2014 Quadrennial Regulatory Review, 29009-29064 [2014-10870]
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Vol. 79
Tuesday,
No. 97
May 20, 2014
Part III
Federal Communications Commission
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47 CFR Part 73
2014 Quadrennial Regulatory Review; Proposed Rule
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Federal Register / Vol. 79, No. 97 / Tuesday, May 20, 2014 / Proposed Rules
Federal Communications
Commission.
ACTION: Proposed rule.
This document solicits
comment on proposed changes to the
broadcast ownership rules in
compliance with section 202(h) of the
Telecommunications Act of 1996
requires the Commission to review its
broadcast ownership rules
quadrennially to review these rules to
determine whether they are necessary in
the public interest as a result of
competition. In addition, this document
solicits comment on certain aspects of
the Commission’s 2008 Diversity Order
that the U.S. Court of Appeals for the
Third Circuit remanded and directed
the Commission to address in its
quadrennial review proceeding. This
document solicits comment also on a
potential disclosure requirement for
certain broadcast television shared
service agreements.
DATES: Comments are due on or before
July 7, 2014 and reply comments are
due on or before August 4, 2014.
Written comments on the Paperwork
Reduction Act proposed information
collection requirements must be
submitted by the public, Office of
Management and Budget (OMB), and
other interested parties on or before July
21, 2014.
ADDRESSES: Federal Communications
Commission, 445 12th Street SW.,
Washington, DC 20554. In addition to
filing comments with the Secretary, a
copy of any comments on the
Paperwork Reduction Act information
collection requirements contained
herein should be submitted to the
Federal Communications Commission
via email to PRA@fcc.gov and to
Nicholas A. Fraser, Office of
Management and Budget, via email to
Nicholas_A._Fraser@omb.eop.gov or via
fax at (202) 395–5167.
FOR FURTHER INFORMATION CONTACT:
Hillary DeNigro, Industry Analysis
Division, Media Bureau, FCC, (202)
418–2330. For additional information
concerning the PRA proposed
information collection requirements
contained in the Further Notice of
Proposed Rulemaking, contact Cathy
Williams at (202) 418–2918, or via the
Internet at PRA@fcc.gov.
This
Further Notice of Proposed Rulemaking,
in MB Docket Nos. 14–50, 09–182, 07–
294, and 04–256; FCC 14–28, was
adopted on March 31, 2014, and
released on April 15, 2014. The
document is available for download at
https://fjallfoss.fcc.gov/edocs_public/.
The complete text of the document is
available for inspection and copying
during normal business hours in the
FCC Reference Center, 445 12th Street
SW., Washington, DC 20554, and may
also be purchased from the
Commission’s copy contractor, BCPI,
Inc., Portals II, 445 12th Street SW.,
Washington, DC 20554. Customers may
contact BCPI, Inc. at their Web site
https://www.bcpi.com or call 1–800–
378–3160.
Initial Paperwork Reduction Act of
1995 Analysis
This Further Notice of Proposed
Rulemaking proposes a new or revised
information collection requirement. The
Commission, as part of its continuing
effort to reduce paperwork burdens,
invites the general public and the OMB
to comment on the information
collection requirements contained in
this document, as required by the
Paperwork Reduction Act of 1995,
Public Law 104–13. Public and agency
comments are due July 21, 2014.
Comments should address: (a) Whether
the proposed collection of information
is necessary for the proper performance
of the functions of the Commission,
including whether the information shall
have practical utility; (b) the accuracy of
the Commission’s burden estimates; (c)
ways to enhance the quality, utility, and
clarity of the information collected; (d)
ways to minimize the burden of the
collection of information on the
respondents, including the use of
automated collection techniques or
other forms of information technology;
and (e) way to further reduce the
information collection burden on small
business concerns with fewer than 25
employees. In addition, pursuant to the
Small Business Paperwork Relief Act of
2002, Public Law 107–198, see 44 U.S.C.
3506(c)(4), the Commission seeks
specific comment on how it might
further reduce the information
collection burden for small business
concerns with fewer than 25 employees.
SUPPLEMENTARY INFORMATION:
FEDERAL COMMUNICATIONS
COMMISSION
47 CFR Part 73
[MB Docket Nos. 14–50, 09–182, 07–294,
and 04–256; FCC 14–28]
2014 Quadrennial Regulatory Review
AGENCY:
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SUMMARY:
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I. Synopsis of the Further Notice of
Proposed Rulemaking
A. Introduction
1. The Commission takes another
major step in its review of the broadcast
ownership rules. The Commission
wishes to build on that record to resolve
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the ongoing 2010 proceeding, and the
Commission is cognizant of its statutory
obligation to review the broadcast
ownership rules every four years. To
accomplish both objectives, with this
Further Notice of Proposed Rulemaking
the Commission is initiating this 2014
Quadrennial Review; incorporating the
existing 2010 record into this
proceeding; proposing rules that are
formulated based on the Commission’s
evaluation of that existing record; and
seeking new and additional information
and data on market conditions and
competitive indicators as they exist
today. The Commission issues this
Further Notice of Proposed Rulemaking
to seek additional comment on the
appropriateness of the broadcast
ownership rules to today’s evolving
marketplace. Also, the Commission
seeks additional comment on issues
referred to the Commission in the Third
Circuit’s remand in Prometheus II of
certain aspects of the Commission’s
2008 Diversity Order (73 FR 28361, May
16, 2008, FCC 07–217, rel. March 5,
2008). Finally, the Commission takes
steps herein to address concerns about
the use of a variety of sharing
agreements between independently
owned television stations—Shared
Service Agreements or SSAs.
B. Background
2. The media ownership rules subject
to this quadrennial review are the local
television ownership rule, the local
radio ownership rule, the newspaper/
broadcast cross-ownership rule, the
radio/television cross-ownership rule,
and the dual network rule. Congress
requires the Commission to review these
rules every four years to determine
whether they ‘‘are necessary in the
public interest as the result of
competition’’ and to ‘‘repeal or modify
any regulation [the Commission]
determines to be no longer in the public
interest.’’ The Third Circuit has
instructed that ‘‘necessary in the public
interest’’ is a ‘‘ ‘plain public interest’
standard under which ‘necessary’ means
‘convenient,’ ‘useful,’ or ‘helpful,’ not
‘essential’ or ‘indispensable.’ ’’ There is
no ‘‘ ‘presumption in favor of repealing
or modifying the ownership rules.’ ’’
Rather, the Commission has the
discretion ‘‘to make [the rule] more or
less stringent.’’ This 2014 Quadrennial
Review will focus on identifying a
reasoned basis for retaining, repealing,
or modifying each rule consistent with
the public interest.
3. Policy Goals. The media ownership
rules have consistently been found to be
necessary to further the Commission’s
longstanding policy goals of fostering
competition, localism, and diversity.
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The Commission seeks additional
comment on the NPRM’s (77 FR 2867,
Jan. 19, 2012, FCC 11–186, rel. Dec. 22,
2011) tentative conclusion that these
policy goals continue to be the
appropriate framework within which to
evaluate and address minority and
female interests as they relate to the
broadcast ownership rules. Based on the
record developed in response to the
NPRM, the Commission continues to
believe that the longstanding policy
goals of competition, localism, and
diversity are broadly defined to promote
the core responsibilities of broadcast
licensees. The Commission is not
persuaded by the comments in the
record that it would be appropriate to
adopt any additional formal policy
goals. The Commission seeks comment
on this tentative conclusion.
C. Media Ownership Rules
1. Local Television Ownership Rule
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a. Introduction
4. Based on the record that was
compiled for the 2010 Quadrennial
Review, the Commission tentatively
concludes that the current local
television ownership rule remains
necessary in the public interest and
should be retained with a limited
modification. As discussed below, the
Commission believes that, based on the
current media marketplace and the
record in this proceeding, the public
interest would be best served by
replacing the Grade B contour overlap
test used to determine when to apply
the local television ownership rule with
a digital noise limited service contour
(NLSC) test, rather than the DMA-based
approach proposed in the NPRM. The
Commission believes that the local
television ownership rule is necessary
to promote competition. The
Commission further believes that the
competition-based rule proposed in this
Further Notice of Proposed Rulemaking
also would promote viewpoint diversity
by helping to ensure the presence of
independently owned broadcast
television stations in local markets and
would be consistent with the
Commission’s localism goal. The
Commission finds that the local
television ownership rule proposed in
this Further Notice of Proposed
Rulemaking would be consistent with
the goal of promoting minority and
female ownership of broadcast
television stations. Finally, the
Commission believes that the proposed
limited modification of the rule will
better promote competition, and that
this benefit would outweigh any
burdens, which would be minimized by
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the proposal to grandfather
combinations as described herein.
5. The Commission proposes to
modify the local television ownership
rule to allow an entity to own up to two
television stations in the same DMA if:
(1) The digital NLSCs of the stations (as
determined by § 73.622(e) of the
Commission’s rules) do not overlap; or
(2) at least one of the stations is not
ranked among the top-four stations in
the market and at least eight
independently owned television
stations would remain in the DMA
following the combination. In
calculating the number of stations
remaining post-merger, only those
stations whose digital NLSC overlaps
with the digital NLSC of at least one of
the stations in the proposed
combination would be considered,
which would be consistent with the
contour overlap provision of the current
rule. In addition, the Commission
proposes to retain the existing failed/
failing station waiver policy. The
Commission seeks comment on these
proposed modifications to the local
television ownership rule and ask
whether there have been any
developments since the NPRM that the
Commission should take into account in
the review of the rule. The Commission
seeks comment on the costs and benefits
of the proposed local television
ownership rule. To the greatest extent
possible, commenters should quantify
the expected costs or benefits of the
proposed rule and provide detailed
support for any actual or estimated
values provided, including the source of
such data and/or the method used to
calculate reported values.
b. Background
6. In the NPRM, the Commission
proposed to retain the local television
ownership rule, with one modification.
Specifically, the NPRM proposed to
retain the top-four prohibition, eightvoices test, and numerical limits of the
existing rule, while proposing to replace
the Grade B contour overlap provision
with a DMA-based approach, under
which the Commission would prohibit
ownership of two stations in the same
DMA unless at least one of the stations
is not rated in the top four and at least
eight independent voices would remain
after the transaction. The NPRM also
invited comment on whether to adopt a
market size waiver standard, the impact
of multicasting on the local television
ownership rule, and the impact of the
proposed rule on minority and female
ownership.
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c. Discussion
7. Market. As proposed in the NPRM,
the Commission tentatively finds that
the local television ownership rule
continues to be necessary to promote
competition among broadcast television
stations in local television viewing
markets. Although the Commission
believes the record in the 2010
Quadrennial Review proceeding
supports its view of the appropriate
parameters for defining the market, the
Commission seeks comment on whether
developments since the NPRM should
cause the Commission to shift the focus
of its analysis.
8. First, the Commission believes that
the video programming market remains
the relevant market for review of the
local television ownership rule. The
Commission also believes that the video
programming market is distinct from the
radio listening market. While multiple
broadcast commenters argued in favor of
an expansive market definition that
would include nearly all forms of
media, the Commission tentatively finds
such arguments to be unpersuasive. The
Commission has previously found that
the video programming market is
distinct from other media markets
because consumers do not view nonvideo entertainment options (e.g.,
listening to music or reading) and nondelivered video options (e.g., DVDs or
movie theaters) as good substitutes for
watching television, and there is no
evidence in the current record that
would cause the Commission to disturb
these findings. In addition, the
Commission notes the NPRM’s tentative
conclusion that it is not now
appropriate to expand the relevant
product market beyond video
programming to include non-video
information sources of local news and
information. This tentative conclusion
was based on evidence that Internetonly Web sites provide only a small
amount of local news content and a lack
of evidence that non-video information
sources modify their programming
decisions based on the actions of local
broadcast television stations or vice
versa. The Commission did not receive
significant comment on this specific
issue in the 2010 proceeding, and the
Commission seeks comment on whether
it should confirm the NPRM’s tentative
conclusion for the reasons discussed
therein.
9. Second, the Commission believes
that its analysis regarding the local
television ownership rule should
continue to focus on promoting
competition among broadcast television
stations in local television viewing
markets. In order to compete effectively
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in its local market, and thereby gain
market share, a broadcast television
station must invest in better
programming and provide programming
tailored to the needs and interests of the
local community, including local news
and public interest programming. By
strengthening their position in the local
market, television broadcasters are
better able to compete for advertising
revenue and retransmission consent
fees, an increasingly important source of
revenue for many stations. Viewers in
the local market benefit from such
competition among numerous strong
rivals in the form of higher quality
programming.
10. While the Commission is keenly
aware of the growing popularity of
video programming delivered via
MVPDs and the Internet, it tentatively
find that competition from such video
programming providers is currently of
limited relevance for the purposes of its
analysis. These programming
alternatives compete largely in national
markets—cable network programming is
generally uniform across all markets, as
is video programming content available
via the Internet—and, unlike local
broadcast stations, such programming
providers are not likely to respond to
conditions in local markets. Though
certain broadcast commenters disputed
this notion, the Commission tentatively
finds their arguments to be unsupported
by evidence of non-broadcast video
programmers modifying their
programming decisions based on the
competitive conditions in a particular
local market.
11. In addition, the Commission
tentatively finds that broadcast
television’s strong position in the local
advertising market supports its view
that non-broadcast video programmers
are not yet meaningful substitutes in
local television markets. Broadcasters
asserted that the Commission should
expand the relevant market, in part
because of increased competition for
advertising from non-broadcast sources
of video programming, particularly in
the local advertising market. The data
do not support this claim. From 2008
through 2011, though overall local
advertising spending was down from its
highs in 2005 and 2006, local broadcast
television’s market share actually
increased and achieved the highest
levels since 2004. While the shares of
local advertising on cable television and
the Internet also increased during this
time period, those gains do not appear
to be at the expense of broadcast
television stations. NAB asserted that
the recent growth in television station
advertising revenue is temporary and
not likely to ‘‘address the structural
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changes that have taken place in the
[television] market’’ because the
predicted 2012 advertising revenues for
the broadcast television industry are
below the levels achieved in 2006.
While advertising revenues for
broadcast television stations were lower
during this period, the Commission
believes the evidence does not support
the conclusion that this was the result
of a unique change in the television
marketplace; instead, the total
advertising market for all media
experienced a significant contraction,
which was most likely the result of the
global financial crisis that impacted
nearly all markets. Moreover, total
station revenue for 2012 was predicted
to exceed the total station revenue for
2006 and to grow steadily through 2017.
However, the Commission seeks
comment on whether any structural
changes have occurred in the television
marketplace and, if so, whether to adjust
the 2014 Quadrennial Review analysis
to account for such changes. The
Commission seeks comment on whether
there have been any significant changes
since these figures became available.
12. The Commission believes that
broadcast television stations continue to
play a unique and vital role in local
communities that is not meaningfully
duplicated by non-broadcast sources of
video programming. In addition to
providing viewers with the majority of
the most popular programming on
television, broadcast television stations
remain the primary source of local news
and public interest programming.
Moreover, millions of U.S. households
lack broadband access at speeds
sufficient to stream or download video
programming available via the Internet.
Accordingly, the Commission
tentatively finds that the record
continues to support a local television
ownership rule designed to promote
competition among broadcast television
stations. The Commission believes the
2010 Quadrennial Review record
supports the use of this approach, and
it seeks comment on whether this
market definition should apply for
purposes of the 2014 Quadrennial
Review.
13. Contour Overlap. The NPRM
proposed to eliminate the Grade B
contour overlap test and rely solely on
Nielsen DMAs to determine when to
apply the local television ownership
rule. The NPRM recognized that the
DMA approach could have a
disproportionate impact in certain
DMAs and sought comment on the
impact of such a change. As discussed
below, the Commission tentatively finds
that the public interest is best served by
retaining the contour-based approach of
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the previous rule but by replacing the
analog Grade B contour with the digital
NLSC. The Commission seeks comment
on whether any developments have
occurred since the NPRM that should
cause it to reconsider this proposed
approach.
14. The Commission believes that the
proposed DMA-only approach would
unnecessarily expand the reach of the
local television ownership rule in
certain DMAs and thus would be
overbroad. Therefore, the Commission
tentatively declines to adopt that
approach. NAB argues that relying
instead on the digital NLSC, which the
Commission has treated as the
functional equivalent of the Grade B
contour, would serve the purpose of
establishing a trigger that would
accurately reflect current digital service
areas while avoiding any potential
disruptive impact, and the Commission
believes that approach is reasonable. By
contrast, there is no digital counterpart
to a station’s analog city grade contour.
Accordingly, consistent with case law
developed after the digital transition,
the Commission would continue to
evaluate all future requests for new or
continued satellite status on an ad hoc
basis. In addition, consistent with
previous Commission decisions, the
Commission tentatively finds that
retaining a contour-based approach
would serve the public interest by
promoting local television service in
rural areas. In particular such an
approach would continue to allow
station owners in rural areas to build or
purchase an additional station in remote
portions of the DMA, so long as there is
no digital NLSC overlap. It is important
that the local television ownership rule
take into account the current digital
service area of a station. The
Commission confirms that the digital
NLSC is an accurate measure of a
station’s current service area and thus
would be an appropriate standard.
Thus, under the modified rule proposed
in the Further Notice of Proposed
Rulemaking, the Commission would
continue to define the geographic
dimensions of the local television
market by reference to DMAs, but the
Commission would replace the analog
Grade B contour with the digital NLSC,
such that within a DMA an entity could
own or operate two stations in a market
if the digital NLSCs of those stations did
not overlap. To the extent that the
digital NLSC of two stations in the same
DMA overlapped, then the stations
serve the same area, even if there was
no analog Grade B contour overlap prior
to the digital transition, and in that case
the combination would be permitted
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only if it satisfied the top-four
prohibition and the eight-voices test. In
the 2002 Biennial Review Order (68 FR
46286, Aug. 5, 2003, FCC 03–127, rel.
July 2, 2003), in which the local
television ownership rule was relaxed,
the Commission eliminated the contour
overlap provision. However, in
recognition of the unique circumstances
involving stations without Grade B
contour overlap, the Commission
adopted waiver criteria that would
permit common ownership if the
applicant could demonstrate ‘‘that the
stations have no Grade B overlap and
that the stations are not carried by any
MVPD to the same geographic area.’’
The revised rule adopted in the 2002
Biennial Review Order was overturned
on appeal. The Commission believes its
proposal to adopt the digital NLSC
standard is in the public interest and is
supported by the record, and it declines
to propose alternate possible solutions,
such as waiver criteria similar to those
adopted in the 2002 Biennial Review
Order. However, the Commission
invites commenters to propose alternate
solutions if they object to the
Commission’s approach.
15. The NPRM described the potential
benefits of a DMA-based approach,
including correlation with DMA-wide
carriage of broadcast signals pursuant to
mandatory carriage requirements and
benefits similar to those realized by the
geographic market definition in the
radio rule. For the reasons discussed
above, however, that approach could
have a negative impact in certain DMAs.
The Commission seeks comment on the
tentative conclusion that the alternative
approach proposed in this Further
Notice of Proposed Rulemaking would
avert the negative impact of the DMAbased approach, accurately reflect
current digital service areas, and
appropriately balance the Commission’s
public interest goals.
16. Grandfathering. The Commission
tentatively affirms the NPRM’s proposal
to grandfather existing ownership
combinations that would exceed the
numerical limits under the revised
contour approach, though it tentatively
finds that the sale of such combinations
must comply with the local television
ownership rule then in effect. In
addition, the Commission proposes that
all permanent waivers from the prior
rule that previously have been granted
would continue in effect under the new
rule, but, like any newly grandfathered
combinations, could not be transferred/
assigned intact unless the combination
complies with the local television
ownership rule in effect at the time of
the transfer/assignment. The
Commission seeks comment on whether
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it should adopt this approach in the
2014 quadrennial proceeding.
