitimate investment-backed expectation in profits to be 
obtained from future anticompetitive behavior. We thus believe that any 
investment-backed expectations that same market, separately owned Top 
Four stations may have had are unreasonable and do not satisfy the 
second prong of the test above.
    Finally, with respect to the character of governmental action, the 
rule we adopt in this Order substantially advances the legitimate 
government interests in preserving competition in local television 
markets and preventing supra-competitive increases in retransmission 
consent fees. The rule proscribing joint negotiation also advances 
Congress's statutory objective to ensure that any terms and conditions 
for retransmission consent are ``based on competitive marketplace 
considerations.'' As noted above, the rule is grounded in our 
assessment of the relative harms and benefits of agreements among Top 
Four stations in the same market that provide for joint negotiation and 
is carefully tailored to promote Congress's objectives in section 325.

IV. Procedural Matters

A. Regulatory Flexibility Act

    Final Regulatory Flexibility Analysis. As required by the 
Regulatory Flexibility Act of 1980, as amended (``RFA''),\43\ the 
Initial Regulatory Flexibility Analysis (``IRFA'') was incorporated 
into the Notice of Proposed Rulemaking (``NPRM'') in this proceeding. 
The Federal Communications Commission (``Commission'') sought written 
public comment on the proposals in the NPRM, including comment on the 
IRFA. This Final Regulatory Flexibility Analysis (``FRFA'') conforms to 
the RFA.\44\
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    \43\ See 5 U.S.C. 603. The RFA, see 5 U.S.C. 601 et seq., has 
been amended by the Small Business Regulatory Enforcement Fairness 
Act of 1996 (``SBREFA''), Pub. L. 104-121, Title II, 110 Stat. 857 
(1996). The SBREFA was enacted as Title II of the Contract with 
America Advancement Act of 1996 (``CWAAA'').
    \44\ See 5 U.S.C. 604.
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1. Need for, and Objectives of, the Report and Order
    In the Report and Order (``Order''), we revise our ``retransmission 
consent'' rules, which govern carriage negotiations between broadcast 
television stations and multichannel video programming distributors 
(``MVPDs''). In March 2010, 14 MVPDs and public interest groups filed a 
rulemaking petition arguing that changes in the marketplace, and the 
increasingly contentious nature of retransmission consent negotiations, 
justify revisions to the Commission's rules governing retransmission 
consent. The Commission initiated this proceeding and a robust record 
developed. The action we take in this Order will help to ensure the 
successful completion of negotiations between broadcast stations and 
MVPDs. Specifically, we address MVPDs' argument that competing 
broadcast television stations (``broadcast stations'' or ``stations'') 
obtain undue bargaining leverage by negotiating together when they are 
not commonly owned. In the Order, we conclude that such joint 
negotiation by stations that are ranked among the top four stations in 
a market as measured by audience share (``Top Four'' stations) and are 
not commonly owned constitutes a violation of the statutory duty to 
negotiate retransmission consent in good faith. It is our intention 
that this action will facilitate the fair and effective completion of 
retransmission consent negotiations.
2. Legal Basis
    The action in this Order is authorized pursuant to sections 4(i), 
4(j), 301, 303(r), 303(v), 307, 309, 325, and 614 of the Communications 
Act of 1934, as amended, 47 U.S.C. 154(i), 154(j), 301, 303(r), 303(v), 
307, 309, 325, and 534.
3. Summary of Significant Issues Raised in Response to the IRFA
    While several parties filed comments describing the impact of the 
current retransmission consent rules on small businesses, and the 
potential impact of several proposed rules on small businesses, only 
the U.S. Small Business Administration Office of Advocacy (``SBA'') 
commented specifically with the RFA process in mind. Noting that part 
of its role is ``to monitor agency compliance with the RFA,'' the SBA 
filed comments describing the impact of the current rules on small 
MVPDs.\45\ On balance, we believe that the rules adopted in this Order 
will encourage parties to reach agreements, thus benefiting small 
businesses including the small MVPDs on whose behalf SBA commented. SBA 
specifically urged the Commission to adopt proposals that the 
Commission concluded in the NPRM were beyond its authority to adopt, 
including interim carriage in the event of a retransmission consent 
impasse as well as a dispute resolution process. The NPRM sought 
comment on that conclusion but we note here that such proposals are 
beyond the scope of this Order. To the extent the Commission addresses 
these issues in the future, SBA's comments will be fully 
considered.\46\
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    \45\ Comments of Office of Advocacy, U.S. Small Business 
Administration Comments at 2, 3-4 (``SBA Comments'').
    \46\ The final regulatory flexibility analysis must contain 
``the response of the agency to any comments filed by the Chief 
Counsel for Advocacy of the Small Business Administration, and a 
detailed statement if the SBA comment causes a change from the 
proposed rule to the final rule.'' 5 U.S.C. 604(a)(3). We emphasize 
that the SBA comments in this proceeding were silent on the 
proposals actually adopted. Should the Commission in the future 
address the issues on which SBA commented, it will fully consider 
SBA's position.
---------------------------------------------------------------------------