17. The Commission tentatively finds
that the concerns raised by those in
favor of permitting grandfathering and
the transfer of grandfathered
combinations would largely be
addressed by the proposal to retain a
contour overlap provision in the local
television ownership rule and to
substitute the digital NLSC for the Grade
B contour. The contour element of the
rule would effectively maintain the
status quo for most, if not all, owners of
duopolies formed as a result of the
previous Grade B contour overlap
provision. Consistent with the tentative
conclusion in the NPRM, however, the
Commission proposes to grandfather
ownership of existing combinations of
television stations, if any, that would
exceed the ownership limit as a result
of the change to the digital NLSC test
the Commission proposes herein. Even
in limited circumstances, compulsory
divestiture is disruptive to the
marketplace and is a hardship for
individual owners; the Commission
believes any benefits to its policy goals
(including promoting ownership
diversity) would be outweighed by these
countervailing equitable considerations.
18. The Commission proposes,
however, to require that the sale of any
such grandfathered combination comply
with the local television ownership rule
in place at the time the transfer of
control or assignment application is
filed. As stated above, the digital NLSC
is an accurate measure of a station’s
digital service area. If the digital NLSC
of two stations in the same DMA
overlap, then the stations serve the same
area, even if there was no Grade B
contour overlap prior to the digital
transition. Accordingly, requiring that
the sale of a grandfathered combination
comply with the new standard would be
consistent with the Commission’s
rationale for adopting the digital NLSCbased standard and would not cause
hardship by requiring premature
divestiture. Consistent with the
Commission’s previous decisions, it
tentatively finds that the public interest
would not be served by allowing
grandfathered combinations to be freely
transferable in perpetuity where a
combination does not comply with the
local television ownership rule at the
time of transfer/assignment. Under its
proposed approach, the Commission
would continue to allow pro forma
changes in ownership and involuntary
changes of ownership due to death or
legal disability of the licensee. The
Commission seeks comment on this
tentative conclusion.
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19. Numerical Limits. The
Commission proposed in the NPRM to
retain the current numerical limits in
the local television ownership rule. The
Commission seeks comment on whether
to adopt that proposal, thereby
permitting a licensee to own up to two
stations (i.e., a duopoly) in a market,
subject to the other requirements
proposed in this Further Notice of
Proposed Rulemaking.
20. The Commission seeks comment
on its preliminary view that the local
television marketplace has not changed
significantly since the NPRM to justify
either tightening or loosening the
current numerical limits of the local
television rule. Ownership of a second
in-market station can create substantial
efficiencies, which may allow a local
broadcast station to invest in
programming that meets the needs of its
local community, such as local news or
other public interest programming.
Notably, the Commission tentatively
finds that there is substantial evidence
in the record that the duopolies
permitted subject to the restrictions of
the current rule have created tangible
public interest benefits for viewers in
local television markets that more than
offset any potential harms that are
associated with common ownership.
Moreover, as discussed in greater detail
in the paragraphs below on
multicasting, the Commission believes
that the ability to multicast is not a
substitute for common ownership of
multiple stations and, therefore, would
not justify tightening the existing
numerical limits. The Commission seeks
comment on these tentative findings.
21. Similarly, the Commission does
not believe there have been sufficient
changes in the local television
marketplace to justify ownership of a
third in-market station. The
Commission seeks comment on this
tentative conclusion. The primary
‘‘change’’ in the marketplace cited by
those commenters in favor of loosening
the rule is competition from nonbroadcast alternatives. As discussed
above, however, the Commission
believes the local television ownership
rule is designed to promote competition
among broadcast television stations in
local television markets, and the
Commission has tentatively concluded
that it is not yet appropriate to consider
competition from non-broadcast sources
in evaluating whether the rule remains
necessary. Even if the Commission were
to consider such competition,
Entravision, which supported
ownership of up to two stations in all
markets and up to three stations in
markets with 18 or more television
stations, conceded that such
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consolidation is likely to threaten the
Commission’s competition and diversity
goals by jeopardizing small and midsized broadcasters. To combat these
harms, Entravision proposed a series of
‘‘behavioral regulations’’ that the
Commission could adopt in tandem
with loosening the ownership
restrictions. The Commission declined
to adopt this proposal in the 2006
Quadrennial Review proceeding, a
decision that was upheld in Prometheus
II, and the Commission sees no changes
in the local television marketplace that
would warrant reconsideration of the
Commission’s previous decision. The
Commission has long applied structural
local media ownership rules and has
previously rejected proposals for
instituting behavioral rules. The
Commission proposes to affirm this
approach, as it continues to believe that
behavioral rules are not appropriate
substitutes for structural local media
ownership rules. The Commission seeks
comment on this proposal. Without
significant evidence of the public
interest benefits that could result from
the ownership of three stations in a
local market, the Commission does not
believe that there is adequate
justification at this time for increasing
the numerical limits.
22. Top-Four Prohibition. The
Commission proposes to continue to
prohibit mergers between two top-fourrated stations in a local market,
consistent with the tentative conclusion
in the NPRM. The Commission
tentatively finds that the top-four
prohibition remains necessary to
promote competition in the local
television marketplace. The
Commission seeks comment on whether
there have been any developments since
the NPRM that it should consider with
regard to this issue.
23. Consistent with previous
Commission decisions, the Commission
proposes to continue to prohibit mergers
involving two of the top-four stations in
a market because it believe such
combinations would be the most
deleterious to competition. The
Commission has previously identified
potential harms associated with top-four
combinations, and the Commission
found no evidence in the 2010
Quadrennial Review record to disturb
the Commission’s previous findings.
Accordingly, the Commission continues
to believe that top-four combinations
would often result in a single firm
obtaining a significantly larger market
share than other firms in the market and
that such combinations could create
welfare harms. Top-four combinations
have been found to reduce incentives
for local stations to improve their
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programming, as once strong rivals
suddenly have incentives to coordinate
their programming in order to minimize
competition between the commonly
owned stations. In addition, in general,
there remains a significant ‘‘cushion’’ of
audience share points that separates the
top-four stations in a market from the
fifth-ranked station. Accordingly, the
Commission tentatively finds that the
public interest is best served by
retaining the top-four prohibition. The
Commission seeks comment on this
tentative conclusion.
24. The NPRM also sought comment
on certain circumstances in which a
licensee is able to obtain control over
two of the top-four stations in a market
through a transaction or series of
transactions, sometimes referred to as
‘‘affiliation swaps,’’ that do not require
prior Commission approval. Based on
its review of the 2010 Quadrennial
Review record, the Commission
tentatively finds that such transactions
should be subject to the top-four
prohibition because it believes they
circumvent the intent of the rule and are
not in the public interest. The
Commission seeks comment on whether
it should adopt this approach.
25. In general, national network
affiliation is a significant driver of a
station’s audience share. The
Commission has previously found that,
nationally, the Big Four networks (i.e.,
ABC, CBS, Fox, and NBC) are the
highest rated networks and that, in
general, the national audience statistics
are reflected in the rankings in the local
markets. Recent Nielsen data confirm
this finding. Accordingly, an affiliation
swap involving a top-four station and a
non-top-four station will nearly always
result in the non-top-four station
becoming a top-four station after the
swap. Because such affiliation swaps do
not involve the assignment or transfer of
a station license, the transaction is not
subject to prior Commission approval
under Section 310(d) of the
Communications Act of 1934. Thus, by
engaging in an affiliation swap, parties
can achieve a top-four station
combination that would otherwise have
been prohibited by the Commission’s
rules.
26. This fact is evidenced in the
Honolulu, Hawaii, DMA, where an
affiliation swap between a top-four
station and a non-top-four station—
which was commonly owned with a
different top-four station in the
market—was executed. In addition to
the affiliation swap, the parties swapped
certain of the stations’ non-network
programming and the stations’ call
signs, purportedly to avoid viewer
confusion. Thus, the stations (though
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not the licenses) effectively changed
hands without prior Commission
approval—approval that was not
technically required. Consistent with
the Commission’s observation above
regarding the correlation between
affiliation with a Big Four network and
market rank, following the affiliation
swap, the non-top-four station became a
top-four station. By structuring these
transactions so as to evade Commission
review, a single entity was able to
acquire control over a second top-four
station in the market, a result that is
prohibited under the local television
ownership rule.
27. The Commission tentatively finds
that transactions involving the sale or
swap of network affiliations between inmarket stations that result in an entity
holding an attributable interest in two
top-four stations can be used to evade
the top-four prohibition. Accordingly, in
order to close this loophole, the
Commission proposes to clarify that
such transactions must comply with the
top-four prohibition at the time the
agreement is executed. Specifically, the
Commission believes an entity should
not be permitted to directly or indirectly
own, operate, or control two television
stations in the same DMA through the
execution of any agreement (or series of
agreements) involving stations in the
same DMA, or any individual or entity
with a cognizable interest in such
stations, in which a station (the new
affiliate) acquires the network affiliation
of another station (the previous
affiliate), if the change in network
affiliations would result in the licensee
of the new affiliate, or any individual or
entity with a cognizable interest in the
new affiliate, directly or indirectly
owning, operating, or controlling two of
the top-four rated television stations in
the DMA at the time of the agreement.
In addition, the Commission proposes
that, for purposes of making this
determination, the new affiliate’s postconsummation ranking would be the
ranking of the previous affiliate at the
time the agreement is executed,
determined in accordance with
§ 73.3555(b)(1)(i) of the Commission’s
rules. The Commission proposes to find
any party that has control over two topfour stations in the same DMA as a
result of such transactions to be in
violation of the top-four prohibition and
subject to enforcement action.
Application of this rule would be
prospective, and parties that acquired
control over a second in-market top-four
station by engaging in such transactions
prior to the release date of a decision to
adopt such a rule would not be subject
to divestiture or enforcement action.
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Consistent with KHNL/KGMB License
Subsidiary, such transactions that
would not be subject to such a rule
could still be considered in the context
of individual licensing proceedings. All
future transactions would be required to
comply with the Commission’s rules
then in effect. The Commission seeks
comment on these proposals. In
addition, it seeks comment on whether
and how station owners are attempting
to circumvent the top-four prohibition,
or any other of the media ownership
rules, through the invention of similar
devices. While the Commission has
tentatively determined that the present
circumstances support prospective
application of this rule, parties are on
notice that similar efforts to evade the
media ownership rules could be subject
to enforcement action.
28. The Commission seeks comment
on whether this application of the topfour prohibition is consistent with the
Commission’s policy to avoid
constraints on commercial activities that
are designed to effect station
improvements. The Commission
continues to encourage licensees to
improve the quality of the programming
and operation of their stations in ways
that are consistent with the
Commission’s rules and policies.
Moreover, the Commission does not
believe that closing this loophole in the
top-four prohibition violates the First
Amendment. Indeed, recent
constitutional challenges to the media
ownership rules have been rejected, and
the Commission tentatively finds that
this application of the top-four
prohibition withstands First
Amendment scrutiny for the same
reasons.
29. While certain commenters argued
to the contrary, for the reasons
discussed herein, acquiring control over
a second in-market top-four station
through the transactions described
above is easily distinguishable from
other, legitimate actions a station may
undertake to increase ratings at the
expense of a competitor. In addition,
Sinclair cautioned the Commission
against interfering in the free market
negotiation of affiliation agreements—
which it asserted occur often and for
valid business reasons—based upon a
single instance where the Commission
believes an affiliation swap constituted
an ‘‘end run’’ around the top-four
prohibition. Contrary to Sinclair’s
assertion, the Commission does not
believe that it is necessary, or wise, to
permit additional parties to evade the
top-four prohibition before it acts, nor
does it believe that this proposal is
likely to have a significant impact on
the negotiation of affiliation agreements.
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Consistent with Sinclair’s comments,
the Commission believes that the
negotiation of affiliation agreements
typically does not involve affiliation
swaps and, therefore, would be
unaffected by this proposal. And while
such swaps may not occur often, given
the potential of such transactions to
undermine the local television
ownership rule, the Commission
believes that the application of the topfour prohibition to such transactions
would be necessary. The Commission
does not believe there is a reliable
marketplace solution that would
restrain the use of affiliation swaps to
evade the top-four prohibition. The
Commission seeks comment on these
views.
30. Eight-Voices Test. Consistent with
the proposal in the NPRM, the
Commission tentatively concludes that a
merger between two in-market stations
with overlapping contours should not
be permitted unless there would be at
least eight independently owned
commercial and noncommercial
television stations remaining in the
market post-merger, and at least one
station is not a top-four station. The
Commission tentatively finds that the
eight-voices test continues to be
necessary to promote competition in
local television markets. The
Commission seeks comment on these
tentative conclusions.
31. The Commission’s view is that the
2010 Quadrennial Review record does
not reveal sufficient changes in the local
television marketplace to warrant
modification of the eight-voices test at
this time. Consistent with the
Commission’s prior position, the
Commission tentatively finds that, in
order to permit common ownership of
two in-market stations with digital
NLSC overlap, there should be a
minimum of eight independently owned
and operated television stations in the
market post-merger. The Commission
believes this minimum threshold would
help ensure robust competition among
local television stations in the markets
where common ownership is permitted
under its proposed rule, as it would
increase the likelihood that each such
market would be served by stations
affiliated with each of the Big Four
networks as well as at least four
independently owned and operated
stations unaffiliated with these major
networks. Indeed, nearly every market
with eight or more full-power television
stations—absent a waiver of the local
television ownership rule or unique
circumstances—is served by each of the
Big Four networks and at least four
independent competitors unaffiliated
with a Big Four network. Competition
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among these independently owned
stations is important, as it serves to
improve the programming offered both
by the major network stations and the
independent stations, including
increased local news and public interest
programming. The Commission notes
that this competition is perhaps most
valuable during the parts of the day in
which local broadcast stations do not
transmit the programming of affiliated
broadcast networks. Moreover, because
there continues to be a significant gap
in audience share between the top-four
stations in a market and the remaining
stations in most markets, the
Commission continues to believe that it
is appropriate to retain the eight-voices
test, which helps to promote at least
four independent competitors before
common ownership is allowed. The
Commission seeks comment on the
tentative conclusion that, in light of this
concentration and consistent with the
2006 Quadrennial Review Order (73 FR
9481, Feb. 21, 2008, FCC 07–216, rel.
Feb. 4, 2008), it remains prudent to
require the presence of at least four
additional independently owned and
operated competitors in the market in
order to promote competition in the
local television market before permitting
any common ownership in that market.
The Commission is most interested in
learning whether any new information
has become available since the NPRM
that it should take into account in
considering this issue.
32. The Commission tentatively finds
that it is appropriate to include only
full-power television stations in the
voice count. The primary purpose of the
rule is to promote competition among
broadcast television stations in local
television viewing markets; therefore,
the Commission tentatively finds that it
would be inappropriate to include other
types of media when counting voices.
The Commission notes that in the 2006
Quadrennial Review Order the
Commission addressed the Sinclair
court’s criticisms of the eight-voices
test, specifically the rationale for
defining voices differently in the radiotelevision cross ownership rule and the
local television ownership rule. The
Commission detailed its rationale for
limiting voices in the television rule to
only full-power television stations, a
rationale that was subsequently upheld
on appeal in Prometheus II, and to
which the Commission proposes to
continue to adhere herein. The
Commission seeks comment on its view
that Sinclair does not compel the
Commission to include additional
voices in the eight-voices test.
33. Market Size Waivers. The NPRM
sought comment on whether the
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Commission should adopt a waiver
standard for markets where the rules
would otherwise limit ownership to a
single television station, and, if so, how
such a waiver standard should be
structured. The NPRM sought comment
also on whether such a market size
waiver, which could even allow
combinations between top-four stations,
would promote additional local news
offerings in small markets that are less
able to support four local news
operations. Based on review of the 2010
Quadrennial Review record, the
Commission tentatively concludes that a
market size waiver standard is not
necessary. Instead, the Commission
tentatively concludes that retention of
the existing failed/failing station waiver
policy would serve the public interest
and it seeks additional comment on
whether to relax the waiver criteria or
establish additional grounds for waiver.
34. The Commission seeks comment
on the tentative conclusion that
establishing a new market size waiver
standard is not needed. Having
evaluated the various proposed waiver
standards proffered by commenters, the
Commission is concerned that many of
the proposed waiver criteria would be
difficult to monitor or enforce, are not
rationally related to the ability of each
station to compete in the local market,
and could be manipulated in order to
obtain a waiver. Ultimately, the
Commission predicts that such
standards would significantly expand
the circumstances in which a waiver of
the local television ownership rule
would be granted. The Commission is
concerned that such relaxation would
be inconsistent with the tentative
conclusion that the public interest is
best served by retaining the existing
television ownership limits. Moreover,
the Commission believes that the
existing waiver standard is not unduly
restrictive and that it provides
appropriate relief in markets of all sizes.
Waiver of its rules is meant to be
exceptional relief, and the Commission
tentatively finds that the existing waiver
criteria strike an appropriate balance
between enforcing the ownership limits
and providing relief from the rule on a
case-by-case basis.
35. In addition, the Commission
tentatively finds that it is not necessary
to modify the existing waiver standard
in order to promote additional local
news, as the current policy already
indirectly takes this into consideration
in cases involving failing stations.
Indeed, parties frequently pledge to
continue and/or increase local news
offerings in order to demonstrate that
the proposed transaction would produce
public interest benefits. The
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Commission’s commitment to
promoting increased local news remains
strong, and the Commission believes
that the existing waiver policy helps
further that goal. The Commission seeks
comment on whether there is new
information since the NPRM that would
alter its preliminary views on this issue.
36. The Commission seeks comment
on the tentative conclusion that
maintaining the failed/failing station
waiver policy will serve the public
interest. While it proposes to retain the
existing failed/failing station waiver
policy, it acknowledges that some
industry participants have argued that
certain elements of the existing policy
are too restrictive. Accordingly, the
Commission seeks comment on
potential changes to the policy to
address those circumstances. For
example, are there circumstances in
which the Commission should refrain
from applying the four-percent all-day
audience share requirement or adopt a
higher threshold? If so, what
circumstances would justify such a
change? Are any other changes
appropriate? The Commission
encourages commenters to provide
alternative waiver criteria for its
consideration, including specific
justifications for such criteria, as well as
the potential impact on its policy goals.
37. Multicasting. The NPRM sought
comment on whether the transition to
digital television, and specifically a
station’s ability to multicast multiple
program streams has eliminated the
need to permit common ownership of
two stations in local television markets,
as the local television ownership rule
does. The 2010 Quadrennial Review
record does not persuade the
Commission that multicasting justifies
imposition of a single-station ownership
restriction or other tightening of the
current ownership limits. The
Commission seeks comment on whether
there have been any developments since
the NPRM that should cause it to
reevaluate this position.
38. The Commission tentatively
concurs with the broadcast commenters
that, while multicasting has produced
public interest benefits, the ability to
multicast does not justify tightening the
current numerical limits. Based on
evidence in the 2010 Quadrennial
Review record, broadcasting on a
multicast stream does not—at present—
produce the cost savings and additional
revenue streams that can be achieved by
owning a second in-market station.
Therefore, tightening the numerical
limits might prevent those broadcasters
in markets where common ownership is
permitted under the existing rule from
achieving the efficiencies and related
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public interest benefits associated with
common ownership. Accordingly, the
Commission’s view based on the most
recent record is that it is not appropriate
to adjust the numerical limits as a result
of stations’ multicasting capability. The
Commission seeks comment, however,
on whether it should reconsider its
position within the context of the 2014
Quadrennial Review proceeding. The
Commission notes that it has authorized
channel sharing by broadcast television
stations in connection with the
incentive auction of broadcast television
spectrum and that the statutory
provision mandating the incentive
auction protects the must-carry rights of
stations that voluntarily relinquish
spectrum usage rights in order to
channel share. The Commission seeks
comment on the potential impact of this
aspect of the incentive auction for
purposes of the media ownership rules.
39. Moreover, as discussed above, the
Commission tentatively finds that the
public interest is served by retaining the
current numerical ownership limits; it
believe that doing so would promote
competition in local television markets.
Therefore, as the court noted in
Prometheus II, even if multicasting did
generate cost savings and new revenue
streams similar to owning a second inmarket station—though the Commission
believes that at present it does not—the
Commission is not required ‘‘to
promulgate a more restrictive rule just
because entities may gain similar
economies of scale and generate new
revenue by multicasting.’’ Indeed, for
the reasons discussed herein, the
Commission proposes not to make such
a change, and it seeks comment on the
potential consequences of such an
approach for purposes of the 2014
Quadrennial Review.
40. The NPRM sought comment also
on the impact of dual network
affiliations on local markets and
whether the Commission should limit
the ability of stations to utilize their
multicast capacity to form dual
affiliations with certain networks. As
discussed below, the Commission
proposes to decline to regulate such
dual affiliations in the context of the
media ownership rules at this time, and
it seeks comment on this proposal. The
Commission seeks comment on
multicasting issues in general and, in
particular, on any potential impact on
the incentive auction.
41. The Commission does not believe
the 2010 Quadrennial Review record
supports regulation within the context
of its media ownership rules to restrict
the use of multicast capability to form
dual affiliations. The commenters were
primarily concerned with such dual
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affiliations involving two Big Four
networks. Evidence available during the
2010 proceeding indicates that dual
affiliations involving two Big Four
networks via multicasting are
generally—if not exclusively—limited to
smaller markets with an insufficient
number of full-power commercial
television stations to accommodate each
Big Four network or where other unique
marketplace factors are responsible for
creating the dual affiliation
arrangements. BIA data from 2012
indicate that there are approximately 40
instances of dual affiliation via
multicasting involving multiple Big
Four networks. Each market in which
the Commission identified such dual
affiliation was outside the top-100
ranked DMAs, with the vast majority of
such markets—approximately 73
percent—containing three or fewer fullpower commercial television stations.
These findings are consistent with the
data and estimates provided by cable
commenters, as a significant majority of
the dual affiliations identified in these
comments involved a Big Four network
and a ‘‘Little Two’’ network (i.e., The
CW or MyNetworkTV). The Commission
tentatively finds that Big Four/Little
Two dual affiliations via multicasting,
regardless of market rank, do not raise
sufficient competitive concerns to
justify an amendment to the local
television ownership rule. While there
may be potential harms that result from
certain dual network affiliations, the
Commission tentatively agrees with
broadcast commenters that the potential
benefits of dual affiliation via
multicasting in these smaller markets,
including dual affiliation with more
than one Big Four network, outweigh
any potential harms to the
Commission’s policy goals. Indeed, the
Commission believes that a significant
benefit of the multicast capability is the
ability to bring more local network
affiliates to smaller markets, thereby
increasing access to popular network
programming and local news and public
interest programming tailored to the
specific needs and interests of the local
community. Based on the 2010
Quadrennial Review record, it appears
that marketplace incentives operate to
limit the occurrence of dual affiliations
via multicasting involving multiple Big
Four networks to these smaller markets.
For these reasons, the Commission
tentatively declines to regulate dual
affiliations at this time, and the
Commission seeks comment on this
approach within the context of any
marketplace changes that may have
occurred since the NPRM.
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42. Minority and Female Ownership.
The Commission sought comment on
the impact of the proposed local
television ownership rule on minority
and female ownership opportunities, as
well as the impact of diverse television
ownership on viewpoint diversity. The
Commission tentatively finds that the
local television ownership rule
proposed in this Further Notice of
Proposed Rulemaking is consistent with
its goal to promote minority and female
ownership of broadcast television
stations. The Commission seeks
comment on this tentative conclusion.
43. As discussed above, the
Commission tentatively finds that the
2010 Quadrennial Review record
demonstrates that the existing local
television ownership rule remains
necessary to promote competition
among broadcast television stations in
local markets. Moreover, the
Commission believes the competitionbased rule would also indirectly
advance its viewpoint diversity goal by
helping to ensure the presence of
independently owned broadcast
television stations in the local market,
thereby increasing the likelihood of a
variety of viewpoints. In addition, while
the Commission does not propose to
retain the rule with the specific purpose
of preserving the current levels of
minority and female ownership, the
Commission tentatively finds that
retaining the existing rule would
effectively address the concerns of those
commenters who suggested that
additional consolidation would have a
negative impact on minority and female
ownership of broadcast television
stations. The Commission notes also
that it proposes to retain without
modification the current failed/failing
station waiver policy, including the outof-market-buyer solicitation
requirement—the failed station
solicitation rule (FSSR)—which
promotes new entry in a market by
ensuring that out-of-market entities
interested in purchasing a station,
including minorities and women, will
have an opportunity to bid. The
Commission seeks comment on how any
developments since the NPRM may
affect these tentative findings. In
addition, the Commission seeks
comment on whether the incentive
auction has the potential to impact
minority and female broadcast
ownership and whether any such
impacts should affect the 2014
Quadrennial Review.
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2. Local Radio Ownership Rule
a. Introduction
44. Based on the 2010 Quadrennial
Review record, the Commission
tentatively finds that the current local
radio ownership rule remains necessary
in the public interest and should be
retained without modification. The
Commission believes that the rule is
necessary to promote competition. In
addition, the Commission believes that
the radio ownership limits promote
viewpoint diversity ‘‘by ensuring a
sufficient number of independent radio
voices and by preserving a market
structure that facilitates and encourages
new entry into the local media market.’’
Similarly, the Commission tentatively
finds that a competitive local radio
market helps to promote localism, as a
competitive marketplace will lead to the
selection of programming that is
responsive to the needs and interests of
the local community. The Commission
tentatively finds also that the local radio
ownership rule is consistent with its
goal of promoting minority and female
ownership of broadcast television
stations. Finally, the Commission
believes that these benefits outweigh
any burdens that may result from its
proposal to retain the rule without
modification. The Commission seeks
comment on these tentative
conclusions.
45. In accordance with these tentative
conclusions, the Commission proposes
that an entity may continue to own: (1)
Up to eight commercial radio stations in
radio markets with 45 or more radio
stations, no more than five of which can
be in the same service (AM or FM); (2)
up to seven commercial radio stations in
radio markets with 30–44 radio stations,
no more than four of which can be in
the same service (AM or FM); (3) up to
six commercial radio stations in radio
markets with 15–29 radio stations, no
more than four of which can be in the
same service (AM or FM); and (4) up to
five commercial radio stations in radio
markets with 14 or fewer radio stations,
no more than three of which can be in
the same service (AM or FM), provided
that an entity may not own more than
50 percent of the stations in such a
market, except that an entity may
always own a single AM and single FM
station combination. The Commission
seeks comment on the costs and benefits
of its proposal to retain the existing
local radio ownership rule. To the
greatest extent possible, commenters
should quantify the expected costs or
benefits of retaining the rule and
provide detailed support for any actual
or estimated values provided, including
the source of such data and/or the
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b. Background
46. In the NPRM, the Commission
proposed to retain the local radio
ownership rule without modification,
including the AM/FM subcaps, and
sought comment on this tentative
conclusion. The Commission also
sought comment on whether and, if so,
how, to incorporate new audio
platforms into the rule and on the
impact of such platforms on the
broadcast radio industry. In addition,
the NPRM sought comment on whether
to adopt a specific waiver standard for
the local radio ownership rule and on
how the proposed rule would affect
minority and female ownership
opportunities.
c. Discussion
47. Market. In the NPRM, the
Commission tentatively concluded that
the relevant market for review of the
local radio ownership rule is the radio
listening market and that it is not
appropriate, at this time, to expand that
market to include non-broadcast sources
of audio programming. Based on the
Commission’s review of the 2010
Quadrennial Review record, it believes
this approach is appropriate, and it
seeks comment on whether it should
maintain this market definition.
48. The Commission tentatively finds
that, for purposes of the Commission’s
ownership rules, non-broadcast sources
of audio programming are not yet
meaningful substitutes for broadcast
radio stations with respect to either
listeners or advertisers. While alternate
platforms such as satellite radio and
Internet-delivered audio are growing in
popularity, broadcast radio remains the
dominant radio technology. In 2012, 92
percent of Americans age 12 or older
listened to broadcast radio, a figure that
has remained essentially constant over
the last decade. Satellite radio still
serves only a small portion of the
population, even though its subscription
rates continue to climb. And though
recent data suggest that a significant
portion of adult U.S. broadband
households (42 percent) listen to
Internet-delivered audio programming,
the Commission notes that millions of
U.S. households continue to lack
broadband connections. In addition,
only 14 percent of Internet radio
listeners listen in their cars, where most
broadcast radio listening occurs. Thus,
the Commission tentatively concludes
that Internet-delivered audio
programming is not yet a meaningful
substitute for broadcast radio listening
for most listeners. The Commission
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seeks comment on this tentative
conclusion and invites commenters to
provide any more recent relevant
information and data.
49. The Commission believes,
moreover, that satellite radio and
content delivered via the Internet
generally are national platforms that are
not likely to respond to competitive
conditions in local markets. Satellite
radio content is uniform nationally, and
there is no evidence in the record that
content decisions are made based on
competitive conditions in local markets.
Similarly, there is no evidence in the
record that Internet radio stations and
other Internet-delivered audio
programming providers (excluding
streams of local broadcast radio stations)
modify their programming decisions to
respond to competitive conditions in
local markets. Ultimately, the
Commission tentatively finds that only
local broadcasters provide programming
based on the unique characteristics of
their respective local markets. As the
Commission has stated previously, it is
the competition between such rivals
that most benefits listeners in a local
market and serves the public interest—
competition that is currently lacking
from non-broadcast audio alternatives.
Therefore, the Commission proposes to
continue to limit the relevant market for
the local radio ownership rule to
broadcast radio stations in local radio
listening markets, and it seeks comment
on this proposal.
50. In addition, broadcast radio’s
consistently strong position in both
local and national advertising markets
appears to support the Commission’s
tentative finding that non-broadcast
sources of audio programming are not
significant competitors at this time.
Broadcasters asserted that the
Commission should expand the relevant
market for review, in part, because of
competition for advertising revenue
from non-broadcast audio sources;
however, recent advertising data do not
support this contention. From 2008
through 2011, broadcast radio’s local
advertising revenue market share
increased each year, reaching 16.6
percent in 2011. In the national
advertising market during that same
time period, broadcast radio’s market
share remained stable (between 1.8 and
2.0 percent). By contrast, satellite
radio’s advertising revenue market share
in both the local and national markets
did not exceed 0.1 percent. And while
‘‘Internet advertising’’ has seen
significant gains in advertising revenue
market share both locally and
nationally, evidence suggests that the
revenue is not attributable in any
significant portion to providers of
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Internet-delivered audio programming.
For example, in 2011, online-only audio
programming providers were estimated
to have earned approximately $295
million in advertising revenue. By
contrast, in 2011, the total broadcast
radio advertising revenue market was
projected at approximately $17.8
billion. The Commission notes that NAB
conceded that local radio broadcasting
revenues have improved in recent years,
but it argued that there has been a
‘‘structural change in the audio
marketplace’’ because overall revenues
were below levels earned in 2005 and
2006 and are not expected to reach
those levels until 2015. While total
advertising revenue for local radio
stations did decline from 2006–2009,
with the most significant declines in
2008 and 2009, the evidence does not
support the conclusion that this was a
result of a unique change in the audio
marketplace; instead, the total
advertising market for all media
experienced a significant contraction
that was most likely the result of the
global financial crisis that impacted
nearly all markets. Moreover, overall
advertising revenues for the broadcast
radio industry have steadily improved
since 2010 and are predicted to grow
through 2020. However, the
Commission seeks comment on whether
any structural changes have occurred in
the audio marketplace and, if so,
whether to adjust the 2014 Quadrennial
Review analysis to account for such
changes. The Commission seeks
comment on whether there have been
any significant changes since these
figures became available.
51. Market Size Tiers. The NPRM
proposed to retain the current approach
of setting numerical limits based on
market size tiers and determining the
market size based on the number of
commercial and noncommercial radio
stations in the local market. The
Commission tentatively concludes that
it should adopt these proposals and seek
comment on this approach.
52. The Commission tentatively
declines to modify the current rule’s
method of calculating the number of
stations a licensee owns. The
Commission seeks comment on MidWest Family’s assessment that the
Prometheus I decision mandates an
adjustment, in light of the court’s
Prometheus II decision upholding the
existing rule’s methodology. The
Commission’s preliminary view is that
adopting Mid-West Family’s approach
would permit potentially significant
consolidation in local radio markets,
which would be inconsistent with the
rationale for the Commission’s proposal,
discussed in greater detail below, to
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retain the existing numerical ownership
limits. Finally, the Commission
proposes to reject Mt. Wilson’s
proposal. As discussed in greater detail
below in the context of the AM/FM
subcaps, digital radio is still a growing
technology; there is no mandate
requiring its adoption; and it has not yet
achieved widespread deployment or
consumer acceptance. Therefore, the
Commission tentatively finds that it is
premature to amend its local radio
ownership rule as a result of digital
technology, and it seeks comment on
this approach.
53. Numerical Limits. The NPRM
proposed to retain the existing
numerical limits. In addition, the NPRM
sought comment on Clear Channel’s
proposal to allow increased ownership
in larger markets by creating additional
tiers. Clear Channel suggested an
increase from eight to ten in the number
of stations a single entity may own in
markets with between 55 and 64
stations and from eight to twelve in the
number of stations that a single entity
may own in markets with 65 or more
stations. No party provided comments
on this proposal and, as discussed
below, the Commission tentatively finds
that the record supports retaining the
existing numerical limits (i.e., the
existing number of tiers and the
numerical limits associated with each);
therefore, it tentatively declines to adopt
the new ownership tiers proposed by
Clear Channel. As discussed above,
many commenters in the 2010
Quadrennial Review proceeding
supported the Commission’s proposal to
retain its existing limits, while other
commenters argued in favor of
loosening or tightening the existing
limits. However, no commenters
proposed specific numerical limits to
replace the existing limits. For the
reasons discussed below, the
Commission proposes to adopt the
tentative conclusion in the NPRM to
retain the existing numerical ownership
limits for each existing market size tier.
54. In the 2006 Quadrennial Review
Order, the Commission rejected calls to
relax the numerical ownership limits,
finding instead that retaining the
existing limits was necessary to protect
against excessive market concentration.
The Commission noted that, following
the relaxation of the local radio
ownership limits by Congress in the
1996 Act, there had been substantial
consolidation of radio ownership both
nationally and locally. Evidence in the
record demonstrated that, in local
markets, the largest firms often
dominated the market in terms of
audience and revenue share. The
Commission ultimately concluded not
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only that the existing limits were not
unduly restrictive, but also that
permitting additional consolidation
would not be in the public interest. The
Prometheus II court upheld the
Commission’s decision.
55. The Commission determined also
in the 2006 Quadrennial Review Order
that tightening the radio ownership
limits was not justified based on the
record. The Commission held that
tightening the ownership limits would
be inconsistent with Congress’s decision
to relax the limits in the 1996 Act and
would ignore the financial stability that
consolidation brought to the radio
industry. In addition, the Commission
determined that tightening the rule
would require significant divestitures
that would disrupt the radio
marketplace and could undermine the
ability of local stations to provide
quality programming to their local
markets. While acknowledging that
grandfathering was an option to avoid
the disruptive impact of divestitures,
the Commission determined that
grandfathering in this instance would
not be in the public interest.
56. Based on the 2010 Quadrennial
Review record, the Commission
tentatively finds that the competitive
conditions in the radio marketplace that
supported the Commission’s decision to
retain the existing numerical limits in
the 2006 Quadrennial Review Order are
essentially unchanged. Evidence from
2012 shows that in local markets, the
largest commercial firms continue to
enjoy substantial advantages in revenue
share—on average, the largest firm in
each Arbitron Metro market has a 45
percent share of the market’s total radio
advertising revenue, with the largest
two firms accounting for 73 percent of
the revenue. In more than a third of all
Arbitron Metro markets, the top two
commercial station owners control at
least 80 percent of the radio advertising
revenue. With respect to ratings, the
top-four firms continue to dominate
audience share. Therefore, the
Commission does not believe the public
interest would be served by relaxing the
existing numerical limits. The
Commission seeks comment on whether
there are any more recent data that point
toward a different conclusion.
57. The Commission notes also that
the record in the 2010 Quadrennial
Review proceeding does not reflect
changes in the marketplace that warrant
reconsideration of the Commission’s
previous decision not to make the limits
more restrictive, as some commenters
recommended. The Commission
believes that tightening the restrictions
would disregard the previously
identified benefits of consolidation in
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the radio industry and would be
inconsistent with the 1996 Act. Further,
tightening the rule would require
divestitures that the Commission
believes would be disruptive to the
radio industry and would upset the
settled expectations of individual
owners. The Commission seeks
comment on whether any benefits
derived from tightening the limits
would outweigh these countervailing
considerations. In addition, the
Commission seeks comment on its
continued belief that, for the reasons
stated in the 2006 Quadrennial Review
Order, tightening the limits while
grandfathering existing combinations
would not be in the public interest and
should be avoided.
58. Clarification of Application of
Local Radio Ownership Rule. In the
2002 Biennial Review Order, the
Commission adopted the current
standard of using Arbitron Metro areas,
where available, for the application of
the numerical radio ownership limits.
At that time, the Commission also
adopted certain procedures and
safeguards designed to guide the
implementation of the revised local
radio ownership rule and to deter
parties from attempting to circumvent
the rule through the manipulation of
Arbitron market definitions. Years of
experience applying the current
approach suggest certain aspects of the
current standard that the Commission
believes merit clarification or further
action to fulfill the intent of the 2002
Biennial Review Order.
59. Multiple parties raised other
issues in the 2010 Quadrennial Review
proceeding that the Commission
tentatively declines to address
specifically herein. Mid-West Family
requested changes to the grandfathering
rules regarding transfers of control due
to death or other departure of
shareholders/partners of closely held
businesses, asserting that such transfers
of control should be treated the same as
transfers that occur pursuant to a will or
intestacy. In addition, UCC et al. argued
that the Commission should consider
reversing its decision in the 2002
Biennial Review Order to grandfather
certain radio station combinations,
particularly in light of the elimination of
the eligible entity exception, which they
asserted could present ownership
opportunities for minorities and
women. By contrast, Frandsen argued
that the Commission should permit the
sale of grandfathered clusters to any
party. The Commission tentatively
declines at this time to address the
issues raised by Mid-West Family, UCC
et al., and Frandsen. As the Commission
has proposed to retain the existing
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numerical limits, it sees no reason at
this time to reverse or expand the
grandfathering policies that apply to
existing combinations. The Commission
has previously found Mid-West
Family’s requested relief to be outside
the scope of the quadrennial review
proceeding. Moreover, as discussed
herein, the Commission has proposed to
reinstate the eligible entity exception.
60. The 2002 Biennial Review Order
prohibits a party from receiving the
benefit of a change in Arbitron Metro
boundaries or ‘‘home’’ market
designation unless that change has been
in place for at least two years (or, in the
case of a ‘‘home’’ designation change,
the station’s community of license is
within the Metro). The Commission
does not apply the two-year waiting
period to Arbitron Metro changes
resulting from a Commission-approved
change in community of license to an
area outside the Metro’s boundaries.
The Commission proposes to clarify that
the exception to the waiting period for
Commission-approved changes applies
only where the community of license
change also involves the physical
relocation of the station facilities to a
site outside the relevant Arbitron Metro
market boundaries. Otherwise, the
licensee of a station currently located in
an Arbitron Metro could use the
exception to reduce the number of its
stations listed as ‘‘home’’ to that Metro,
without triggering the two-year waiting
period and without any change in
physical coverage or market
competition, merely by specifying a new
community of license located outside
the Metro. Thus, this clarification
safeguards the local radio ownership
limits from manipulation based on
Arbitron market definition. The
Commission seeks comment on this
proposed clarification.
61. Note 4 to § 73.3555 of the
Commission’s rules (Note 4)
grandfathers existing station
combinations that do not comply with
the numerical ownership limits of
§ 73.3555(a). Certain circumstances,
however, require applicants to come
into compliance with the numerical
ownership limits despite the fact that
the relevant station may have been part
of an existing grandfathered cluster. One
such circumstance is a community of
license change, which occasionally can
lead to difficulty in the case where an
applicant with a grandfathered cluster
of stations seeks to move a station’s
community of license outside the
relevant Arbitron Metro. Given that the
Commission relies on BIA for market
designations, such an applicant may be
prevented from demonstrating
compliance with the multiple
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ownership limits because the station
proposing to change its community will
continue to be listed by BIA as ‘‘home’’
to the Metro until the community of
license change has taken place. To
resolve this practical issue, the
Commission tentatively proposes to
allow a temporary waiver of the radio
multiple ownership limits for three
months in this limited instance to allow
BIA sufficient time to change the
affected station’s ‘‘home’’ designation
following a community of license
relocation. The Commission also
proposes to exempt from the
requirements of Note 4 ‘‘intra-Metro’’
community of license changes—from
one community to another within the
same Arbitron Metro. The Commission
tentatively finds that, in the majority of
cases, such a move will have little or no
impact on the state of competition
within the local market. The
Commission seeks comment on these
proposed adjustments to the operation
of Note 4.