    Without mentioning the IRFA, a couple of parties commented on the 
impact of the specific rules adopted in this Order on small entities. 
For example, parties representing small MVPDs were generally in favor 
of a joint negotiation ban, arguing that joint negotiation enables 
broadcast stations to charge supra-competitive retransmission consent 
fees to MVPDs which, in turn, are passed along to consumers in the form 
of higher rates for MVPD services, and that joint negotiation heightens 
the disruption caused by negotiating breakdowns and depletes capital 
that MVPDs otherwise could use to deploy broadband and other advanced 
services. Parties representing broadcasters generally argued that the 
joint negotiation enhances efficiency and reduces transaction costs, 
thereby facilitating agreements and resulting in lower retransmission 
consent rates. These parties also contend that joint negotiation helps 
small broadcasters to reduce their operating costs and devote more 
resources to local programming; and that a prohibition on joint 
negotiation would arbitrarily inflict greater harm on some broadcasters 
based on spectrum allocation and market size.
4. Description and Estimate of the Number of Small Entities to Which 
the Rules Will Apply
    The RFA directs the Commission to provide a description of and, 
where feasible, an estimate of the number of small entities that will 
be affected by the rules adopted in the Order.\47\ The RFA generally 
defines the term ``small entity'' as having the same meaning as the 
terms ``small business,'' ``small organization,'' and ``small 
governmental jurisdiction.'' \48\ In addition, the term

[[Page 28625]]

``small business'' has the same meaning as the term ``small business 
concern'' under the Small Business Act.\49\ 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.\50\ Below are descriptions 
of the small entities that are directly affected by the rules adopted 
in the Order, including, where feasible, an estimate of the number of 
such small entities.
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    \47\ 5 U.S.C. 603(b)(3).
    \48\ 5 U.S.C. 601(6).
    \49\ 5 U.S.C. 601(3) (incorporating by reference the definition 
of ``small-business concern'' in the Small Business Act, 15 U.S.C. 
632). Pursuant to 5 U.S.C. 601(3), the statutory definition of a 
small business applies ``unless an agency, after consultation with 
the Office of Advocacy of the Small Business Administration and 
after opportunity for public comment, establishes one or more 
definitions of such term which are appropriate to the activities of 
the agency and publishes such definition(s) in the Federal 
Register.''
    \50\ 15 U.S.C. 632.
---------------------------------------------------------------------------

    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.'' \51\ The SBA has developed a small 
business size standard for wireline firms within the broad economic 
census category, ``Wired Telecommunications Carriers.'' \52\ 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.\53\ Of this total, 30,178 
establishments had fewer than 100 employees, and 1,818 establishments 
had 100 or more employees.\54\ Therefore, under this size standard, we 
estimate that the majority of businesses can be considered small 
entities.
---------------------------------------------------------------------------

    \51\ U.S. Census Bureau, 2007 NAICS Definitions, ``517110 Wired 
Telecommunications Carriers''; https://www.census.gov/naics/2007/def/ND517110.HTM#N517110.
    \52\ 13 CFR 121.201 (NAICS code 517110).
    \53\ U.S. Census Bureau, 2007 Economic Census. See U.S. Census 
Bureau, American FactFinder, ``Information: Subject Series--Estab 
and Firm Size: Employment Size of Establishments for the United 
States: 2007--2007 Economic Census,'' NAICS code 517110, Table 
EC0751SSSZ2; available at https://factfinder2.census.gov/faces/nav/jsf/pages/index.xhtml.
    \54\ Id.
---------------------------------------------------------------------------

    Cable Television Distribution Services. Since 2007, these services 
have been defined within the broad economic census category of Wired 
Telecommunications Carriers; that category is defined above. The SBA 
has developed a small business size standard for this category, which 
is: All such firms having 1,500 or fewer employees. Census data for 
2007 shows that there were 31,996 establishments that operated that 
year.\55\ Of this total, 30,178 establishments had fewer than 100 
employees, and 1,818 establishments had 100 or more employees.\56\ 
Therefore, under this size standard, we estimate that the majority of 
businesses can be considered small entities.
---------------------------------------------------------------------------

    \55\ U.S. Census Bureau, 2007 Economic Census. See U.S. Census 
Bureau, American FactFinder, ``Information: Subject Series--Estab 
and Firm Size: Employment Size of Establishments for the United 
States: 2007--2007 Economic Census,'' NAICS code 517110, Table 
EC0751SSSZ2; available at https://factfinder2.census.gov/faces/nav/jsf/pages/index.xhtml.
    \56\ Id.
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    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.\57\ Industry data 
shows that there were 1,141 cable companies at the end of June 
2012.\58\ Of this total, all but 10 incumbent cable companies are small 
under this size standard.\59\ In addition, under the Commission's 
rules, a ``small system'' is a cable system serving 15,000 or fewer 
subscribers.\60\ Industry data indicate that, of 7,208 systems 
nationwide, 6,139 systems have under 10,000 subscribers, and an 
additional 379 systems have 10,000-19,999 subscribers.\61\ Thus, under 
this standard, most cable systems are small.
---------------------------------------------------------------------------