62. In its comments in the 2010
Quadrennial Review proceeding, ARSO
renewed its longstanding request that
the Commission redefine local radio
markets for Puerto Rico. ARSO argues
that Arbitron’s definition of the entire
island of Puerto Rico as a single
Arbitron Metro market does not
accurately reflect market and geographic
realities, which prevent stations from
competing island-wide. ARSO requests
that the Commission: (1) redefine the
local radio markets in Puerto Rico using
the eight Metropolitan Statistical Areas
defined by the Office of Management
and Budget (OMB); or (2) redefine the
local radio markets using the three
Combined Statistical Areas defined by
OMB; or (3) treat Puerto Rico as a nonArbitron Metro area and redefine its
local markets using contour-overlap
methodology. The Commission has
consistently waived the Arbitron Metro
definition for applicants in Puerto Rico
and employed the contour-overlap
methodology in the course of
implementing the 2002 Biennial Review
Order. The Commission has previously
stated that it would address ARSO’s
request for relief in a future proceeding.
The Commission seeks comment on
ARSO’s suggestions and on the
effectiveness of the Commission’s prior
waivers of the definition in this context.
63. AM/FM Subcaps. The NPRM
proposed to retain the existing AM/FM
subcaps, finding that the rationales for
doing so set forth in the 2006
Quadrennial Review Order were still
valid, namely to promote new entry and
to account for the technological and
marketplace differences between AM
and FM stations and thereby promote
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competition. In addition, the NPRM
sought comment on the impact of the
digital radio transition on the AM/FM
subcaps, as well as issues regarding the
aggregation of multiple AM stations to
provide signal coverage in large
geographic areas or in areas with
mountainous terrain. Consistent with
the proposal in the NPRM, the
Commission tentatively finds that there
have not been significant changes in the
broadcast radio marketplace with
respect to the rationale for maintaining
the AM/FM subcaps since the
conclusion of the 2006 Quadrennial
Review proceeding, and it proposes to
retain the existing AM/FM subcaps for
the reasons set forth in the 2006
Quadrennial Review Order. The
Commission seeks comment on this
approach.
64. The Commission tentatively
agrees with the commenters in the 2010
Quadrennial Review proceeding that
supported retention of the AM subcaps
in order to promote new entry.
Consistent with Commission precedent,
the Commission believes that broadcast
radio, in general, continues to be a more
likely avenue for new entry in the media
marketplace—including entry by small
businesses and entities seeking to serve
niche audiences—as a result of radio’s
ability to more easily reach certain
demographic groups and the relative
affordability of radio stations compared
to other mass media. AM stations are
generally the least expensive option for
entry into the radio market, often by a
significant margin, and therefore permit
new entry for far less capital investment
than is required to purchase an FM
station. While some commenters
suggested that eliminating the subcaps
could result in divestiture of properties
that could be acquired by new entrants,
the Commission tentatively finds that
this speculative rationale is not
persuasive. Therefore, consistent with
Commission precedent, it believes that
the public interest is best served by
retaining the existing AM subcaps,
which would continue to further
competition, and possibly also
viewpoint diversity, by promoting new
entry. The Commission seeks comment
on this issue and invites commenters to
provide any new relevant information
that has become available since the
NPRM.
65. In addition, the Commission
tentatively finds that there continue to
be technical and marketplace
differences between AM and FM
stations that justify retention of both the
AM and FM subcaps in order to
promote competition in local radio
markets. As the Commission has noted
previously, FM stations enjoy unique
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technical advantages over AM stations,
such as increased bandwidth and
superior audio signal fidelity. In
addition, AM signal propagation varies
with the time of day (i.e., AM signals
travel much farther at night than during
the day), and many AM stations are
required to cease operation at sunset.
These technological differences often,
but not always, result in greater
listenership and revenues for FM
stations.
66. While the Commission has
previously stated that digital radio
technology may help AM stations to
level the playing field with FM stations,
it tentatively finds that this is not yet
the case. Deployment of digital radio
technology for both AM and FM stations
is limited and has not changed
significantly in recent years. In addition,
the Commission believes it is important
to consider consumer adoption when
evaluating the impact of digital radio on
the technological and marketplace
differences between AM and FM
stations. AM stations will not be able to
realize the potential competitive
benefits of transitioning to digital if
listeners are largely unable to receive
the digital broadcasts. Recent digital
radio deployment data suggest that FM
stations may actually be increasing the
technological divide through greater
adoption rates of digital radio
technology. Furthermore, consumers
have been slow to adopt radios capable
of receiving digital signals, though
consumer awareness of the technology
is relatively high and there are efforts to
increase the availability of such radios,
particularly as standard or optional
equipment in many new car models.
The Commission proposes to continue
to monitor the impact of the digital
radio transition in future media
ownership proceedings. It seeks
comment on this approach.
67. Furthermore, the Commission
tentatively finds that the recent changes
to the FM translator rules, ‘‘to allow AM
stations to use currently authorized FM
translator stations to retransmit their
AM service within their AM stations’
current coverage areas’’ have not yet
significantly impacted the technological
and marketplace differences between
AM and FM stations. While this change
has been beneficial for many AM
stations, many more AM stations have
not availed themselves of the
opportunity and/or lack the ability to do
so. Consequently, the Commission
believes that FM stations generally
continue to enjoy significant advantages
over AM stations. The Commission
proposes to continue to monitor the
impact of this change in future media
ownership proceedings, and it seeks
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comment on this approach. The
Commission has recently initiated a
proceeding to explore ways to revitalize
the AM band. Similarly, the
Commission proposes to monitor that
proceeding for any future impact on the
AM marketplace that may warrant
consideration in its media ownership
proceedings. The Commission seeks
comment on any present implications of
these revitalization efforts for the 2014
Quadrennial Review.
68. Finally, while the technological
and marketplace differences between
AM and FM stations generally benefit
FM stations, and thus support retention
of the FM subcaps, there continue to be
many markets in which AM stations are
‘‘significant radio voices.’’ For example,
a study provided by Clear Channel
found that throughout the 300 Arbitron
Metro markets, there are 187 a.m.
stations ranked in the top five in terms
of all-day audience share. And
according to NAB, AM stations are
among the top revenue earners in some
of the largest radio markets (e.g., New
York, Chicago, and Los Angeles).
Therefore, the Commission tentatively
finds that retention of the existing AM
subcaps is necessary to prevent a single
station owner from acquiring excessive
market power through concentration of
ownership of AM stations in markets in
which AM stations are significant radio
voices.
69. In addition, as discussed above,
the Commission tentatively concludes
that it is not in the public interest to
tighten the numerical ownership limits;
therefore, the Commission sees no need
to reassess the subcaps associated with
each numerical tier, as proposed by Mt.
Wilson. Indeed, tightening the subcaps
absent a concurrent tightening of the
numerical ownership limits would
result in an internal inconsistency in the
rule, as an entity would be unable to
own all the stations otherwise permitted
under certain numerical tiers. For
example, in markets with 30–44
stations, an entity currently may own up
to seven stations, provided that no more
than four of the stations are in the same
service. If the subcap was tightened to
three stations in the same service, an
entity could then only own up to six
stations, even though the rule’s premise
is that the public interest is best served
by permitting ownership of up to seven
stations in this particular market. The
Commission seeks comment on whether
there is any reason the Commission
should adopt different subcaps despite
this potential inconsistency.
70. Market Size Waivers. Though the
NPRM sought comment on whether to
adopt a specific waiver standard, no
commenter proposed such a standard in
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the 2010 Quadrennial Review
proceeding. The Commission tentatively
declines to adopt a specific waiver
standard for the local radio ownership
rule. The Commission seeks comment
on whether it is sufficient that,
consistent with Commission precedent,
parties that wish to seek a waiver of the
local radio ownership rule may do so
pursuant to the general waiver standard
under Section 1.3 of the Commission’s
rules.
71. Minority and Female Ownership.
The Commission sought comment on
how the radio rule affects minority and
female ownership opportunities,
including specific comment on the
results of Media Ownership Study 7,
which analyzes the relationship
between ownership structure and the
provision of radio programming targeted
to African-American and Hispanic
audiences. The Commission tentatively
finds that the radio ownership rule
proposed in this Further Notice of
Proposed Rulemaking is consistent with
the goal to promote minority and female
ownership of broadcast radio stations.
The Commission seeks comment on this
tentative conclusion.
72. As noted above, the Commission
tentatively finds that retaining the
existing competition-based numerical
limits would indirectly promote its
viewpoint diversity goal, in part by
preserving ownership opportunities for
new entrants, including minority- and
female-owned businesses. Moreover,
part of the rationale for the proposal to
retain the AM/FM subcaps is to promote
new entry, particularly in the AM band,
which has historically provided lowcost ownership opportunities for new
entrants, including minorities and
women.
73. The Commission tentatively
declines to tighten the local radio rule’s
ownership limits in order to promote
increased minority and female
ownership, as some recommend. While
the Commission remains committed to
promoting minority and female
ownership, it is one of many—
sometimes competing—goals that the
Commission must balance when setting
the numerical ownership limits. As
discussed above, the Commission
believes that tightening the local radio
rule’s ownership limits would ignore
the benefits of consolidation in the radio
industry and therefore be inconsistent
with the 1996 Act. Furthermore, it
believes that tightening the local radio
rule would require divestitures that
would be disruptive to the radio
industry. In addition, while the
Commission does not propose to retain
the rule specifically to preserve the
current levels of minority and female
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ownership, it tentatively finds that
retaining the existing rule effectively
would address the concerns of those
commenters who suggest that additional
consolidation would have a negative
impact on minority and female
ownership of broadcast radio stations.
Ultimately, the Commission tentatively
finds that, based on the record in the
2010 Quadrennial Review proceeding,
the current competition-based limits
reflect an appropriate balance of its
policy goals and that retaining these
limits would serve the public interest
and simultaneously promote viewpoint
diversity. The Commission seeks
comment on these tentative conclusions
and invites commenters to provide any
evidence bearing on this issue that has
become available since the NPRM.
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3. Newspaper/Broadcast CrossOwnership Rule
a. Introduction
74. Since 1975, the newspaper/
broadcast cross-ownership rule (NBCO
rule) has prohibited common ownership
of a daily newspaper and a full-power
broadcast station (AM, FM, or TV) if the
station’s service contour encompasses
the newspaper’s city of publication.
This absolute ban on newspaper/
broadcast cross-ownership remains in
effect today despite the Commission’s
attempts over the last decade to modify
the restriction. Most recently, in the
2006 Quadrennial Review Order, the
Commission adopted a revised standard
whereby waiver requests for certain
mergers in the top 20 Nielsen DMAs
were granted a favorable presumption.
The Third Circuit, however, vacated and
remanded the revisions on procedural
grounds, finding that the Commission
had failed to provide adequate public
notice of its proposed rule pursuant to
the APA. Although the Court in
Prometheus I affirmed the Commission’s
conclusion that an absolute ban is not
necessary, the Court in Prometheus II
did not reach the Commission’s
substantive modifications to the NBCO
rule.
75. The Commission continues to
believe that some restriction on
newspaper/broadcast cross-ownership is
necessary to protect and promote
viewpoint diversity in local markets.
The Commission seeks comment on that
tentative conclusion. This view is
consistent with the Commission’s
longstanding rationale for the NBCO
rule. As the Commission recognized in
the 2002 Biennial Review Order, ‘‘[a]
diverse and robust marketplace of ideas
is the foundation of our democracy.’’
The Supreme Court has recognized the
importance of the Commission’s role in
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promoting viewpoint diversity, calling it
a ‘‘basic tenet of national
communications policy.’’
76. As discussed below, daily
newspapers and local television stations
(and their affiliated Web sites) continue
to be the dominant providers of local
news and information to which
consumers turn. Evidence in the 2010
Quadrennial Review proceeding does
not suggest that the Internet, for all its
ability to make infinite sources of
information immediately and globally
accessible, has yet tilted that balance.
Thus, the ‘‘diverse and antagonistic
sources’’ that the NBCO rule historically
has protected—daily newspapers and
local television stations—are still the
primary outlets of local news and
information that consumers use.
Comments in the current record touting
the localism benefits of newspaper/
broadcast cross-ownership or claiming a
competitive need for traditional media
to achieve economies of scale in today’s
marketplace, while providing a fuller
understanding of the newsgathering
efficiencies of cross-owned properties
and the current financial challenges
facing traditional media, were not
substantially different from those made
in previous reviews, and the
Commission does not believe they
diminish the viewpoint diversity
rationale for the rule. Moreover, the
efficiencies that may be gained from
newspaper/broadcast combinations do
not necessarily lead to gains in localism.
As explained below, the Commission
seeks comment on the extent to which
this dominance of daily newspapers and
local televisions stations in the
provision of local news and information
persists today.
77. However, the Commission found
in previous reviews that the nearly 40year-old blanket prohibition on
newspaper/broadcast cross-ownership is
overly broad, and the Third Circuit
upheld those findings. It is possible that
some newspaper/broadcast
combinations could be allowed without
unduly harming viewpoint diversity. To
that end, the Commission seeks
comment on whether the prohibition on
newspaper/radio combinations should
be lifted. The Commission asks what
impact such a modification would have
on viewpoint diversity in local markets.
Research shows that most radio stations
do not produce significant amounts of
local news and that most consumers do
not rely on radio stations as their
primary source of local news. Given that
the newspaper/television restriction has
always been the crux of the NBCO rule,
the Commission seeks comment
regarding the added value of the rule’s
newspaper/radio component. The
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Commission seeks comment, therefore,
on whether there is sufficient
justification under the legal standards of
Section 202(h) for continuing to restrict
newspaper/radio combinations. The
Commission seeks comment also on the
costs and benefits associated with
retaining or eliminating the restriction
on newspaper/radio combinations. To
the greatest extent possible, commenters
should quantify the expected costs or
benefits of the rule and any alternatives
and provide detailed support for any
actual or estimated values provided,
including the source of such data and/
or the method used to calculate reported
values.
78. The Commission invites comment
also on whether and in what way it
should modify the newspaper/television
cross-ownership restriction. Although
further comment is welcome, the
Commission is disinclined to impose a
bright-line rule permitting combinations
in certain circumstances. Instead the
Commission seeks comment on
approaches that would maintain the ban
on newspaper/television combinations
in all markets but that would allow
applicants the opportunity to seek
approval of particular transactions. The
Commission could consider any waiver
requests on a purely case-by-case basis,
assessing each request independently
and considering the totality of the
circumstances each proposed
transaction presents, including all
asserted and potential likely public
interest implications of the specific
proposed combination. The Commission
seeks comment on this approach,
including the costs and benefits
associated with a pure case-by-case
review of waiver applications. To the
greatest extent possible, commenters
should quantify the expected costs or
benefits of this proposal and any
alternatives and provide detailed
support for any actual or estimated
values provided, including the source of
such data and/or the method used to
calculate reported values.
79. The Commission also invites
further comment on a case-by-case
waiver approach that would include
presumptions that favor or disfavor the
grant of waiver requests in accordance
with certain prescribed guidelines. This
approach would build on proposals in
the NPRM to modify the vacated 2006
rule. Under this approach, a request for
waiver of the newspaper/television
cross-ownership prohibition would be
entitled to a presumption that it is
consistent with the public interest,
convenience, and necessity to allow an
entity to own, operate, or control one
daily newspaper and one full-power
television station in a top-20 Nielsen
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DMA provided that: (1) The television
station is not ranked among the top-four
television stations in the DMA, based on
the most recent all-day (9 a.m.–
midnight) audience share, as measured
by Nielsen or by any comparable
professional, accepted audience ratings
service, and (2) at least eight
independently owned and operating
major media voices will remain in the
DMA. Major media voices would
include full-power television broadcast
stations and newspapers that are
published at least four days a week
within the DMA in the dominant
language of the market and have a
circulation exceeding 5 percent of the
households in the DMA. In all other
cases and in any DMA below the top-20
there would be a presumption that
granting a waiver to permit a
newspaper/television combination is
inconsistent with the public interest,
convenience, and necessity. A party
seeking to overcome a presumption
would carry the burden of proof that the
proposed combination will or will not
unduly harm viewpoint diversity within
the DMA. As provided below, the
Commission seeks comment on all
aspects of this framework, including the
costs and benefits of each of the
elements discussed herein. To the
greatest extent possible, commenters
should quantify the expected costs or
benefits of this approach and any
alternatives and provide detailed
support for any actual or estimated
values provided, including the source of
such data and/or the method used to
calculate reported values.
80. As described in more detail below,
the Commission seeks comment on
various other issues regarding a
newspaper/television cross-ownership
restriction. First, any restriction would
be modified to replace the obsolete
analog Grade A contour with an
approach that approximates the
outdated contour as closely as possible.
The Commission proposes to prohibit
common ownership of a full-power
television station and a daily newspaper
when: (1) The television station’s
community of license and the
newspaper’s community of publication
are in the same Nielsen DMA, and (2)
the principal community contour (PCC)
of the television station, as defined in
§ 73.625 of the Commission’s rules,
encompasses the entire community in
which the newspaper is published.
Second, the restriction would not
include the four-factor test that all
waiver applicants, even those entitled to
a favorable presumption, were required
to satisfy under the 2006 rule. As
discussed below, the Commission
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believes that the factors are for the most
part vague, subjective, difficult to prove
and enforce, and/or not directly linked
to viewpoint diversity. Third, the
restriction would not include a local
news exception, such as the one
permitted by the 2006 rule under which
the Commission reversed the negative
presumption against a waiver when the
proposed combination involved a
broadcast station that had not been
offering local newscasts and the
applicants committed to airing at least
seven hours of local news per week after
the transaction. As described below, the
Commission believes that the potential
difficulties in monitoring and enforcing
the exception would render it
meaningless. Fourth, the Commission
proposes to include in any restriction an
exception for merger applicants that
demonstrate that either the television
station or the newspaper has failed or is
failing.
81. Finally, the Commission
tentatively agrees with DCS that the
NBCO rule does not have a significant
impact on minority ownership, and the
Commission believes that these modest
revisions the Commission put forth for
comment would be unlikely to have a
disproportionate effect on either
minority or female owners. The
Commission seeks comment on whether
the benefits of the revisions it describes
here in the interest of protecting
viewpoint diversity would outweigh
any burdens that could result from such
revisions, which the Commission would
minimize by grandfathering any
combinations that would become newly
non-compliant because of the revisions.
b. Background
82. As discussed below, the NPRM
inquired about detailed scenarios in
connection with proposed rule
modifications.
c. Discussion
(i) Policy Goals
83. Background. In the NPRM, the
Commission tentatively affirmed the
Commission’s past determinations that
the NBCO rule promotes viewpoint
diversity but is not necessary to advance
its localism and competition goals.
Consistent with previous Commission
findings, the Commission tentatively
concluded that, although an absolute
ban is overly broad, some newspaper/
broadcast cross-ownership restrictions
continue to be necessary to protect and
promote viewpoint diversity. The
Commission’s reasoning centered on
evidence that newspapers and local
television stations, and their affiliated
Web sites, are the primary sources that
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consumers rely on for local news and
information. The Commission
recognized that newspaper/broadcast
cross-ownership may provide certain
benefits that promote its localism goal.
Thus, it tentatively affirmed the
Commission’s earlier findings that the
opportunity to share newsgathering
resources and to realize other
efficiencies derived from economies of
scale and scope may improve the ability
of commonly owned media outlets to
provide local news and information. It
tentatively concluded, as the
Commission found in previous
ownership reviews, that newspapers
and broadcast stations do not compete
in the same product market and,
therefore, that the rule is not necessary
to promote its competition goal.
84. Discussion. The Commission seeks
comment on the current validity of the
Commission’s tentative conclusion in
the NPRM that newspapers and local
television stations, and their affiliated
Web sites, are the dominant sources
consumers rely on for local news and
therefore that cross-ownership
restrictions continue to be necessary
under Section 202(h) to promote
viewpoint diversity in local markets.