    \57\ 47 CFR 76.901(e). The Commission determined that this size 
standard equates approximately to a size standard of $100 million or 
less in annual revenues. Implementation of Sections of the 1992 
Cable Act: Rate Regulation, Sixth Report and Order and Eleventh 
Order on Reconsideration, 60 FR 35854-01 (1995).
    \58\ NCTA, Industry Data, Number of Cable Operating Companies 
(June 2012), https://www.ncta.com/Statistics.aspx (visited Sept. 28, 
2012). Depending upon the number of homes and the size of the 
geographic area served, cable operators use one or more cable 
systems to provide video service. See Annual Assessment of the 
Status of Competition in the Market for Delivery of Video 
Programming, MB Docket No. 12-203, Fifteenth Report, FCC 13-99 at--
24 (rel. July 22, 2013) (``15th Annual Competition Report'').
    \59\ See SNL Kagan, ``Top Cable MSOs--12/12 Q''; available at 
https://www.snl.com/InteractiveX/TopCableMSOs.aspx?period=2012Q4&sortcol=subscribersbasic&sortorder=desc. We note that, when applied to an MVPD operator, under this size 
standard (i.e., 400,000 or fewer subscribers) all but 14 MVPD 
operators would be considered small. See NCTA, Industry Data, Top 25 
Multichannel Video Service Customers (2012), https://www.ncta.com/industry-data (visited Aug. 30, 2013). The Commission applied this 
size standard to MVPD operators in its implementation of the CALM 
Act. See Implementation of the Commercial Advertisement Loudness 
Mitigation (CALM) Act, MB Docket No. 11-93, Report and Order, 77 FR 
40276 (2012) (``CALM Act Report and Order'') (defining a smaller 
MVPD operator as one serving 400,000 or fewer subscribers 
nationwide, as of December 31, 2011).
    \60\ 47 CFR 76.901(c).
    \61\ Television and Cable Factbook 2006, at F-2 (Albert Warren 
ed., 2005) (data current as of Oct. 2005). The data do not include 
718 systems for which classifying data were not available.
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    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.'' \62\ There are approximately 56.4 million incumbent 
cable video subscribers in the United States today.\63\ 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.\64\ Based on available data, we find that all but 10 
incumbent cable operators are small under this size standard.\65\ 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.\66\ Although it

[[Page 28626]]

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.
---------------------------------------------------------------------------

    \62\ 47 U.S.C. 543(m)(2); see 47 CFR 76.901(f) & nn. 1-3.
    \63\ See NCTA, Industry Data, Cable Video Customers (2012), 
https://www.ncta.com/industry-data (visited Aug. 30, 2013).
    \64\ 47 CFR 76.901(f); see Public Notice, FCC Announces New 
Subscriber Count for the Definition of Small Cable Operator, DA 01-
158 (Cable Services Bureau, Jan. 24, 2001).
    \65\ See NCTA, Industry Data, Top 25 Multichannel Video Service 
Customers (2012), https://www.ncta.com/industry-data (visited Aug. 
30, 2013).
    \66\ The Commission does receive such information on a case-by-
case basis if a cable operator appeals a local franchise authority's 
finding that the operator does not qualify as a small cable operator 
pursuant to Sec.  76.901(f) of the Commission's rules. See 47 CFR 
76.901(f).
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    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,'' \67\ which was developed for small wireline firms. Under 
this category, the SBA deems a wireline business to be small if it has 
1,500 or fewer employees.\68\ Census data for 2007 shows that there 
were 31,996 establishments that operated that year.\69\ Of this total, 
30,178 establishments had fewer than 100 employees, and 1,818 
establishments had 100 or more employees.\70\ Therefore, under this 
size standard, the majority of such businesses can be considered small. 
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.\71\ 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 by the SBA would have the financial wherewithal to become a DBS 
service provider.
---------------------------------------------------------------------------

    \67\ See 13 CFR 121.201, NAICS code 517110 (2007). The 2007 
NAICS definition of the category of ``Wired Telecommunications 
Carriers'' is in paragraph 7, above.
    \68\ 13 CFR 121.201, NAICS code 517110 (2007).
    \69\ U.S. Census Bureau, 2007 Economic Census. See U.S. Census 
Bureau, American FactFinder, ``Information: Subject Series--Estab 
and Firm Size: Employment Size of Establishments for the United 
States: 2007--2007 Economic Census,'' NAICS code 517110, Table 
EC0751SSSZ2; available at https://factfinder2.census.gov/faces/nav/jsf/pages/index.xhtml.
    \70\ Id.
    \71\ 13 CFR 121.201; NAICS code 517510 (2002).
---------------------------------------------------------------------------

    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,'' \72\ which was 
developed for small wireline firms. Under this category, the SBA deems 
a wireline business to be small if it has 1,500 or fewer employees.\73\ 
Census data for 2007 shows that there were 31,996 establishments that 
operated that year.\74\ Of this total, 30,178 establishments had fewer 
than 100 employees, and 1,818 establishments had 100 or more 
employees.\75\ Therefore, under this size standard, the majority of 
such businesses can be considered small.
---------------------------------------------------------------------------

    \72\ See 13 CFR 121.201, NAICS code 517110 (2007).
    \73\ 13 CFR 121.201, NAICS code 517110 (2007).
    \74\ U.S. Census Bureau, 2007 Economic Census. See U.S. Census 
Bureau, American FactFinder, ``Information: Subject Series--Estab 
and Firm Size: Employment Size of Establishments for the United 
States: 2007--2007 Economic Census,'' NAICS code 517110, Table 
EC0751SSSZ2; available at https://factfinder2.census.gov/faces/nav/jsf/pages/index.xhtml.
    \75\ Id.
---------------------------------------------------------------------------

    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.\76\ The SBA has developed a small business size standard for 
this category, which is: all such firms having 1,500 or fewer 
employees. Census data for 2007 shows that there were 31,996 
establishments that operated that year.\77\ Of this total, 30,178 
establishments had fewer than 100 employees, and 1,818 establishments 
had 100 or more employees.\78\ Therefore, under this size standard, the 
majority of such businesses can be considered small.
---------------------------------------------------------------------------

    \76\ 13 CFR 121.201, NAICS code 517110 (2007).
    \77\ U.S. Census Bureau, 2007 Economic Census. See U.S. Census 
Bureau, American FactFinder, ``Information: Subject Series--Estab 
and Firm Size: Employment Size of Establishments for the United 
States: 2007--2007 Economic Census,'' NAICS code 517110, Table 
EC0751SSSZ2; available at https://factfinder2.census.gov/faces/nav/jsf/pages/index.xhtml.
    \78\ Id.
---------------------------------------------------------------------------

    Broadband Radio Service and Educational Broadband Service. 
Broadband Radio Service systems, previously referred to as Multipoint 
Distribution Service (MDS) and Multichannel Multipoint Distribution 
Service (MMDS) systems, and ``wireless cable,'' transmit video 
programming to subscribers and provide two-way high speed data 
operations using the microwave frequencies of the Broadband Radio 
Service (BRS) and Educational Broadband Service (EBS) (previously 
referred to as the Instructional Television Fixed Service (ITFS)). In 
connection with the 1996 BRS auction, the Commission established a 
small business size standard as an entity that had annual average gross 
revenues of no more than $40 million in the previous three calendar 
years.\79\ The BRS auctions resulted in 67 successful bidders obtaining 
licensing opportunities for 493 Basic Trading Areas (BTAs). Of the 67 
auction winners, 61 met the definition of a small business. BRS also 
includes licensees of stations authorized prior to the auction. At this 
time, we estimate that of the 61 small business BRS auction winners, 48 
remain small business licensees. In addition to the 48 small businesses 
that hold BTA authorizations, there are approximately 392 incumbent BRS 
licensees that are considered small entities.\80\ After adding the 
number of small business auction licensees to the number of incumbent 
licensees not already counted, we find that there are currently 
approximately 440 BRS licensees that are defined as small businesses 
under either the SBA or the Commission's rules. In 2009, the Commission 
conducted Auction 86, the sale of 78 licenses in the BRS areas. The 
Commission offered three levels of

[[Page 28627]]

bidding credits: (i) A bidder with attributed average annual gross 
revenues that exceed $15 million and do not exceed $40 million for the 
preceding three years (small business) will receive a 15 percent 
discount on its winning bid; (ii) a bidder with attributed average 
annual gross revenues that exceed $3 million and do not exceed $15 
million for the preceding three years (very small business) will 
receive a 25 percent discount on its winning bid; and (iii) a bidder 
with attributed average annual gross revenues that do not exceed $3 
million for the preceding three years (entrepreneur) will receive a 35 
percent discount on its winning bid.\81\ Auction 86 concluded in 2009 
with the sale of 61 licenses. Of the 10 winning bidders, two bidders 
that claimed small business status won four licenses; one bidder that 
claimed very small business status won three licenses; and two bidders 
that claimed entrepreneur status won six licenses.
---------------------------------------------------------------------------

    \79\ 47 CFR 21.961(b)(1).
    \80\ 47 U.S.C. 309(j). Hundreds of stations were licensed to 
incumbent MDS licensees prior to implementation of section 309(j) of 
the Communications Act of 1934, 47 U.S.C. 309(j). For these pre-
auction licenses, the applicable standard is SBA's small business 
size standard of 1500 or fewer employees.
    \81\ Id. at 8296.
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    In addition, the SBA's placement of Cable Television Distribution 
Services in the category of Wired Telecommunications Carriers is 
applicable to cable-based EBS. Since 2007, Cable Television 
Distribution Services have been defined within the broad economic 
census category of Wired Telecommunications Carriers; that 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.'' \82\ The SBA has 
developed a small business size standard for this category, which is: 
all such firms having 1,500 or fewer employees. Census data for 2007 
shows that there were 31,996 establishments that operated that 
year.\83\ Of this total, 30,178 establishments had fewer than 100 
employees, and 1,818 establishments had 100 or more employees.\84\ 
Therefore, under this size standard, the majority of such businesses 
can be considered small entities. In addition to Census data, the 
Commission's internal records indicate that, as of September 2012, 
there are 2,241 active EBS licenses.\85\ The Commission estimates that 
of these 2,241 licenses, the majority are held by non-profit 
educational institutions and school districts, which are by statute 
defined as small businesses.\86\
---------------------------------------------------------------------------