The Commission proposes to adopt the
NPRM’s tentative findings that the
NBCO rule is not necessary to foster its
localism and competition goals. While
the Commission recognizes that the rule
may hinder the realization of certain
efficiencies that could result in the
production of more local news, it
anticipates that modifications of the
rule, such as those outlined below,
could enable such efficiencies, and
thereby potentially promote localism, in
situations where viewpoint diversity
would not be unduly sacrificed.
(i) Viewpoint Diversity
85. In the 2010 Quadrennial Review
proceeding, newspaper and media
owners proffered two principal
arguments to support their position that
the Commission’s diversity goal no
longer justifies a prohibition on
newspaper/broadcast cross-ownership.
They argued, first, that ownership does
not necessarily influence viewpoint
and, second, that an array of diverse
viewpoints is widely available from an
abundance of outlets, particularly via
the Internet. Both of these arguments
were addressed by the Commission in
the 2002 and 2006 media ownership
reviews and by the Third Circuit in
Prometheus I. The Third Circuit agreed
with the Commission that, although
these arguments provide an appropriate
basis for relaxing the absolute ban on
newspaper/broadcast cross-ownership,
they do not mandate the removal of all
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restrictions on such combinations. The
Commission seeks comment on the
tentative conclusion that neither of
these arguments presents a reason for
eliminating the NBCO rule in the 2014
Quadrennial Review proceeding.
86. The Commission does not believe
that the 2010 Quadrennial Review
record compels it to alter the earlier
conclusion that cross-ownership can
diminish viewpoint diversity. For
example, the authors of Media
Ownership Study 9 find that ownership
concentration may adversely affect
viewpoint diversity and the quality of
local news. The Commission finds that
the results of Media Ownership Studies
8A and 8B, suggesting that ownership
structure does not have a marked impact
on viewpoint diversity, cannot serve as
a basis for assessing the impact of the
NBCO rule. The analysis in Media
Ownership Study 8B did not include
any variables pertaining to newspaper/
broadcast cross-ownership, and Media
Ownership Study 8A examined only
newspaper/television cross-ownership,
for which its data was particularly
limited. The 2008 Pritchard Study cited
by Cox supports the proposition that
cross-ownership does not diminish
viewpoint diversity; however, its
analysis includes only three crossownership situations. The editorial
restraint exhibited by media owners in
the three markets Pritchard studied does
not negate what Pritchard calls the
‘‘theoretical power’’ of media owners to
control viewpoint. Even if cross-media
owners do not exercise that power
frequently, the Commission believes it
is important to restrict cross-ownership
of the dominant local news providers in
markets where viewpoint diversity is
insufficiently robust to withstand the
potential loss of an independently
owned voice. The Commission seeks
comment on this view.
87. With respect to the second
argument, opponents asserted that the
rule cannot be justified on diversity
grounds because consumers today have
nearly ubiquitous access to a multitude
of voices. The Commission believes that
the media environment has changed
dramatically since 1975 when the
average American read one local print
newspaper and watched one of three
evening newscasts in real time. Without
question, the Internet, MVPD services,
and other technological developments
have profoundly changed the ways in
which people access, consume, and
share news and information. In its 2002
and 2006 ownership decisions, the
Commission described the rapid
advancements in the media industry at
great length. Since then, those changes
have been compounded as both
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providers and consumers of news use
the Internet even more intensely. As the
Commission concluded in its 2002 and
2006 proceedings, the Commission
believes the proliferation of media
outlets since 1975 may well render the
absolute ban on newspaper/broadcast
cross-ownership obsolete.
88. While the extent to which
Americans turn to news Web sites
unaffiliated with traditional media may
be increasing, it appears that such
sources have not supplanted print
newspapers and local television
stations, and their affiliated Web sites,
as the dominant providers of local news.
As a threshold matter, online services
and information are not available or not
enjoyed at full capacity by many
Americans due to disparities in
broadband availability and adoption
rates. Furthermore, according to a recent
Pew Report on the State of the News
Media, ‘‘local TV remains America’s
most popular source of local news and
information.’’ Commission staff reported
in the Information Needs of
Communities Report that, on a typical
day, 78 percent of Americans obtain
news from their local television station.
A recent trade association analysis
reportedly concluded that viewership of
local evening news broadcasts in the 10
largest markets exceeded the five
highest rated cable news programs
combined by more than 430 percent.
Although more consumers now turn to
the Internet than to print newspapers for
news and information, newspapers
(both the print and online versions) are
relied upon for the widest range of local
news topics, and newspaper Web sites
are the primary traditional source of
local news for online consumers in the
vast majority of large markets. In
addition, many local television stations
have become ‘‘major online sources of
news,’’ even surpassing the popularity
of newspaper Web sites in a number of
local markets. The author of Media
Ownership Study 6 concludes that
‘‘[n]ewspapers and television stations
dominate what local news can be found
online.’’ The author found that only 17
of the 1,074 local news Web sites he
examined were unaffiliated with
traditional print or broadcast media. As
the Commission described in the NPRM,
the results of Media Ownership Study 6
are supported by data from other studies
demonstrating a consumer preference
for Web sites affiliated with legacy
media. The Commission seeks comment
on its assessment of the current record
and it invite commenters to provide any
updated information or evidence
regarding consumer reliance on
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unaffiliated online sources for local
news and information.
89. Even Web sites unaffiliated with
newspapers and television stations often
contain local news content that
originates from those traditional
sources. The results of the Pew
Baltimore Study revealed new media’s
‘‘limited role’’ in providing original
reporting. The Information Needs of
Communities Report points to a number
of studies demonstrating that ‘‘the
growing number of web outlets relies on
a relatively fixed, or declining, pool of
original reporting provided by
traditional media.’’ In addition, Media
Ownership Study 6 finds a dearth of
independent Web sites with original
local news content. Commenters in the
2010 Quadrennial Review proceeding
tended to agree that most independent
online sources, particularly news
aggregator Web sites, currently do not
provide a substitute for the original
reporting by professional journalists
associated with traditional local media.
Media Ownership Study 6 cautions that
even the independent local Web sites
that produce high-quality content are
not necessarily substitutes for
traditional media outlets. The
Commission invites commenters to
submit updated information or evidence
regarding the prevalence of original
local news content on Web sites
unaffiliated with traditional media
outlets.
90. At the current time and based on
the record before the Commission, it
tentatively finds that the record does not
support the conclusion that the impact
of the Internet has obviated the need for
cross-ownership restrictions. The NBCO
rule is intended to preserve access to a
variety of viewpoints on substantive
matters of local concern. The
Commission tentatively finds that the
diversity of local news coverage is not
enhanced by the fact that newspapers
from around the world are only a click
away. Remote access to hometown
sports scores and local weather reports
expands the availability, but not the
diversity, of information. While the
Commission tentatively agrees with
Tribune that the presence of local and
specialized Web sites ‘‘enriches the
conversation,’’ the record in the 2010
Quadrennial Review proceeding does
not appear to demonstrate that most
local, hyperlocal, and niche Web sites
fill the role of local television stations
or daily newspapers. In addition, the
studies that Tribune cited in support of
its assertion that Americans increasingly
use the Internet to obtain election
information concluded that television
remains the primary source for such
information among all Americans.
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Although the 2010 Quadrennial Review
record does not appear to provide
convincing evidence that the Internet
eliminates entirely the need for crossownership restrictions, the Commission
seeks comment on its tentative
assessment of the record. The
Commission also seeks comment on
whether there have been any changes in
the Internet’s role in the current
marketplace for local news and
information that the Commission should
consider in its 2014 Quadrennial
Review.
(ii) Localism
91. The evidence in the 2010
Quadrennial Review record does not
appear to negate the basic proposition
that newspaper/broadcast crossownership may enable commonly
owned properties to produce and
disseminate more and sometimes better
local news. As acknowledged in the
NPRM, the Commission has found that
cross-ownership may produce such
benefits to localism. The Commission
recognizes that localism benefits are not
guaranteed, however. The Commission
sought comment in the NPRM not only
on the benefits of cross-ownership
generally, but also specifically on how
to weigh the finding in Media
Ownership Study 4 that an increased
amount of local news on a cross-owned
television station does not necessarily
translate into more local news at the
market level. The author of the study
theorized that cross-owned stations may
tend to ‘‘crowd out’’ the news
production of other stations.
92. The author of Media Ownership
Study 4 cautions that the result showing
less local news in markets with
newspaper/broadcast cross-ownership is
‘‘imprecisely measured and not
statistically different from zero.’’ Given
that disclaimer, and the disputed
evidence in the 2010 Quadrennial
Review record, the Commission
proposes not to accord much weight to
the study’s finding that the amount of
local news at the market level may be
negatively correlated with newspaper/
broadcast cross-ownership. Despite the
criticisms of the methodology used in
Media Ownership Study 4, the
Commission thinks it reasonable to
accept the premise that such crossownership may result in a greater
amount of local news production by the
cross-owned properties based on other
record evidence. The Commission is
aware, however, that such an outcome
is not assured and depends in part on
the owner’s commitment to disseminate
local news.
93. The Commission believes the
nation’s interest in maintaining a robust
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democracy through a ‘‘multiplicity of
voices’’ justifies maintaining certain
NBCO restrictions even if doing so
prevents some combinations that might
create cost-savings and efficiencies in
news production. Moreover, the
Commission does not believe that the
elimination of the NBCO rule would
necessarily result in benefits to
localism. The Commission seeks
comment on whether a continued
restriction, with the modifications
described below, would minimize any
potential effects on localism while
preserving and promoting viewpoint
diversity.
(iii) Competition
94. Traditionally, the Commission
does not evaluate the NBCO rule in
terms of its competition goal because it
has found that newspapers and
broadcast stations do not compete in the
same product market. However, some
commenters in the 2010 Quadrennial
Review proceeding expressed concerns
about the impact of the NBCO rule on
competition more generally. Other
commenters disputed these concerns.
95. Although the Commission shares
the concerns of many Americans about
the future of the newspaper industry,
the Commission agrees with certain
commenters that it would be
inappropriate to relax the NBCO rule on
the ground that newspapers are
struggling to reinvent a successful
business model. The Commission
maintains that the pertinent issue for
this part of its analysis is whether the
NBCO rule is necessary to promote
competition between newspapers and
broadcast stations. The Commission
already has determined that it is not.
The Commission does not believe it
could justify jeopardizing viewpoint
diversity in local markets based on
assertions that the rule limits
opportunities for traditional media
owners to increase revenue.
Nonetheless, given that the revisions to
the NBCO rule considered below would
narrow its application, the Commission
seeks comment on the extent to which
such revisions would mitigate any
unintended harms.
96. Despite the bleak outlook for
newspapers’ print revenues, there have
been some encouraging signs that
traditional media are finding new ways
to monetize their content. The
Commission recognizes that the
adjustments needed to survive this
transition period may pose
insurmountable challenges for some
owners. Accordingly, as discussed
below, the Commission proposes to
include an exception to the crossownership restriction when either the
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newspaper or the television station
involved in a proposed merger is failed
or failing. The Commission believes the
risk that a common owner will
influence the viewpoint of a newly
acquired outlet is preferable to the
greater diversity harm of losing the
outlet altogether.
97. The Commission seeks comment,
for purposes of the 2014 Quadrennial
Review proceeding, on its tentative
view, as described above and consistent
with Commission precedent, that the
NBCO rule is not necessary to promote
localism and competition goals but that
some form of cross-ownership
restriction remains necessary to
preserve and promote viewpoint
diversity in local markets.
(ii) Newspaper/Radio Cross-Ownership
98. Background. In the NPRM, the
Commission sought comment on
whether it should eliminate the part of
the NBCO rule that applies to
newspaper/radio combinations. The
Commission tentatively concluded that
radio stations are not the primary
outlets that contribute to viewpoint
diversity in local markets and that a
substantial amount of news and talk
show programming on radio stations is
nationally syndicated, rather than
locally produced. The Commission’s
preliminary view was that radio stations
are not a primary source that consumers
turn to for local news and information
and that, rather, consumers in markets
of all sizes rely most heavily on other
types of news outlets for local news and
information. The Commission asked
whether newspaper/radio crossownership would promote localism and
provide financially struggling
newspapers and radio stations the
opportunity to become vital participants
in the news and information
marketplace. In addition, the
Commission asked whether it should
substitute Arbitron market definitions
for radio contours to determine when
the NBCO rule is triggered for
newspaper/radio combinations and
whether existing combinations
implicated by a rule change should be
grandfathered. The Commission invites
further comment also on these issues.
99. Discussion. The Commission seeks
further comment on whether the
restriction on newspaper/radio crossownership should be eliminated from
the NBCO rule. The Commission seeks
comment on the Commission’s tentative
conclusions that radio stations are not
the primary outlets that contribute to
viewpoint diversity in local markets and
that consumers rely predominantly on
other outlets for local news and
information. Several commenters in the
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2010 Quadrennial Review proceeding
referenced the fact that promoting
viewpoint diversity has been the
Commission’s lone justification for
retaining the restriction. As discussed
above, the Commission has found
repeatedly that the restriction does not
promote its localism or competition
goals, and the Commission tentatively
reaffirms those findings. Therefore, the
Commission tentatively agrees with
several commenters that if the rule were
no longer necessary to support the
Commission’s viewpoint diversity
policy, then the newspaper/radio crossownership restriction would be left
without a public interest rationale.
Under Section 202(h) of the 1996 Act,
the Commission must repeal or modify
any media ownership regulations that
no longer serve the public interest.
Accordingly, it seeks comment on
whether the newspaper/radio crossownership restriction advances its
interest in promoting viewpoint
diversity or whether the Commission
should eliminate the restriction and
permit common ownership of
newspapers and radio stations in all
markets, within the prescribed limits of
the local radio ownership rule.
100. Evidence from the Information
Needs of Communities Report shows
that consumers’ reliance on radio news
has declined steadily over the past two
decades. From 1991 to 2010, the number
of people reporting that they listened to
some news on the radio dropped from
54 percent to 34 percent. Of the
approximately 11,000 commercial radio
stations in the country, only 30 are allnews radio stations, a reduction from
the mid-1980s when there were 50 such
stations. Although a small number of
commercial all-news radio stations in
the nation’s largest markets are very
successful, radio stations in most cities
do not provide much local journalism.
One finding showed that in 2007 more
than 40 percent of radio stations carried
news programming produced remotely
by a commonly owned station outside
the local market. Typically, only one
employee is involved in news output at
a median-sized radio station. Although
the news-talk radio format has exploded
in popularity, it has done little for
traditional local radio news. Eighty-six
percent of programming on news-talk
stations is nationally syndicated, rather
than locally produced. The Commission
invites commenters to provide any new
data on these subjects that would be
useful for the 2014 Quadrennial Review.
101. In seeking comment on the
elimination of the newspaper/radio
cross-ownership restriction, the
Commission notes that it has recognized
since at least 1970 that radio does not
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play a dominant role in promoting
viewpoint diversity. That year, while
seeking comment on proposals that led
to the adoption of the NBCO rule, the
Commission identified as its foremost
concern the common control of
television stations and newspapers and
noted the significant decline in the
number of people relying primarily on
radio for local news. Even as it adopted
the NBCO rule in 1975, the Commission
recognized that ‘‘a radio station cannot
be considered the equal of either the
paper or the television station in any
sense, least of all in terms of being a
source for news or for being the medium
turned to for discussion of matters of
local concern.’’ The Commission,
nevertheless, included newspaper/radio
combinations within the NBCO
prohibition ‘‘to encourage still greater
diversity’’ because ‘‘even a smaller gain
is worth pursuing.’’ Since 1975, the
Commission repeatedly has
acknowledged radio’s lesser
contributions to viewpoint diversity.
For example, the Commission stated in
its 2002 media ownership review that
‘‘broadcast radio generally has less of an
impact on local diversity than broadcast
television.’’ In its 2006 review, it
observed that ‘‘radio is a significantly
less important source of news and
information than newspapers or
television.’’ The Commission seeks
comment on whether in today’s
marketplace the link between the
newspaper/radio cross-ownership
restriction and the Commission’s goal of
promoting viewpoint diversity has
become too tenuous to support the rule
under Section 202(h).
102. The Commission invites
commenters to augment the record with
any information or evidence regarding
any impact on diversity in the local
radio markets. The Commission notes
that Media Ownership Study 5 suggests
that eliminating the restriction would be
unlikely to affect either radio news
variety or listening, given its finding
that newspaper/radio cross-ownership
is not correlated with either of those
metrics. The Commission seeks
comment on this finding. Moreover,
several commenters claimed that lifting
the newspaper/radio cross-ownership
restriction would revitalize local news
on radio stations and would provide
struggling newspapers with a broader
base of financial support and an
increased ability to reach audiences.
Although the Commission would not
decide to eliminate the restriction based
on those projected outcomes, it would
welcome the accrual of any such
incidental benefits and it seeks
comment on such commenters’
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assertions. Further, the Commission
seeks comment on to what extent, if
any, its decisions regarding the
newspaper/radio cross-ownership rule
and radio/television cross-ownership
rule, discussed below, should align
given that the basis of its analysis for
both rules may rest primarily on the
contributions of radio to viewpoint
diversity.
103. Finally, the Commission notes
that earlier this year MMTC submitted
a study examining the issue of crossowned media properties in a market.
According to MMTC, the study
indicated that cross-ownership does not
have a disparate impact on minority and
female broadcast owners. As discussed
further below, the Commission asks
commenters to provide any
demonstrable evidence of such a link
that may have become available since
the MMTC Cross-Ownership Study.
(iii) Newspaper/Television CrossOwnership Rule
(i) Case-by-Case Waiver Approach
104. Background. In the NPRM, the
Commission tentatively concluded that
it should reinstate a simplified version
of the 2006 rule’s framework generally
prohibiting newspaper/broadcast crossownership but granting waiver requests
on a case-by-case basis, using
presumptive guidelines, when the
proposed merger would not unduly
harm viewpoint diversity in the local
market. The Commission sought
comment on whether, alternatively, it
should adopt a bright-line rule allowing
mergers for newspaper/broadcast
combinations in the top 20 DMAs in
those situations where a waiver request
would have been given a favorable
presumption under a case-by-case
approach. The Commission noted that a
bright-line rule for such newspaper/
broadcast combinations would conserve
resources and promote certainty but that
a case-by-case approach would afford
greater flexibility to account for the
specific circumstances of a proposed
merger.
105. Discussion. Although further
comment on the issue is welcome, the
Commission does not propose to adopt
a bright-line rule allowing newspaper/
television combinations, even under
narrowly prescribed circumstances. The
Commission noted in the NPRM that a
bright-line rule permitting certain
newspaper/broadcast combinations in
the top 20 DMAs might promote
consistency and certainty in the
marketplace and reduce the need for a
potentially costly waiver process. The
Commission recognizes that, under
certain conditions, the largest markets
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may be able to accommodate a limited
amount of consolidation without
impairing viewpoint diversity. The
Commission also is aware that brightline rules are more likely to produce
predictable and consistent outcomes in
an expeditious and less costly manner
than rules that incorporate a waiver
process, which is inherently more
uncertain. The Commission is
concerned, however, that a bright-line
rule is too blunt an instrument to be
used for allowing newspaper/television
cross-ownership, no matter how limited.
For example, allowing certain
combinations only in the top-20 DMAs
could foreclose merger opportunities in
smaller markets where viewpoint
diversity is sufficiently robust.
Conversely, such a bright-line rule
might permit a combination in a top-20
DMA that would harm the public
interest.
106. The Commission tentatively
concludes, therefore, that a general
prohibition on newspaper/television
combinations in all markets is the
appropriate starting point when
considering the impact of newspaper/
television cross-ownership on
viewpoint diversity. It believes the 2010
Quadrennial Review record supports
this view. The Commission recognizes,
however, that particular combinations
might be shown to be consistent with its
diversity goal, and so it proposes to
entertain waiver requests. A waiver
process would enable the Commission
to examine proposed mergers on a caseby-case basis to determine the likely
effects on the affected market. Because
the Commission would have the
flexibility to evaluate the particular
circumstances of a newspaper/television
combination, it could tailor its decision
accordingly.