    \82\ U.S. Census Bureau, 2007 NAICS Definitions, ``517110 Wired 
Telecommunications Carriers,'' (partial definition), www.census.gov/naics/2007/def/ND517110.HTM#N517110. Examples of this category are: 
broadband Internet service providers (e.g., cable, DSL); local 
telephone carriers (wired); cable television distribution services; 
long-distance telephone carriers (wired); closed circuit television 
(``CCTV'') services; VoIP providers, using own operated wired 
telecommunications infrastructure; direct-to-home satellite system 
(``DTH'') services; telecommunications carriers (wired); satellite 
television distribution systems; and multichannel multipoint 
distribution services (``MMDS'').
    \83\ U.S. Census Bureau, 2007 Economic Census. See U.S. Census 
Bureau, American FactFinder, ``Information: Subject Series--Estab 
and Firm Size: Employment Size of Establishments for the United 
States: 2007--2007 Economic Census,'' NAICS code 517110, Table 
EC0751SSSZ2; available at https://factfinder2.census.gov/faces/nav/jsf/pages/index.xhtml.
    \84\ Id.
    \85\ https://wireless2.fcc.gov/UlsApp/UlsSearch/results.jsp.
    \86\ The term ``small entity'' within SBREFA applies to small 
organizations (non-profits) and to small governmental jurisdictions 
(cities, counties, towns, townships, villages, school districts, and 
special districts with populations of less than 50,000). 5 U.S.C. 
601(4)-(6).
---------------------------------------------------------------------------

    Fixed Microwave Services. Microwave services include common 
carrier,\87\ private-operational fixed,\88\ and broadcast auxiliary 
radio services.\89\ They also include the Local Multipoint Distribution 
Service (LMDS),\90\ the Digital Electronic Message Service (DEMS),\91\ 
and the 24 GHz Service,\92\ where licensees can choose between common 
carrier and non-common carrier status.\93\ At present, there are 
approximately 31,428 common carrier fixed licensees and 79,732 private 
operational-fixed licensees and broadcast auxiliary radio licensees in 
the microwave services. There are approximately 120 LMDS licensees, 
three DEMS licensees, and three 24 GHz licensees. The Commission has 
not yet defined a small business with respect to microwave services. 
For purposes of the IRFA, we will use the SBA's definition applicable 
to Wireless Telecommunications Carriers (except satellite)--i.e., an 
entity with no more than 1,500 persons.\94\ Under the present and prior 
categories, the SBA has deemed a wireless business to be small if it 
has 1,500 or fewer employees.\95\ For the category of Wireless 
Telecommunications Carriers (except Satellite), Census data for 2007 
show that there were 11,163 firms that operated that year.\96\ Of 
those, 10,791 had fewer than 1000 employees, and 372 firms had 1000 
employees or more. Thus under this category and the associated small 
business size standard, the majority of firms can be considered small. 
We note that the number of firms does not necessarily track the number 
of licensees. We estimate that virtually all of the Fixed Microwave 
licensees (excluding broadcast auxiliary licensees) would qualify as 
small entities under the SBA definition.
---------------------------------------------------------------------------

    \87\ See 47 CFR Part 101, Subparts C and I.
    \88\ See 47 CFR Part 101, Subparts C and H.
    \89\ Auxiliary Microwave Service is governed by Part 74 of Title 
47 of the Commission's Rules. See 47 CFR Part 74. Available to 
licensees of broadcast stations and to broadcast and cable network 
entities, broadcast auxiliary microwave stations are used for 
relaying broadcast television signals from the studio to the 
transmitter, or between two points such as a main studio and an 
auxiliary studio. The service also includes mobile TV pickups, which 
relay signals from a remote location back to the studio.
    \90\ See 47 CFR Part 101, Subpart L.
    \91\ See 47 CFR Part 101, Subpart G.
    \92\ See id.
    \93\ See 47 CFR 101.533, 101.1017.
    \94\ 13 CFR 121.201, NAICS code 517210.
    \95\ 13 CFR 121.201, NAICS code 517210 (2007 NAICS). The now-
superseded, pre-2007 CFR citations were 13 CFR 121.201, NAICS codes 
517211 and 517212 (referring to the 2002 NAICS).
    \96\ U.S. Census Bureau, 2007 Economic Census, Sector 51, 2007 
NAICS code 517210 (rel. Oct. 20, 2009), https://factfinder.census.gov/servlet/IBQTable?_bm=y&-geo_id=&-fds_name=EC0700A1&-_skip=700&-ds_name=EC0751SSSZ5&-_lang=en.
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    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.\97\ The OVS framework provides opportunities for the 
distribution of video programming other than through cable systems. 
Because OVS operators provide subscription services,\98\ OVS falls 
within the SBA small business size standard covering cable services, 
which is ``Wired Telecommunications Carriers.'' \99\ The SBA has 
developed a small business size standard for this category, which is: 
all such firms having 1,500 or fewer employees. Census data for 2007 
shows that there were 31,996 establishments that operated that 
year.\100\ Of this total, 30,178