107. The Commission believes that a
case-by-case waiver approach would
produce sensible outcomes and also
improve transparency and public
participation in the process. Such an
approach would afford interested
parties the opportunity to comment on
a proposed newspaper/television
combination because the parties to the
transaction would be required to seek a
waiver of the Commission’s rules
regardless of whether the transaction
involved the transfer of a broadcast
license. A newspaper owner seeking to
obtain a television station license would
need to seek a waiver of a newspaper/
television cross-ownership rule as part
of its application for assignment of
license or transfer of control. In
considering a bright-line rule approach,
the NPRM indicated that an opponent of
a transaction permitted under a brightline rule would continue to have the
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option to file a petition to deny a
broadcast license transfer and
assignment application involving an
NBCO combination. However, with
respect to any newspaper purchases by
broadcast owners that would be
permitted under a bright-line rule,
would-be petitioners would not have an
opportunity to oppose the newspaper
purchase because there would be no
transfer application involved. A case-bycase waiver approach would resolve
that issue as every proposed newspaper/
television combination would require
Commission approval. To that end, the
Commission seeks comment on
whether, to enable a timely public
response to a merger involving a
newspaper purchase by a television
licensee, it should require the station to
file its waiver request prior to a
newspaper acquisition, rather than at
the time of the station’s license renewal,
and should require Commission staff to
place such waiver requests on public
notice. Under the Commission’s current
practice, if a television licensee
purchases a newspaper that triggers the
NBCO rule, then, absent a waiver, it
must dispose of its station within one
year or by the time of its next renewal
date, whichever is longer. Alternatively,
it can seek a waiver of the rule in
conjunction with its license renewal, at
which point interested parties are free to
comment on the waiver request. As a
result, the opportunity to comment on a
television station’s acquisition of a
newspaper may not occur until many
years after consummation of the
purchase. The Commission therefore
seeks comment on requiring television
licensees to file waiver requests prior to
a newspaper acquisition in order to
facilitate the public’s timely
participation. What are the benefits of
this approach and what burdens, if any,
would it impose on the applicants?
Would the potential benefits outweigh
any burdens?
108. Pure Case-by-Case Approach.
The Commission also request comment
on what type of waiver process would
enable it to identify any acceptable
newspaper/television combinations
most accurately and effectively. The
Commission could implement a pure
case-by-case approach that evaluates the
totality of the circumstances for each
individual transaction, considering each
waiver request anew without measuring
it against a set of defined criteria or
awarding the applicant an automatic
presumption based on a prima facie
showing of particular elements. The
Commission would not require any
particular type of evidence to support a
waiver applicant’s showing that the
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proposed merger would not diminish
viewpoint diversity, and thus would be
in the public interest. Similarly,
opponents of a transaction could offer a
range of arguments and evidence
concerning the unique characteristics of
a transaction that weigh against the
grant of that particular application. This
approach could offer the Commission
maximum flexibility and discretion in
each case to decide whether a waiver
would serve the public interest. Such a
potentially broad inquiry would avoid a
formulaic approach, which may not
always adequately measure an
imprecise quality like viewpoint
diversity. On the other hand, a pure
case-by-case approach might not
promote consistency and certainty in
the marketplace and could impose
additional burdens or costs on the
applicants, petitioners, or Commission.
The Commission seeks comment on the
pros and cons, costs and benefits of
evaluating waiver requests on the
individualized merits of each particular
case without relying on presumptive
guidelines or established criteria.
109. If the Commission were to adopt
a case-by-case approach to waiver
applications, it seeks comment on
whether, and if so how, the approach
should differ from the Commission’s
traditional waiver standard under
Commission rules. Further, it seeks
comment on whether a case-by-case
approach should incorporate, or
disavow, the criteria for waiver set forth
when the NBCO rule was adopted in
1975, and which are currently in effect.
At the time of adoption, the
Commission ‘‘contemplated waivers in
four situations: (1) Where there is an
inability to dispose of an interest to
conform to the rules; (2) where the only
possible sale is at an artificially
depressed price; (3) where separate
ownership of the newspaper and station
cannot be supported in the locality; and
(4) where the purposes of the rule
would not be served by divestiture.’’
Has the application of these criteria
historically been useful to the industry,
the public, or the Commission in
evaluating transactions? Have they
tended to create an insurmountable bar
to the grant of applications or inhibited
industry participants from considering
transactions? Or do the conditions
provide a loophole to the existing ban?
Do the specific criteria add value to the
standard included in the Commission’s
rules? Should different criteria be
enunciated, for instance including any
or all of the elements that are described
as possible presumptions as described
below? The Commission seeks comment
on these issues.
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110. Case-by-Case Approach with
Presumptions. In addition, the
Commission seeks comment on an
approach whereby the Commission
would ascribe a favorable presumption
to certain waiver applicants in the top20 DMAs and a negative presumption to
all other waiver applicants. As
described below, the Commission seeks
comment on requiring as conditions for
a favorable presumption that: (1) The
proposed merger does not involve a
television station ranked among the topfour television stations in the DMA and
(2) at least eight major media voices
remain in the DMA following the
transaction. In the 2010 Quadrennial
Review proceeding, NAA warned that
opportunities for acquisition and
investment are stifled by the regulatory
uncertainty and delay associated with
even a straightforward waiver request
entitled to a favorable presumption.
CRT called the NBCO waiver provision
‘‘convoluted,’’ and Tribune claimed that
the use of presumptions creates
‘‘uncertainty, additional cost and
prejudice.’’ Nevertheless, presumptive
guidelines would provide waiver
applicants a greater degree of
predictability than under a pure caseby-case approach while still affording
the Commission some flexibility to take
into account the particular
circumstances of a proposed merger.
Newspaper and television station
owners could make more informed
decisions about whether to expend the
time and resources to pursue a merger.
Presumptive guidelines would not
prevent a waiver applicant from
submitting whatever evidence it deemed
useful and would not constrain the
Commission’s decision-making
discretion. However, by providing
direction regarding what showings to
make, presumptive guidelines could
save a waiver applicant time and money
and improve its chances for a successful
outcome in warranted circumstances.
On the other hand, the presumptions
could lead to unintended consequences
in specific situations, such as
recommending denial of an application
that could benefit the public interest as
a result of the specific characteristics of
the transaction and local market or the
grant of an application that would not.
The Commission seeks comment on the
pros and cons, costs and benefits of
adopting a case-by-case approach that
includes presumptions and the tradeoffs involved as compared to the pure
case-by-case approach.
(ii) The Scope of the Rule
111. Background. The current rule
prohibits common ownership of a daily
newspaper and a television station
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when the Grade A contour of the station
encompasses the entire community in
which the newspaper is published. The
Commission tentatively concludes that
the rule should be updated to reflect the
fact that, since the transition to digital
television service, full-power television
stations no longer have analog Grade A
contours. In the NPRM, the Commission
sought comment on whether it should
modify the rule so that the crossownership prohibition is triggered when
a daily newspaper and a television
station are located in the same Nielsen
DMA. It asked what the impact of the
change would be, and in particular
whether many more newspaper/
television combinations would be
implicated under a DMA-based
approach than under a contour-based
approach. The Commission’s
preliminary view was that DMA market
definitions would reflect newspaper
circulation and television viewing areas
more accurately than the current
approach.
112. The Commission proposed to
grandfather ownership of existing
newspaper/television combinations that
would be in violation of the NBCO rule
as a result of shifting to a DMA-based
approach. It tentatively concluded that
requiring divestiture would be
disruptive to the industry and a
hardship for the individual owners. In
addition, it sought comment on whether
grandfathered combinations should be
freely transferable in perpetuity.
113. Discussion. Based on the 2010
Quadrennial Review record, including
the responses of many newspaper and
broadcast owners, the Commission
proposes to adopt an approach that uses
both DMAs and contours. Newspaper
and broadcast owners argued that,
because DMAs can be much larger in
size than the former Grade A contour
areas, the NPRM’s proposed DMA-based
approach would expand the reach of the
rule too broadly. Several commenters
asserted that the approach proposed in
the NPRM could prohibit crossownership when there is no overlap
between the community in which a
newspaper is published and the primary
service area of a broadcast station. To
avoid that possibility, the Commission
proposes to prohibit cross-ownership of
a full-power television station and a
daily newspaper when: (1) The
community of license of the television
station and the community of
publication of the newspaper are in the
same Nielsen DMA, and (2) the PCC of
the television station, as defined in
Section 73.625 of the Commission’s
rules, encompasses the entire
community in which the newspaper is
published. Both conditions would need
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to be met in order for the crossownership prohibition to be triggered.
The DMA requirement would ensure
that the newspaper and television
station both serve the same economic
market, while the contour requirement
would ensure that they actually reach
the same communities and consumers
within that larger geographic market.
Further, if a newspaper’s community of
publication is located in a different
DMA than the television station, then
the station likely does not primarily
serve the community of publication,
despite the fact that the over-the-air
signal reaches that community. The
Commission notes further, that a
television station is not entitled to
carriage on cable or satellite television
systems outside its DMA, and thus
would not be entitled to carriage in the
newspaper’s out-of-market community
of publication. The Commission
acknowledges that such an approach
could permit combinations that would
be prohibited under a contour-only
approach; however, it believes that the
number of instances where a station’s
PCC encompasses a newspaper’s
community of publication not located in
the same DMA would be limited. The
Commission seeks comment on this
approach and notes that, if adopted, it
would apply irrespective of how the
Commission decides to evaluate
requests for waiver of the prohibition.
114. The PCC is a digital contour that
ensures reliable service for the
community of license. Commission
rules already define the PCC, and it can
be verified in a straightforward manner
if a dispute arose concerning the reach
of the NBCO rule.
115. In the Notice of Inquiry (75 FR
33227, June 11, 2010, FCC 10–92, rel.
May 25, 2010) (NOI), the Commission
explained that it has defined one other
digital television service contour, the
digital NLSC. However, the NLSC is
roughly equivalent to the former analog
Grade B service contour and
approximates the same probability of
service as that contour, which reaches a
broader geographic area than the Grade
A service contour. For that reason, the
Commission does not believe the NLSC
would be an appropriate contour to use
in conjunction with the NBCO rule.
When the Commission initially adopted
the NBCO rule, it deliberately chose the
smaller Grade A contour to define the
rule’s boundaries. The Commission
seeks comment on its preference not to
adopt the NLSC.
116. The Commission recognized in
the NOI that because the PCC is larger
than the Grade A contour, its use could
result in a more restrictive NBCO rule.
The Commission’s proposed approach,
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however, would be less restrictive than
its initial proposal to rely solely on the
DMA market definition to trigger the
cross-ownership prohibition. In
addition, the Commission has examined
size differentials between the PCC and
the former Grade A contour for various
categories of television stations,
specifically, high-VHF, low-VHF, and
UHF stations. While the PCC is slightly
larger than the Grade A contour, the
Commission seeks comment on its belief
that the size differentials are not so great
as to have a meaningful impact in terms
of the proposed rule’s applicability.
117. Furthermore, the Commission
believes the PCC would be preferable to
the other suggestions commenters
offered. NAA proposed that the
Commission simulate a digital Grade A
contour by applying to a station’s NLSC
the propagation and implementation
margin factor it established for cable
carriage of digital broadcast stations
(i.e., 20dB). NAA asserted that the
resulting simulated contour would be
appropriate because the Commission
developed the 20dB measurement using
‘‘Grade A-type signal quality factors.’’
The Commission believes that using a
measurement based on the signal
quality required for cable carriage
would impose too strict a standard for
purposes of the NBCO rule because it
would exclude parts of the coverage
area that reliably receive the television
signal. A.H. Belo and CRT suggested
that the Commission add a mileage
qualifier to the DMA measurement.
A.H. Belo and CRT, however, did not
specify what mileage the qualifier
should be or explain how the
Commission could develop a mileage
qualifier that would be meaningful. The
Commission seeks comment on its view
that using the PCC would be the
superior approach.
118. The Commission is not inclined
to adopt the suggestion of A.H. Belo and
CRT to limit the application of the
NBCO rule to ‘‘major’’ daily newspapers
having a circulation exceeding 5 percent
of the DMA’s households. Cox similarly
argued that the NBCO rule should not
be triggered unless the newspaper’s
circulation exceeds 5 percent of the
households in the television station’s
community of license. The Commission
seeks comment on whether there are
any reasons to change the current
definition, which states that ‘‘a daily
newspaper is one which is published
four or more days per week, which is in
the dominant language in the market,
and which is circulated generally in the
community of publication.’’ The
Commission notes that the newspaper
definition suggested by A.H. Belo and
CRT could fail to trigger the rule when
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a newspaper is not widely circulated in
the larger DMA despite its influence in
its own community of publication. In
addition, the Commission is not
inclined to adopt Cox’s suggestion to
impose a minimum circulation
requirement within the television
station’s community of license. Under
the vacated 2006 rule, a newspaper was
not deemed a ‘‘major media voice’’ for
purposes of the rule’s eight voices test
unless it had a circulation exceeding
five percent of the households within
the DMA. Different definitions may
serve different purposes, however, and
the Commission seeks comment on
whether the current requirement that a
daily newspaper be published at least
four days a week, in the dominant
language in the market, and circulated
generally in its community of
publication is sufficient to ensure the
significance of the newspaper for
purposes of triggering the rule, thereby
obviating specification of a minimum
circulation amount or modification of
the area of consideration. The
Commission previously has determined
that newspapers with these
characteristics are significant enough to
come within the scope of the NBCO
rule, and commenters in the 2010
Quadrennial Review record proceeding
have not provided evidence that a less
restrictive definition would be sufficient
to protect viewpoint diversity.
119. The Commission seeks comment
on the tentative conclusion that, to the
extent that an existing newspaper/
television combination would become
newly non-compliant as a result of its
proposed modification of the NBCO
rule, the Commission should
grandfather such combinations in order
to avoid market disruption and to avoid
penalizing licensees for the switch from
an analog contour to a digital contour.
The Commission believes that
incorporating the PCC into the rule
would limit the number of existing
newspaper/television combinations that
would fall in this category. Consistent
with existing precedent, the
Commission does not believe
grandfathered combinations should be
transferrable. The Commission seeks
comment on its view that any future
transfer of a grandfathered combination
should comply with the applicable
ownership rules, including the NBCO
rule, in place at the time the transfer of
control or assignment application is
filed. The Commission does not intend
to upset any filing deadlines it has
previously imposed on specific parties
related to cross-ownership proceedings.
In addition, consistent with the
Commission’s decision in the 2006
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Quadrennial Review Order, the
Commission would allow all
grandfathered combinations or
permanent waivers from the prior rule
that previously have been granted to
continue in effect under the rule
ultimately adopted, to the extent that
such grandfathering/permanent waivers
would still be necessary to permit
common ownership.
(iii) Market Tiers
120. Background. In the NPRM, the
Commission proposed to differentiate
between markets ranked among the top
20 DMAs and markets below the top 20
DMAs for purposes of determining
whether a waiver request is entitled to
a favorable presumption under the
approach discussed in the NPRM. The
Commission proposed a top-20
demarcation point for newspaper
combinations involving either television
or radio stations. The Commission’s
proposal to lift the restriction on
newspaper/radio cross-ownership
would render moot the delineation of
market tiers for such combinations. The
Commission seeks comment, however,
on whether a top-20 demarcation point
should apply to newspaper/radio
combinations in the event it retains a
restriction on such combinations.
Consistent with its findings in the 2006
Quadrennial Review Order, the
Commission’s preliminary view was
that the top 20 DMAs are notably
different from other markets, both in
terms of voices and in terms of
television and radio households. The
Commission tentatively concluded that,
based on the range of media outlets
available in the top 20 DMAs, viewpoint
diversity in those largest markets is
healthy and vibrant in comparison to
other DMAs. It sought comment on its
tentative conclusion that the viewpoint
diversity level in the 20 largest DMAs is
sufficient to consider adopting a
regulatory framework that would
accommodate a limited amount of
newspaper/broadcast cross-ownership
in those markets. It also sought
comment on its continued belief that
markets below the top 20 DMAs
generally cannot accommodate such
cross-ownership absent particular
circumstances warranting a waiver. In
addition, it asked whether a different
demarcation point would more
effectively protect and promote its goals.
121. Discussion. In the event it were
to adopt a waiver standard with
presumptive guidelines, the
Commission seeks further comment on
whether to grant a favorable
presumption to waiver requests seeking
approval for a merger in a top-20 DMA
where certain conditions are met and to
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ascribe a negative presumption to
waiver requests involving mergers in the
remaining DMAs. As described below,
the Commission also seeks comment on
whether waiver requests for proposed
newspaper/television combinations
within the top-20 DMAs should be
entitled to a favorable presumption only
if the television station were not ranked
among the top-four television stations
within the DMA and there would be at
least eight independently owned and
operated major media voices remaining
in the DMA post-transaction. It seeks
comment on the impact of such an
approach on viewpoint diversity,
particularly in the 20 largest DMAs, and
on how any such presumptive waiver
standard would work. The Commission
tentatively concludes that any such rule
should create a favorable presumption
for waiver requests only in cases where
the proposed combination consists of a
single television station and single daily
newspaper, as described above, and not
in cases where the common ownership
is proposed to include a television
duopoly, regardless of whether a
duopoly is permitted under the local
television ownership rule. The
Commission seeks comment on this
tentative conclusion. For each element
it proposes to include in a presumptive
waiver standard, it seeks comment on
its usefulness and the costs and benefits
of its inclusion.
122. Some commenters in the 2010
Quadrennial Review proceeding
asserted that differentiating the 20
largest DMAs from smaller markets
would be arbitrary and capricious. On
the other hand, there is evidence
supporting such a distinction. The
greater demographic diversity found
more frequently within larger
populations is more likely to generate
demand for a wider range of viewpoints.
The larger populations of the top-20
DMAs may also be better able to provide
the economic base to support a greater
number of media outlets. Indeed,
evidence demonstrates a greater level of
media diversity in the 20 largest DMAs
that distinguishes those markets from
the remaining DMAs. Data show that,
while there are at least 10
independently owned, commercial
television stations in 14 of the top 20
DMAs, none of the DMAs ranked 21
through 25 has more than seven
independently owned, commercial
television stations. Additionally, while
10 of the top 20 DMAs have at least two
newspapers with a circulation of at least
5 percent of the households in that
DMA, four of the five DMAs ranked 21
through 25 have only one such
newspaper. Moreover, the top 20
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markets, on average, have 15
independently owned television
stations and major newspapers and
approximately 2.6 million television
households. By comparison, DMAs 21
through 30 have on average nine major
media voices and fewer than 1.2 million
television households, representing
drops of 37 percent and 56 percent from
the top 20 markets, respectively. DMAs
31 through 50 have average numbers of
voices for each category similar to
markets 21 through 30, but a lower
number of television households
averaging 795,000. DMAs 51 through
210 show even more dramatic drops,
with, on average, fewer than seven
major media voices and approximately
240,000 television households,
representing drops of 54 percent and 91
percent from the top 20 DMAs,
respectively.
123. Several commenters in the 2010
Quadrennial Review proceeding
contended that many lower-ranked
DMAs are abundantly diverse. The
Commission emphasizes that any
presumptions would provide merely a
starting point for the analysis of the
likely impact of a proposed merger on
a particular market. A presumption
could be overcome if the weight of the
evidence favors the party with the
burden of proof. Waiver applicants in
smaller markets would not be precluded
from demonstrating that a proposed
merger would create efficiencies that
would serve the public interest without
harming viewpoint diversity in the local
market.
124. None of the commenters
specified an alternative demarcation
point, but a few commenters argued that
the same standard should apply to all,
or the majority of, markets. For example,
Cox proposed a two-part test that it
argued should apply to NBCO waiver
requests in all markets. The first part of
the test, Cox claimed, would protect
viewpoint diversity by requiring that 20
independent media voices remain in the
market following a proposed
combination, which could include a
newspaper and any broadcast properties
that would be permitted under the local
ownership rules. Cox proposed that
independent media voices include
independently owned daily
newspapers, full-power television
stations, full-power radio stations, cable
and satellite television services (counted
as one voice), and the Internet (counted
as one voice). As Cox stated, the
diversity prong of its proposed test was
patterned in part after the radio/
television cross-ownership rule. The
second part of Cox’s test, intended to
preserve localism, would require that at
least three independent media voices
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that produce and distribute local news
and information programming, other
than the combining properties, remain
in the market post-transaction. The
Commission seeks comment on Cox’s
suggestion. For the reasons explained
below in connection with the eightvoices restriction, the Commission
believes that the first part of Cox’s
proposed test would define independent
media voices too broadly. As to the
second part of Cox’s proposed test, the
Commission believes it would be
difficult to apply and enforce an
objective, content-neutral standard of
what constitutes an independent media
voice that produces and distributes local
news and information programming.