[[Page 28628]]

establishments had fewer than 100 employees, and 1,818 establishments 
had 100 or more employees.\101\ Therefore, under this size standard, 
the majority of such businesses can be considered small. In addition, 
we note that the Commission has certified some OVS operators, with some 
now providing service.\102\ 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 entities authorized to provide OVS, some of 
which may not yet be operational. Thus, at least some of the OVS 
operators may qualify as small entities.
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    \97\ 47 U.S.C. 571(a)(3)-(4). See 13th Annual Report, 24 FCC Rcd 
at 606,--135.
    \98\ See 47 U.S.C. 573.
    \99\ U.S. Census Bureau, 2007 NAICS Definitions, ``517110 Wired 
Telecommunications Carriers''; https://www.census.gov/naics/2007/def/ND517110.HTM#N517110.
    \100\ U.S. Census Bureau, 2007 Economic Census. See U.S. Census 
Bureau, American FactFinder, ``Information: Subject Series--Estab 
and Firm Size: Employment Size of Establishments for the United 
States: 2007--2007 Economic Census,'' NAICS code 517110, Table 
EC0751SSSZ2; available at https://factfinder2.census.gov/faces/nav/jsf/pages/index.xhtml.
    \101\ Id.
    \102\ A list of OVS certifications may be found at https://www.fcc.gov/mb/ovs/csovscer.html.
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    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.'' \103\ 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.\104\ Census data for 2007 show that there were 659 
establishments that operated that year.\105\ Of that number, 462 
operated with annual revenues of less than $10 million and 197 operated 
with annual revenues of between $10 million and $100 million or 
more.\106\ Thus, under this size standard, the majority of such 
businesses can be considered small entities.
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    \103\ U.S. Census Bureau, 2007 NAICS Definitions, ``515210 Cable 
and Other Subscription Programming''; https://www.census.gov/naics/2007/def/ND515210.HTM#N515210.
    \104\ 13 CFR 121.210; 2012 NAICS code 515210.
    \105\ U.S. Census Bureau, 2007 Economic Census. See U.S. Census 
Bureau, American FactFinder, ``Information: Subject Series--Estab 
and Firm Size: Employment Size of Establishments for the United 
States: 2007--2007 Economic Census,'' NAICS code 517110, Table 
EC0751SSSZ2; available at https://factfinder2.census.gov/faces/nav/jsf/pages/index.xhtml.
    \106\ Id.
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    Small Incumbent Local Exchange Carriers. We have included small 
incumbent local exchange carriers in this present RFA analysis. A 
``small business'' under the RFA is one that, inter alia, meets the 
pertinent small business size standard (e.g., a telephone 
communications business having 1,500 or fewer employees), and ``is not 
dominant in its field of operation.'' \107\ The SBA's Office of 
Advocacy contends that, for RFA purposes, small incumbent local 
exchange carriers are not dominant in their field of operation because 
any such dominance is not ``national'' in scope.\108\ We have therefore 
included small incumbent local exchange carriers in this RFA analysis, 
although we emphasize that this RFA action has no effect on Commission 
analyses and determinations in other, non-RFA contexts.
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    \107\ 15 U.S.C. 632.
    \108\ Letter from Jere W. Glover, Chief Counsel for Advocacy, 
SBA, to William E. Kennard, Chairman, FCC (May 27, 1999). The Small 
Business Act contains a definition of ``small-business concern,'' 
which the RFA incorporates into its own definition of ``small 
business.'' See 15 U.S.C. 632(a) (Small Business Act); 5 U.S.C. 
601(3) (RFA). SBA regulations interpret ``small business concern'' 
to include the concept of dominance on a national basis. See 13 CFR 
121.102(b).
---------------------------------------------------------------------------

    Incumbent Local Exchange Carriers (``ILECs''). Neither the 
Commission nor the SBA has developed a small business size standard 
specifically for incumbent local exchange services. The appropriate 
size standard under SBA rules is for the category Wired 
Telecommunications Carriers. Under that size standard, such a business 
is small if it has 1,500 or fewer employees.\109\ Census data for 2007 
shows that there were 31,996 establishments that operated that 
year.\110\ Of this total, 30,178 establishments had fewer than 100 
employees, and 1,818 establishments had 100 or more employees.\111\ 
Therefore, under this size standard, the majority of such businesses 
can be considered small entities.
---------------------------------------------------------------------------

    \109\ 13 CFR 121.201 (2007 NAICS code 517110).
    \110\ U.S. Census Bureau, 2007 Economic Census. See U.S. Census 
Bureau, American FactFinder, ``Information: Subject Series--Estab 
and Firm Size: Employment Size of Establishments for the United 
States: 2007--2007 Economic Census,'' NAICS code 517110, Table 
EC0751SSSZ2; available at https://factfinder2.census.gov/faces/nav/jsf/pages/index.xhtml.
    \111\ Id.
---------------------------------------------------------------------------

    Competitive Local Exchange Carriers, Competitive Access Providers 
(CAPs), ``Shared-Tenant Service Providers,'' and ``Other Local Service 
Providers.'' Neither the Commission nor the SBA has developed a small 
business size standard specifically for these service providers. The 
appropriate size standard under SBA rules is for the category Wired 
Telecommunications Carriers. Under that size standard, such a business 
is small if it has 1,500 or fewer employees.\112\ Census data for 2007 
shows that there were 31,996 establishments that operated that 
year.\113\ Of this total, 30,178 establishments had fewer than 100 
employees, and 1,818 establishments had 100 or more employees.\114\ 
Therefore, under this size standard, the majority of such businesses 
can be considered small entities.
---------------------------------------------------------------------------