Moreover, nothing in the Cox proposal
provided specific evidentiary support
that relates the standard specifically to
newspaper/television combinations.
(iv) Top-Four Restriction
125. Background. Consistent with the
2006 NBCO rule, the Commission
proposed in the NPRM that newspaper/
television combinations involving a
television station ranked among the topfour television stations in the DMA
would not be entitled to a favorable
presumption. The Commission
proposed that television rankings be
based on the most recent all-day (i.e.,
9:00 a.m. to midnight) audience share,
as measured by Nielsen or another
comparable professional, accepted
audience ratings service.
126. The Commission’s preliminary
view was that ‘‘allowing a top-four
station to merge with a daily newspaper
would create the greatest risk of losing
an independent voice in that market.’’
Based on the Commission’s data
analysis, the amount of local news
drops significantly between the fourthand fifth-ranked stations. The most
dramatic difference occurs in larger
markets, where the fifth-ranked station
generally provides no more than half the
amount of local news aired on the
fourth-ranked station. The Commission
sought comment on whether a different
limit would be more appropriate, such
as a top-five or top-six restriction. It also
asked if the restriction should depend
on whether the station is affiliated with
one of the four major broadcast
networks, given evidence that such
stations tend to air more local news.
127. Discussion. If the Commission
were to adopt a waiver standard with
presumptive guidelines, it would not
provide a favorable presumption for
newspaper/television combinations
involving a television station ranked
among the top-four television stations in
the DMA. The Commission would
continue to determine a television
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station’s ranking in accordance with
Section 73.3555(d)(3)(i) of the
Commission’s rules. As stated in the
NPRM, evidence shows that the top-four
television stations in a DMA generally
air more local news and information
than the other television stations in the
market, particularly in the larger DMAs.
The Commission seeks comment on its
tentative conclusion that viewpoint
diversity in even the largest markets
could be harmed if a top-ranked
television station merged with a daily
newspaper within the same DMA.
Therefore, regardless of the DMA’s size,
the Commission believes that a
proposed combination involving a topfour television station would be
inconsistent with the public interest.
The Commission invites commenters to
provide any new information or
evidence that the Commission should
take into consideration regarding this
issue.
128. The Commission disagrees with
those commenters who contend that the
rationale for allowing cross-ownership
in the top 20 markets would also
support not having a top-four
restriction. The Commission’s analysis
of this rule hinges not on whether it
should be relaxed to enhance
efficiencies that could promote
localism, but on whether some form of
the rule remains necessary to promote
viewpoint diversity. Although the
Commission would hope that any
permitted combinations under a revised
rule would generate localism benefits,
the NBCO rule is designed to protect
viewpoint diversity. Under the
presumptive waiver standard the
Commission seeks comment on today,
waiver applicants in the top-20 DMAs
would be entitled to a favorable
presumption on the theory that
permitting certain newspaper/television
combinations in those markets would
not likely harm viewpoint diversity.
Allowing the combination of a
newspaper and a top-four station,
however, could potentially harm
viewpoint diversity precisely because
the top-four television stations typically
provide the most local news among
television stations. A combination with
one of those stations thus could result
in a diminution of viewpoint diversity,
and therefore the Commission believes
that a waiver request involving such a
station should not be entitled to a
favorable presumption. The
Commission seeks comment on this
proposition.
129. Other arguments also sidestep
the diversity rationale. Tribune
contended that combining with one of
the market’s weaker television stations
may not provide the lifeline that many
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struggling newspapers need. It further
asserted that the rationale for the topfour restriction within the context of the
local television rule—to preserve
competition among the strongest
television stations—is inapplicable to
the NBCO rule. The Commission’s
primary intent, however, in considering
whether to retain the top-four
component of the NBCO rule, if
amended, is to protect viewpoint
diversity, not to save struggling
newspapers or to promote competition.
The Commission seeks comment on its
position with respect to these assertions.
130. Finally, Fox claimed that a topfour restriction would violate the First
Amendment because it would preclude
a speaker from acquiring additional
outlets based on the popularity of the
speaker’s content. The Commission
disagrees. As the U.S. Supreme Court
stated, assuring ‘‘access to a multiplicity
of information sources . . . promotes
values central to the First Amendment.’’
The Commission also disagrees with
Fox’s assertion that such a restriction
would be content-based. Rather, the
Commission believes the top-four
restriction would operate on the
content-neutral basis of market ranking.
It notes that, within the context of the
local television rule, the Third Circuit
upheld the top-four restriction as a
reasonable limit on market power.
(v) Eight Major Media Voices Restriction
131. Background. The Commission
proposed that transactions that would
leave fewer than eight independently
owned and operating ‘‘major media
voices’’ in the DMA would not be
entitled to a favorable presumption
under a presumptive waiver standard.
Major media voices were defined in the
2006 Quadrennial Review Order as fullpower commercial and noncommercial
television stations and major
newspapers. The Commission sought
comment on the potential impact of
eliminating this voices test given its
analysis that eight major media voices
would remain in each of the top-20
DMAs even if all daily newspapers in
those markets combined with television
stations. The Commission also asked
whether requiring a different number of
voices would protect its diversity goal
more effectively.
132. Discussion. Were the
Commission to adopt the presumptive
waiver standard on which it seeks
comment, the Commission proposes to
ascribe a negative presumption to
waiver requests for newspaper/
television combinations in the top-20
DMAs if fewer than eight major media
voices would remain in the DMA
following the proposed merger. The
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Commission believes it should continue
to define major media voices as fullpower television broadcast stations and
newspapers that are published at least
four days a week within the DMA in the
dominant language of the market and
have a circulation exceeding 5 percent
of the households in the DMA. None of
the commenters in the 2010
Quadrennial Review proceeding
addressed the impact of removing the
eight-voices test from a presumptive
waiver standard or recommended an
alternative voices test for the top-20
DMAs. Notwithstanding the supposition
in the NPRM that the eight-voices test
may not have an impact in the top-20
DMAs currently, if the Commission
decides to adopt a presumptive waiver
standard, then it proposes to retain the
test as the more cautious approach and
to protect viewpoint diversity in the
event that media diversity in a top-20
DMA drops to the point where the test
would become a critical factor in
promoting that goal. The Commission
included the eight-voices test in the
2006 waiver standard to prevent ‘‘a
significant decrease in the number of
independently owned major media
voices’’ in the top-20 DMAs, and it
seeks comment on whether it should
incorporate the test for the same reason
if it adopts a presumptive waiver
standard.
133. Some commenters recommended
that the Commission expand the
definition of major media voices beyond
full-power commercial and
noncommercial television stations and
major newspapers. For example, Cox
urged the Commission to include in the
definition full-power radio stations,
cable and satellite television services
(counted as one voice), and the Internet
(counted as one voice). Cox argued that
its approach would resemble the
definition used for the radio/television
cross-ownership rule. Referencing the
local television rule, Tribune asserted
that a voices test should include radio
stations, cable and satellite news
channels, weekly newspapers, and
independent Web sites with news and
local information. The Commission’s
view is that neither of these
comparisons should persuade it to
expand its definition: This Further
Notice of Proposed Rulemaking seeks
comment on repealing the radio/
television cross-ownership rule, and
only television stations count toward
the minimum number of remaining
media outlets required under the local
television rule. In addition, the
Commission is disinclined to agree with
NAA that the definition should include
any media outlet that ‘‘contribute[s]
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meaningfully to local news diversity,’’
the determination of which would
depend on the type of media outlet
under consideration. For practical and
legal reasons, the Commission believes
it unwise to engage in the kind of
subjective, content-based assessment
that such a standard likely would entail.
The Commission seeks comment on
these views.
134. The Commission tentatively
concludes that, for purposes of any
newspaper/television cross-ownership
rule that the Commission may adopt,
full-power television stations and major
newspapers are the relevant voices that
should be included in the definition of
major media voices. As noted in the
2006 Quadrennial Review Order and
discussed above, television stations and
major newspapers are the predominant
sources consumers rely on for news and
information. In addition, evidence
demonstrates that radio stations and
independent Web sites generally do not
originate significant amounts of local
news. Evidence also suggests that
viewership of local broadcast television
news far outstrips that of cable news
programming. Therefore, the
Commission believes that counting the
full-power television stations and the
major newspapers within a local market
provides a reasonable proxy for the level
of viewpoint diversity that is
meaningful for purposes of its proposed
rule, and the Commission seeks
comment on this belief.
(vi) Four-Factor Test
135. Background. Under the NBCO
rule as revised in the 2006 Quadrennial
Review Order, the Commission
considered four factors in evaluating a
request for a rule waiver. All waiver
applicants, regardless of whether they
were entitled to a favorable
presumption, were required to show: (1)
That the combined entity would
significantly increase the amount of
local news in the market; (2) that the
newspaper and the broadcast outlets
each would continue to employ its own
staff and exercise its own independent
news judgment; (3) the level of
concentration in the Nielsen DMA; and
(4) the financial condition of the
newspaper or broadcast station, and if
the newspaper or broadcast station was
in financial distress, the proposed
owner’s commitment to invest
significantly in newsroom operations.
136. In the NPRM, the Commission
sought comment on whether to retain
these four factors. The Commission
asked if the factors benefitted the waiver
applicants or the Commission staff
responsible for reviewing waiver
requests. It sought comment on whether
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the factors were overly subjective or
likely to create unnecessary delay. The
Commission also asked whether, if the
four-factor test were excluded from the
rule, the presumptions in favor of or
against a transaction should create a
prima facie case, which would shift the
burden of proof to the party seeking to
overcome the presumption.
137. Discussion. The Commission
proposes not to include the four-factor
test in any newspaper/television crossownership rule that it ultimately may
adopt. None of the commenters in the
2010 Quadrennial Review proceeding
supported retaining the test. The
Commission tentatively concludes that
the factors are not well-suited as
standards required of every waiver
applicant because they are vague,
subjective, difficult to verify, and costly
to enforce. The Commission would not
discourage waiver applicants,
particularly those in smaller markets,
from attempting to strengthen their
requests by presenting evidence in
support of considerations like those
reflected in the four factors. Rather, the
ill-defined nature of these factors leads
the Commission to believe that they
should not be imposed automatically on
every waiver applicant. The
Commission seeks comment on this
approach.
138. In the event the Commission
adopts a presumptive waiver standard,
it seeks further comment on whether,
instead of a four-factor test, it should
treat a presumption either in favor of or
against a waiver request as establishing
a prima facie case. The party seeking to
overcome the presumption would have
the burden to show that the proposed
newspaper/television combination
would or would not unduly harm
viewpoint diversity within the DMA. To
meet this burden, parties could present
evidence, for instance, regarding the
quantity and strength of existing local
news providers within the DMA
including, for example, their
availability, accessibility, and focus on
local news and information; the level
and pervasiveness of their presence or
influence within the DMA, particularly
in those portions of the DMA that
potentially would be most affected by
the proposed merger; and the strength of
the applicant’s proposed local news and
other local program offerings. The
impact on viewpoint diversity in the
local market would be the focal point of
the Commission’s review. Evidence
related to other variables could shade
the Commission’s analysis but would
not be necessary or sufficient. The
Commission believes this type of
narrowed approach would be consistent
with its objective to rationalize the
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NBCO rule by linking its requirements
to its purpose.
(vii) Overcoming the Negative
Presumption
139. Background. In the NPRM, the
Commission sought comment on
whether to retain the criteria required
by the 2006 Quadrennial Review Order
to overcome a negative presumption.
Under the 2006 rule, a waiver applicant
could overcome a negative presumption
by demonstrating, with clear and
convincing evidence, that the merged
entity would increase the diversity of
independent news outlets and the level
of competition among independent
news sources in the relevant market.
The rule adopted in the 2006
Quadrennial Review Order further
stated that the Commission would
reverse a negative presumption in two
limited circumstances: (1) When the
proposed combination involved a
failed/failing station or newspaper, or
(2) when the proposed combination was
with a broadcast station that was not
offering local newscasts prior to the
combination, and the station would
initiate at least seven hours per week of
local news after the combination. The
NPRM asked whether these standards
were sufficiently objective and
quantifiable. It asked also whether
special consideration should be given to
a transaction involving a station or
newspaper that is failed or failing, and
if so, what type of showing should be
required. Finally, the NPRM sought
comment on whether the Commission
should adopt any other criteria,
particularly given that licensees could
seek waivers under Section 1.3 of the
Commission’s rules.
140. Discussion. The Commission
believes it should not adopt the criteria
required by the 2006 Quadrennial
Review Order to overcome a negative
presumption in any presumptive waiver
standard that the Commission may
adopt, other than the failed/failing
station or newspaper criterion. In the
preceding discussion of the four-factor
test, the Commission sought comment
on whether it should enable merger
applicants to overcome any negative
presumption by demonstrating that the
proposed transaction would not unduly
harm viewpoint diversity within the
DMA. The Commission seeks comment
on whether that standard also should
replace the 2006 criteria requiring clear
and convincing evidence that diversity
and competition would increase. The
Commission believes that the clear and
convincing measure imposed an overly
burdensome evidentiary standard,
unnecessarily included a competition
showing, and failed to identify relevant
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evidence that would support the
diversity showing. The Commission is
inclined to agree with Free Press that
the exception for waiver applicants that
commit to initiating weekly local news
programming on a television station that
has not been offering any local news
would be too difficult to enforce. Not
only does the Commission think it
would be impractical for the
Commission to monitor the station’s
subsequent local news output, but it
does not wish to engage in making
content-based judgments regarding what
constitutes local news. For this reason
and for the reasons stated above for
proposing to reject the four-factor test,
the Commission is not inclined to adopt
NAA’s recommendation that any NBCO
rule the Commission adopts include an
exception when: (1) The merger
applicants commit to retaining,
protecting, and exercising their
respective editorial independence or (2)
the merger applicants commit to adding
news or public affairs programming to a
broadcast station that previously had
not been airing news. The Commission
seeks comment on this approach.
141. The Commission proposes to
adopt a failed/failing entity exception,
which would allow merger applicants to
overcome a negative presumption under
a presumptive waiver standard when a
proposed combination involved a
failed/failing television station or
newspaper. In addition, it similarly
proposes to consider an exception for
failed/failing entities if it adopts a
waiver standard that does not include
presumptive guidelines. As explained
above in the discussion of its policy
goals, the Commission believes the
continued operation of a local news
outlet under common ownership would
cause less harm to viewpoint diversity
than would its complete disappearance
from the market. Noting that no
alternative definitions were suggested in
the 2010 Quadrennial Review
proceeding, the Commission seeks
comment on whether to incorporate the
criteria adopted in the 2006
Quadrennial Review Order to determine
if a television station or newspaper is
failed or failing. Specifically, in order to
qualify as failed, the newspaper or
television station would have to show
that it had stopped circulating or had
been dark due to financial distress for at
least four months immediately prior to
the filing of the assignment or transfer
of control application, or that it was
involved in court-supervised
involuntary bankruptcy or involuntary
insolvency proceedings. To qualify as
failing, the applicant would have to
show that: (1) If the television station
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was the failing entity, that it had a low
all-day audience share (i.e., 4 percent or
lower); (2) the financial condition of the
newspaper or television station was
poor (i.e., a negative cash flow for the
previous three years); and (3) the
combination would produce public
interest benefits. An applicant seeking a
waiver of a newspaper/television crossownership prohibition on the basis that
either the television station or the
newspaper was failed or failing would
be required to show that the tangible
and verifiable public interest benefits of
the combination outweighed any harms.
Further, as is already the case with
failed and failing station waivers of the
local television rule, in seeking
subsequent renewals of the television
station’s license, the owner of the
combined entities would be required to
certify to the Commission that the
public interest benefits of the
combination were being fulfilled,
including a specific, factual showing of
the program-related benefits that had
accrued to the public. Cost savings or
other efficiencies, standing alone, would
not constitute a sufficient showing. The
Commission seeks comment on the
implications of requiring such a
showing. In addition, the applicant
would have to show that the in-market
buyer was the only reasonably available
candidate willing and able to acquire
and operate the failed or failing
newspaper or station and that selling
the newspaper or station to any out-ofmarket buyer would result in an
artificially depressed price. One way to
satisfy this criterion would be to
provide an affidavit from an
independent broker affirming that active
and serious efforts had been made to
sell the newspaper or television station,
and that no reasonable offer from an
entity outside the market had been
received. The Commission seeks
comment on whether to adopt such a
criterion. It seeks comment on whether
to adopt such an exception for failed/
failing entities regardless of the waiver
standard it adopts.
(iv) Minority and Female Ownership
142. Background. The Commission
has provided several opportunities for
public input on issues pertaining to
minority and female ownership. It
sought comment in the NPRM on how
the proposed revisions to the NBCO rule
could affect minority and female
ownership opportunities. Further, it
asked how promotion of diverse
ownership promotes viewpoint
diversity. The Commission also sought
comment on the minority and female
ownership data contained in the 2012
323 Report. In addition, the Commission
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invited comment on the MMTC CrossOwnership Study which seeks to
examine ‘‘whether, and to what extent,
cross-ownership might have a material
adverse impact on minority and women
ownership.’’ To inform the 2014
Quadrennial Review, the Commission
seeks further comment below on the
relationship of the NBCO rule to
minority and female ownership.
143. Discussion. Some commenters
criticized the Commission for proposing
to relax the NBCO rule without first
determining that there would be no
negative impact on levels of minority
and female ownership. The Commission
recognizes that the Third Circuit
directed the Commission to address
certain portions of the Diversity Order in
the context of its quadrennial review.
The Commission has considered
carefully whether there is evidence in
the current record that modifications to
the NBCO rule, such as those the
Commission seeks comment on above,
would likely adversely affect minority
and female ownership, and it tentatively
concludes, as discussed below, that the
current record does not establish that
such harm is likely. The Commission
tentatively finds that the information in
the current record asserting a potential
impact would not change its underlying
analysis regarding the possible rule
modifications set forth above. Moreover,
the Commission rejects the argument
that the Prometheus II decision requires
the Commission to take no action unless
it can show definitively that a rule
change would have no negative impact
on minority ownership levels. In any
case, considering the low levels of
minority and female ownership
reflected in the 2012 323 Report, the
Commission does not believe the record
evidence shows that the crossownership ban has protected or
promoted minority or female ownership
of broadcast stations in the past 35
years, or that it could be expected to do
so in the future. The Commission seeks
comment on these views.
144. The Commission notes that
commenters in the 2010 Quadrennial
Review record did not focus on the
impact of newspaper/radio crossownership in particular. None of these
commenters seriously contended or
provided any data showing that
newspaper mergers with minority/
female-owned radio stations would
harm viewpoint diversity in local
markets. As discussed above, the
Commission does not believe that the
vast majority of radio stations contribute
significantly to viewpoint diversity.
Moreover, the Commission has no
evidence in the current record
suggesting that minority/female-owned
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radio stations contribute more
significantly to viewpoint diversity or
broadcast greater amounts of local news
on which consumers rely as a primary
source of information than other radio
stations. Even if they did, the
Commission could not conclude that it
would therefore be reasonable to
restrain the ability of owners of all
commercial radio stations to make
business decisions to exit the market or
to combine with a newspaper should
the record otherwise support allowing
such combinations. The Commission
invites commenters to provide any new
relevant information, data, or evidence
that should inform the 2014
Quadrennial Review.
145. With respect to newspaper/
television combinations, the current
record reflects varying opinions
concerning the impact of a rule
modification on minority and female
ownership. While the Commission
agrees with the commenters that current
levels of minority and female ownership
are discouragingly low, the Commission
is not persuaded by evidence in the
current record that the NBCO
modifications it seeks comment on
above would adversely affect minority
and female ownership levels. Even
assuming that some minority-owned
stations would become acquisition
targets if the rule were loosened, the
Commission does not believe that such
a possibility necessarily would preclude
rule modifications that are otherwise
consistent with its statutory mandate.