    \112\ 13 CFR 121.201 (2007 NAICS code 517110).
    \113\ U.S. Census Bureau, 2007 Economic Census. See U.S. Census 
Bureau, American FactFinder, ``Information: Subject Series--Estab 
and Firm Size: Employment Size of Establishments for the United 
States: 2007--2007 Economic Census,'' NAICS code 517110, Table 
EC0751SSSZ2; available at https://factfinder2.census.gov/faces/nav/jsf/pages/index.xhtml.
    \114\ Id.
---------------------------------------------------------------------------

    Television Broadcasting. The SBA defines a television broadcasting 
station as a small business if such station has no more than $35.5 
million in annual receipts.\115\ Business concerns included in this 
industry are those ``primarily engaged in broadcasting images together 
with sound.'' \116\ The 2007 U.S. Census indicates that 2,076 
television stations operated in that year. Of that number, 1,515 had 
annual receipts of $10,000,000 dollars or less, and 561 had annual 
receipts of more than $10,000,000. Since the Census has no additional 
classifications on the basis of which to identify the number of 
stations whose receipts exceeded $35.5 million in that year, the 
Commission concludes that the majority of television stations were 
small under the applicable SBA size standard.
---------------------------------------------------------------------------

    \115\  See 13 CFR 121.201, 2012 NAICS code 515120.
    \116\ Id. This category description continues, ``These 
establishments operate television broadcasting studios and 
facilities for the programming and transmission of programs to the 
public. These establishments also produce or transmit visual 
programming to affiliated broadcast television stations, which in 
turn broadcast the programs to the public on a predetermined 
schedule. Programming may originate in their own studios, from an 
affiliated network, or from external sources.'' Separate census 
categories pertain to businesses primarily engaged in producing 
programming. See Motion Picture and Video Production, NAICS code 
512110; Motion Picture and Video Distribution, NAICS Code 512120; 
Teleproduction and Other Post-Production Services, NAICS Code 
512191; and Other Motion Picture and Video Industries, NAICS Code 
512199.
---------------------------------------------------------------------------

    Apart from the U.S. Census, the Commission has estimated the number 
of licensed commercial television stations to be 1,388.\117\ In 
addition, according to Commission staff review of the BIA Advisory 
Services, LLC's Media Access Pro Television Database, as of March 28, 
2012, about 950 of an

[[Page 28629]]

estimated 1,300 commercial television stations (or approximately 73 
percent) had revenues of $14 million or less.\118\ We therefore 
estimate that the majority of commercial television broadcasters are 
small entities.
---------------------------------------------------------------------------

    \117\ See Broadcast Station Totals as of December 31, 2013, 
Press Release (MB rel. Jan. 8, 2014) (``Jan. 8, 2014 Broadcast 
Station Totals Press Release''), https://www.fcc.gov/document/broadcast-station-totals-december-31-2013.
    \118\ We recognize that this total differs slightly from that 
contained in Jan. 8, 2014 Broadcast Station Totals Press Release; 
however, we are using BIA's estimate for purposes of this revenue 
comparison.
---------------------------------------------------------------------------

    We note, however, that, in assessing whether a business concern 
qualifies as small under the above definition, business (control) 
affiliations \119\ 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 
do not exclude any television station from the definition of a small 
business on this basis and are therefore over-inclusive to that extent.
---------------------------------------------------------------------------

    \119\ ``[Business concerns] are affiliates of each other when 
one concern controls or has the power to control the other or a 
third party or parties controls or has to power to control both.'' 
13 CFR 121.103(a)(1).
---------------------------------------------------------------------------

    In addition, the Commission has estimated the number of licensed 
noncommercial educational (NCE) television stations to be 396.\120\ 
These stations are non-profit, and therefore considered to be small 
entities.\121\
---------------------------------------------------------------------------

    \120\ See Jan. 8, 2014 Broadcast Station Totals Press Release.
    \121\ See generally 5 U.S.C. 601(4), (6).
---------------------------------------------------------------------------

5. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements for Small Entities
    Reporting Requirements. The Order does not adopt reporting 
requirements.
    Recordkeeping Requirements. The Order does not adopt recordkeeping 
requirements.
    Compliance Requirements. Under the joint negotiation ban, a Top 
Four station will be prohibited from negotiating jointly with another 
Top Four station that is not commonly owned and that serves the same 
market.
6. Steps Taken To Minimize Economic Impact on Small Entities and 
Significant Alternatives Considered
    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.\122\ The IRFA invited comment on issues that had the 
potential to have a significant impact on some small entities.\123\
---------------------------------------------------------------------------

    \122\ 5 U.S.C. 603(a)(6).
    \123\ IRFA, 26 FCC Rcd at 2762,--27.
---------------------------------------------------------------------------

    In the NPRM, we sought comment on any potential alternatives we 
should consider to our proposals that would minimize any adverse impact 
on small entities while maintaining the benefits of our proposals.\124\ 
Our goal in the Order is for the joint negotiation ban to facilitate 
the fair and effective completion of retransmission consent 
negotiations. The joint negotiation rules will serve the public 
interest by promoting competition among Top Four broadcast stations for 
MVPD carriage of their signals and the associated retransmission 
consent revenues.
---------------------------------------------------------------------------

    \124\ Id. We received no proposed alternatives for small 
business pertaining to the changes adopted in the Order.
---------------------------------------------------------------------------

    As required by the Regulatory Flexibility Act, we have considered 
alternatives to minimize the impact on small entities.\125\ Some 
parties opposing a joint negotiation prohibition argued it would 
decrease efficiency and increase transaction costs, because non-
commonly owned broadcast stations in the same market must conduct 
negotiations separately. We note that since small MVPDs supported 
adoption of this ban, no further analysis of alternatives on their 
behalf is necessary. With respect to small broadcasters, we have sought 
to limit the economic impact on such entities by applying the 
prohibition on joint negotiation only to situations involving two or 
more separately owned Top Four stations in the same market.
---------------------------------------------------------------------------

    \125\ 5 U.S.C. 603(a)(6).
---------------------------------------------------------------------------

7. Report to Congress
    The Commission will send a copy of the Order, including this FRFA, 
in a report to be sent to Congress pursuant to the Congressional Review 
Act.\126\ In addition, the Commission will send a copy of the Order, 
including this FRFA, to the Chief Counsel for Advocacy of the SBA. The 
Order and FRFA (or summaries thereof) will also be published in the 
Federal Register.\127\
---------------------------------------------------------------------------

    \126\ See 5 U.S.C. 801(a)(1)(A).
    \127\ See id. Sec.  604(b).
---------------------------------------------------------------------------

B. Paperwork Reduction Act

    This document does not contain proposed information collection(s) 
subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-
13. In addition, therefore, it does not contain any new or modified 
information collection burden for small business concerns with fewer 
than 25 employees, pursuant to the Small Business Paperwork Relief Act 
of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4).

C. Congressional Review Act

    The Commission will send a copy of the Order in MB Docket No. 10-71 
in a report to be sent to Congress and the Government Accountability 
Office pursuant to the Congressional Review Act, see 5 U.S.C. 
801(a)(1)(A).

D. Additional Information

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

V. Ordering Clauses

    Accordingly, it is ordered that, pursuant to the authority found in 
sections 4(i), 4(j), 301, 303(r), 303(v), 307, 309, 325, 339(b), 340, 
614, and 653(b) of the Communications Act of 1934, as amended, 47 
U.S.C. 154(i), 154(j), 301, 303(r), 303(v), 307, 309, 325, 339(b), 340, 
534, and 573(b), this Report and Order is adopted, effective thirty 
(30) days after the date of publication in the Federal Register.
    It is ordered that, pursuant to the authority found in sections 
4(i), 4(j), 301, 303(r), 303(v), 307, 309, 325, and 614 of the 
Communications Act of 1934, as amended, 47 U.S.C. 154(i), 154(j), 301, 
303(r), 303(v), 307, 309, 325, and 534, the Commission's rules are 
hereby amended as set forth below.
    It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Report and Order in MB Docket No. 10-71, including the 
Final Regulatory Flexibility Analysis, to the Chief Counsel for 
Advocacy of the Small Business Administration.
    It is further ordered that the Commission shall send a copy of this 
Report and Order in MB Docket No. 10-71 in a report to be sent to 
Congress and the Government Accountability Office

[[Page 28630]]

pursuant to the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A).

List of Subjects in 47 CFR Part 76

    Cable television.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Final Rules

    For the reasons discussed in the preamble, the Federal 
Communications Commission amends 47 CFR 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, 573.


0
2. Amend Sec.  76.65 as follows:
0
a. Remove the word ``and'' from the end of paragraph (b)(1)(vi);
0
b. Remove the period and add ``; and'' to the end of paragraph 
(b)(1)(vii).
0
c. Add paragraph (b)(1)(viii).
    The addition reads as follows:


Sec.  76.65  Good faith and exclusive retransmission consent 
complaints.

* * * * *
    (b) * * *
    (1) * * *
    (viii) Joint negotiation. (A) Joint negotiation includes the 
following activities:
    (1) Delegation of authority to negotiate or approve a 
retransmission consent agreement by one Top Four broadcast television 
station (or its representative) to another such station (or its 
representative) that is not commonly owned, operated, or controlled, 
and that serves the same designated market area (``DMA'');
    (2) Delegation of authority to negotiate or approve a 
retransmission consent agreement by two or more Top Four broadcast 
television stations that are not commonly owned, operated, or 
controlled, and that serve the same DMA (or their representatives), to 
a common third party;
    (3) Any informal, formal, tacit or other agreement and/or conduct 
that signals or is designed to facilitate collusion regarding 
retransmission terms or agreements between or among Top Four broadcast 
television stations that are not commonly owned, operated, or 
controlled, and that serve the same DMA. This provision shall not be 
interpreted to apply to disclosures otherwise required by law or 
authorized under a Commission or judicial protective order.
    (B) For the purpose of applying this paragraph (b)(1)(viii):
    (1) Whether a station is not commonly owned, operated, or 
controlled is determined based on the Commission's broadcast 
attribution rules. See the Notes to 47 CFR 73.3555.
    (2) A station is deemed to be a Top Four station if it is ranked 
among the top four stations in a DMA, based on the most recent all-day 
(9 a.m.-midnight) audience share, as measured by Nielsen Media Research 
or by any comparable professional, accepted audience ratings service; 
and
    (3) DMA is determined by Nielsen Media Research or any successor 
entity.
* * * * *
[FR Doc. 2014-11058 Filed 5-16-14; 8:45 am]
BILLING CODE 6712-01-P