To the extent that governmental action
to boost ownership diversity is
appropriate and in accordance with the
law, the Commission does not believe
that any such action should be in the
form of indirect measures that have no
demonstrable effect on minority
ownership and yet constrain all
broadcast licensees. The Commission
seeks comment on this tentative
conclusion and its impact on any
decision to modify its cross-ownership
rules. Several commenters argued that
promoting access to capital would
advance minority ownership more
effectively than either limiting the
number of potential buyers for minority
broadcast owners interested in selling or
preventing minority broadcast owners
from experimenting with print
publication. The Commission addresses
related proposals below.
146. At this time, the Commission is
not convinced that a top-four restriction,
if adopted as part of a presumptive
waiver standard, would decrease
minority ownership. Commenters
predicted that minority-owned
television stations, the majority of
which are stand-alone stations
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unaffiliated with a network, would be
likely targets for acquisition if top-four
television stations were excluded from
cross-ownership. However, a newspaper
publisher that is foreclosed from buying
a top-ranked television station may not
necessarily seek to purchase a lowerranked station. In any event, station
owners would not be compelled to sell
their stations as a result of a
modification to the NBCO rule.
Moreover, a station owner that wishes to
exit the market is not prevented from
selling its station under the current
NBCO ban, which merely eliminates
newspaper owners as potential buyers.
The Commission notes that the
commenters’ concern is in tension with
the more frequent complaint that the
Commission has not been aggressive
enough in encouraging investment in
minority broadcasters. The changes the
Commission seeks comment on today
could permit stand-alone stations
without a network affiliation to compete
better in the market and to improve
their local news offerings by combining
resources with an in-market daily
newspaper, if they so desired and such
an opportunity were available. The
Commission seeks comment on the
likelihood of such an effect.
147. In addition, commenters arguing
that minority-owned broadcasters are
competitively disadvantaged in the
presence of large media conglomerates
pointed to alleged effects of multiple
station ownership, not cross-ownership
of newspapers and broadcast stations.
As the Commission has found,
newspapers and broadcast stations
generally do not compete in the same
product markets, and it does not believe
that an owner of a newspaper/television
combination would possess any greater
ability to impede local competition
among local television stations than the
well-capitalized owner of a single media
property. Free Press pointed to various
financial pressures that it claims have
forced a number of minority owners to
exit the market. To the extent that Free
Press alleged that these financial
difficulties stemmed from or were
exacerbated by media consolidation, the
consolidation to which Free Press refers
is not related to the NBCO rule. Given
that an NBCO restriction did not
prevent the minority owners Free Press
identified from leaving the market and
in light of the Commission’s finding that
newspapers and broadcast stations
generally do not compete in the same
product market, the Commission seeks
further comment specifically on the
relationship between the NBCO rule and
minority and female ownership.
148. The MMTC Cross-Ownership
Study stated that ‘‘the impact of cross-
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media ownership on minority and
women broadcast ownership is probably
negligible.’’ MMTC indicated that the
study surveyed both minority- and/or
female-owned broadcast stations in
markets with cross-owned media, along
with non-minority/non-female-owned
broadcast stations in the same markets,
to explore whether there was a
difference in the responses of the two
groups regarding the importance of local
cross-owned media. According to
MMTC, the study’s findings showed a
lack of concern by almost all of the
respondents about the presence of crossowned media in the market. MMTC
acknowledged, however, that the study
was ‘‘not intended as a comprehensive
random sample survey’’ and cautioned
that the limited number of responses
warrants ‘‘great care’’ in reaching any
conclusions.
149. A number of commenters argued
that the MMTC Cross-Ownership Study
was critically flawed in its methodology
and analysis and that the Commission
cannot rely on the study as a basis for
policy making. In response, MMTC
recognized that the MMTC CrossOwnership Study is not dispositive but
argued that it provides useful evidence
about the impact of cross-ownership,
noting the record was previously devoid
of any such data.
150. Given the limitations of the study
that even MMTC acknowledges, the
Commission does not believe it can
draw definitive conclusions about the
impact of cross-ownership on minority
and female ownership from the MMTC
Cross-Ownership Study alone. The
Commission invites commenters to
provide additional evidence that bears
on this issue, especially any evidence
arising since MMTC’s filing of the
study.
151. Furthermore, the Commission
notes that any attempt to conduct an
empirical study of the relationship
between cross-ownership restrictions
and minority and female ownership
would face obstacles that likely would
make such study impractical and
unreliable. A rigorous econometric
analysis would require that the
Commission observe a sufficient
number of markets in which crossownership and/or minority and female
ownership levels recently have shown
variation. Due to the Commission’s
cross-ownership restrictions having
been in place for such a long period of
time and to low levels of minority and
female ownership, however, both crossownership and minority and female
ownership levels show very little
variation, making empirical study of the
relationship between these multiple
variables extremely difficult. In
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addition, any study necessarily would
be based on a very small dataset for the
same reasons. As a result of these
limitations, any estimation of the
relationship between cross-ownership
restrictions and minority and female
ownership is likely to be imprecise.
Given such imprecision, the
Commission does not believe that a
study could extrapolate with any degree
of confidence the effect that changing
the Commission’s cross-ownership rules
would have on minority and female
ownership levels, and any attempt to do
so would be misleading. Variation in
ownership structure over time, resulting
from additional cross-owned entities,
could provide additional data points to
study in the future. The Commission
seeks comment on these views
concerning the inherent challenges to
conducting comprehensive research on
these issues.
152. Finally, the Commission
emphasizes that, as proposed above, no
newspaper/television combination
would be permitted without a
Commission waiver of a general rule
prohibiting such combinations. Even a
waiver request that would be granted a
favorable presumption under a
presumptive waiver standard would be
subject to denial if the Commission
found that the proposed transaction was
likely to harm viewpoint diversity in the
local market. A case-by-case waiver
approach under either option the
Commission offers for comment would
allow for close Commission
examination of the particular
circumstances of a proposed
combination. Where the newspaper
purchase of a television station,
minority/female-owned or otherwise,
would disserve the public interest, the
Commission would deny the request for
a rule waiver. The Commission seeks
comment on whether a waiver
requirement would provide adequate
protection when the particular
circumstances of a proposed merger run
counter to its diversity goals.
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4. Radio/Television Cross-Ownership
Rule
a. Introduction
153. The Commission seeks comment
on whether the radio/television crossownership rule, which limits the
combined number of commercial radio
and television stations a single entity
may own in the same market, is still
necessary in the public interest or
whether it should be repealed. It seeks
comment on whether the current media
marketplace and the evidence adduced
in the 2010 Quadrennial Review
proceeding support a conclusion that
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the local television ownership rule and
the local radio ownership rule, which
the Commission proposes to retain with
limited modification elsewhere in this
Further Notice of Proposed Rulemaking,
adequately serve the goals the radio/
television cross-ownership rule was
intended to promote, namely,
competition and diversity in local
markets. The Commission seeks
comment on whether the benefits of
eliminating this regulation would
outweigh any potential costs and
whether simplifying its rules in this way
would have only a minimal effect in
most markets. Moreover, the
Commission seeks comment on whether
repeal of this rule would be consistent
with its goal of promoting minority and
female ownership of broadcast stations.
The Commission invites commenters to
discuss any relevant evidence in the
2010 Quadrennial Review record and
submit any new evidence that bears on
its review of this rule. In addition, the
Commission seeks comment on the
costs and benefits of retaining or
eliminating the radio/television crossownership rule. To the greatest extent
possible, commenters should quantify
the expected costs or benefits of the rule
and any alternatives and provide
detailed support for any actual or
estimated values provided, including
the source of such data and/or the
method used to calculate reported
values.
b. Background
154. In the NPRM, the Commission
tentatively concluded that the radio/
television cross-ownership rule is not
currently necessary to promote the
public interest. The Commission sought
comment on a range of issues, including
whether radio and television stations
constitute different markets, whether
repeal of the rule would encourage more
and better competition in local media
markets, whether repeal of the rule
would result in additional broadcast
consolidation, and what impact, if any,
repeal would have on small,
independent broadcasters, including
those stations owned by minorities and
women. The Commission indicated that
changes in the marketplace and
evidence from the media ownership
studies specifically supported the
tentative conclusion that the rule is not
necessary to promote viewpoint
diversity in local media markets.
155. The Commission invites
commenters to augment the 2010
Quadrennial Review record with any
new or different evidence, data, or
information relevant to its consideration
of the radio/television cross-ownership
rule in this consolidated docket.
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c. Discussion
156. Considering the record in the
2010 Quadrennial Review proceeding
and consistent with the tentative
conclusion in the NPRM, the
Commission seeks comment on whether
the radio/television cross-ownership
rule is still necessary to promote the
public interest or whether the rule
should be repealed. The Commission
notes that the record suggests that,
unlike local television stations and daily
newspapers, radio stations are not a
dominant source of local news and
information, and thus, the Commission
seeks comment on whether retention of
this rule is necessary to promote and
preserve viewpoint diversity in local
markets. Moreover, the Commission
seeks comment on whether the existing
rule offers substantial benefits in
addition to its other rules. The
Commission tentatively finds, as the
Commission consistently has in past
proceedings, that this rule is not
necessary to support its goals of
competition or localism.
157. Viewpoint Diversity. Limiting the
combined number of commercial radio
and television stations that a single
entity may own in a market was
previously found necessary to promote
a diversity of viewpoints. The
Commission seeks comment on the
continued necessity of such a
restriction. It notes that, despite its
specific request in the NPRM, no studies
were submitted in the 2010 Quadrennial
Review record to demonstrate that this
rule supports viewpoint diversity or that
repeal of the rule would cause a
decrease in viewpoint diversity. The
Commission seeks comment on whether
the local radio and local television
ownership rules, which it proposes to
retain, as well as its proposed
newspaper/television cross-ownership
rule, would be sufficient to protect
viewpoint diversity such that retaining
the radio/television cross-ownership
rule is unnecessary.
158. The Commission seeks comment
on evidence in the 2010 Quadrennial
Review record suggesting that radio
stations are not currently a dominant
source of local news and information.
Consistent with the tentative
conclusions in the NPRM, the record in
the 2010 Quadrennial Review
proceeding demonstrates that
consumers rely primarily on local
television stations and daily newspapers
(and their affiliated Web sites) for their
local news, and not on radio stations. If
the record demonstrates that radio
stations are not the primary outlets that
contribute to local viewpoint diversity,
what harm to viewpoint diversity would
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result from repealing the radio/
television cross-ownership restriction?
To the extent that noncommercial radio
stations contribute to local news and
information, the Commission notes that,
because its ownership rules do not
apply to noncommercial radio stations,
the repeal of this rule would not impact
their contribution to viewpoint
diversity. The Commission seeks
comment on how this fact should affect
its analysis.
159. The Commission has previously
acknowledged that radio is a distant
third behind newspapers and television
stations in terms of being an important
provider of news and information.
Indeed, the Commission has long
recognized that ‘‘a radio station cannot
be considered the equal of either the
newspaper or the television station in
any sense, least of all in terms of being
a source for news or for being the
medium turned to for discussion of
matters of local concern.’’ In the 2006
Quadrennial Review Order the
Commission decided to retain the radio/
television cross-ownership rule on the
basis that the public relied on both radio
and television for news and
information. Information in the record
in the 2010 Quadrennial Review
proceeding, as well as the Information
Needs of Communities Report and the
most recent media ownership studies,
suggest that local radio stations do not
contribute to local viewpoint diversity
to the same degree as local television
stations and daily newspapers.
160. As discussed in the context of
the NBCO rule above, recent evidence
demonstrates that consumers regard
local television stations and daily
newspapers as the principal sources of
local news and information. According
to a recent Pew study, this popularity
has, in turn, encouraged many
television stations to produce more local
morning and mid-day news
programming, further establishing
television stations as the main providers
of local news and information in local
markets. Independent television
stations, particularly in those markets
where they air local news, showed
bigger audience or ratings gains in 2011
when compared to any of the stations
affiliated with Big Four broadcast
networks, which may provide more
national programming content during
those day parts.
161. As described in detail above, the
Information Needs of Communities
Report records a steady decline over the
past two decades in consumer reliance
on commercial radio news. The number
of people who listen to some news on
the radio dropped from 54 percent to 34
percent during that period. Only 30
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commercial radio stations out of over
11,000 are all-news radio stations, a
reduction from 50 in the mid-1980s.
Although the Commission
acknowledges that a small number of
commercial all-news radio stations in
the nation’s largest markets are very
successful, radio stations in most cities
do not provide local journalism. Eightysix percent of programming on newstalk stations is nationally syndicated,
rather than locally produced. The
Commission seeks comment on whether
there is any more recent countervailing
evidence refuting these trends.
162. Additionally, the Commission
seeks comment on whether the existing
radio/television cross-ownership rule
provides meaningful additional
restriction on consolidation, given that
the local television and radio rules
separately impose limitations on the
amount of broadcast ownership
permitted in local markets. Would the
repeal of the rule have more than a
minimal impact on broadcast
consolidation in most local markets, as
parties would continue to be
constrained by the applicable local
radio and local television ownership
rules? As discussed in the NPRM, absent
the radio/television cross-ownership
rule, an entity approaching the limits of
the existing cap, if constrained only by
the local radio rule, would be permitted
to acquire one or two additional radio
stations in large markets, at most. Under
the local radio rule, an entity owning six
or seven radio stations can own as many
as eight radio stations in the largest
radio markets in the absence of the
cross-ownership rule. The Commission
seeks comment on whether the local
radio rule is sufficient to protect
competition in local radio markets. It
believes the elimination of the radio/
television cross-ownership rule would
have no effect on the number of
television stations an entity may own as
the existing cross-ownership rule
references the local television rule to
determine how many television stations
an entity may own. The Commission
seeks comment on this conclusion and
on whether the radio/television crossownership rule has independent effects,
aside from those provided by the other
local ownership rules, on consolidation
in most local markets.
163. The Commission also seeks
comment on the implications of the
cross-ownership rule’s two-tiered voice
count restriction on broadcast
consolidation in local markets. The
restrictions appear to be readily met in
many markets. In many large markets,
the requirement that at least 20
independently owned and operating
media voices remain in order to own
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television stations and as many as six or
seven radio stations is met or exceeded
and therefore appears to have little
effect. Similarly, in many small markets
the requirement that at least 10
independently owned media voices
remain in order to own a television
station and as many as four radio
stations is met, so that element of the
rule presumably has a limited impact on
the potential for consolidation in those
markets. The Commission seeks
comment on these findings and on
markets where this element of the rule
may have an impact on television/radio
consolidation. What is the significance
of any such impact? The Commission
seeks comment on whether the record
from the 2010 Quadrennial Review
proceeding or any more recent evidence
establishes any particular or measurable
potential harm that would likely result
from repeal of this cross-ownership rule.
164. Competition. Consistent with
prior holdings, the Commission
tentatively finds that the radio/
television cross-ownership rule is not
necessary to promote competition. The
Commission has found previously that
most advertisers do not consider radio
and television to be good substitutes for
one another, and that ‘‘television and
radio stations neither compete in the
same product market nor do they bear
any vertical relation to one another.’’
This position is consistent with the
long-standing conclusion of the
Department of Justice, which considers
radio advertising as a separate antitrust
market for purposes of its competition
analysis. Similarly, the Commission
tentatively finds that most consumers
do not consider radio and television
stations to be substitutes for one another
and do not switch between television
viewing and radio listening based on
program content. Nothing in the current
record undermines the Commission’s
previous conclusion that a televisionradio combination, therefore, cannot
adversely affect competition in any
relevant product market. Given that
radio and television stations do not
appear to compete in the same market
and that the local television and radio
rules would prevent significant
additional consolidation even in the
absence of this rule, the 2010
Quadrennial Review record does not
suggest that repeal of the radio/
television cross-ownership rule would
harm competition. The Commission
seeks comment on whether any data or
evidence made available since the
NPRM warrants a renewed analysis of
the competitive effect of the radio/
television cross-ownership.
165. Localism. Consistent with the
tentative conclusion in the NPRM and
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previous Commission holdings, the
Commission tentatively finds that the
radio/television cross-ownership rule is
not necessary to promote localism. The
Commission seeks comment on this
tentative conclusion. Furthermore, it
seeks comment on whether elimination
of this rule is likely to result in benefits
to localism in the form of improved or
expanded programming.
166. The Commission sought
comment in the NPRM on the relevance
of the media ownership studies to its
analysis of whether the radio/television
cross-ownership rule promotes its
localism goals. The Commission
specifically highlighted the findings in
Media Ownership Study 1 and Media
Ownership Study 4 about the
correlation between the level of radio/
television cross-ownership in a market
and the amount of local television
programming provided. The
Commission stated in the NPRM that
Media Ownership Study 1 examines
how cross-ownership is associated with
localism, as measured by the amount of
local news provided in the market, and
that the study finds that crossownership decreases local television
news hours but raises ratings, which
leads to ambiguous results.
Additionally, the Commission observed
the finding in Media Ownership Study
4 that, at the station level, radio/
television cross-owned stations appear
to air more local news on average,
though the impact is marginal. The
study showed that for every additional
in-market radio station a parent owned,
the television station aired 3.7 more
minutes of local news. Some
commenters in the 2010 Quadrennial
Review proceeding maintained that
these media ownership studies support
the conclusion that the cross-ownership
rule cannot be justified based on
localism concerns. NAB stated that the
record is clear that repeal of the radio/
television cross-ownership rule would
benefit both localism and diversity.
167. The Commission agrees with
industry commenters who maintained
that some limited cross-ownership
could create efficiencies that could
benefit the public should broadcasters
choose to invest additional resources in
the production of local news and
information programming. When
broadcasters engage in joint operations,
whether those operations are focused on
programming and news gathering or
back office matters, the Commission
believes it likely that financial
efficiencies result. Such efficiencies
could lead ultimately to consumer
benefits in the form of additional station
investments in equipment for radio or
television newsrooms, an increase in
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staffing for news and informational
programs, or additional local news
coverage on radio stations. The
Commission recognizes the potential for
such benefits and seeks comment on the
likely extent of such gains if the rule
were repealed.
168. Minority and Female Ownership.
The Commission also sought comment
in the NPRM on the effect that
eliminating the radio/television crossownership rule would have on efforts to
foster ownership diversity among
minorities and females. Further, the
Commission sought comment on the
minority and female ownership data
contained in the 2012 323 Report. In
addition, interested parties had the
opportunity to comment on the MMTC
Cross-Ownership Study, as discussed in
the context of the NBCO rule above. In
response, several commenters criticized
the Commission for proposing to relax
any of its rules, including the radio/
television cross-ownership rule, without
first determining that there will be no
negative impact on minority and female
ownership. The Commission has
considered carefully whether there is
evidence in the current record that
elimination of the radio/television
cross-ownership rule would likely
adversely affect minority and female
ownership, and it believes, as discussed
below, that the current record does not
establish that such harm is likely.
Furthermore, the Commission does not
believe that record evidence shows that
the cross-ownership ban has protected
or promoted minority or female
ownership of broadcast stations, or that
it could be expected to do so in the
future. Nevertheless, the Commission
invites commenters to submit further
data on the connection, if any, between
the radio/television cross-ownership
rule and minority and female
ownership.
169. Notably, radio/television crossownership combinations were not the
focus of commenters’ concerns raised in
response to the NPRM. In fact, no
commenter to the NPRM presented
empirical data or other analyses that
established that repeal of this rule
would harm competition, localism, or
viewpoint diversity in local markets. As
discussed above, the Commission
tentatively concludes that the rule is not
necessary to promote competition or
localism, and the record reflects that
most radio commercial stations do not
broadcast significant amounts of local
news and information. The current
record does not suggest that minority/
female-owned radio stations contribute
more significantly to viewpoint
diversity than other radio stations or
broadcast more meaningful amounts of
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local news on which consumers rely as
a primary source of information. The
Commission seeks comment on these
views. As discussed further in the
Diversity section below, several of the
media ownership studies in this
proceeding concluded that there is a
positive relationship between minority
station ownership and the provision of
certain types of minority-oriented
content or the consumption of broadcast
content by minority audiences. Several
commenters also raised this issue. This
observation, however, does not alter the
Commission’s view that radio stations—
be they minority-owned or not—do not
contribute significantly to local news.
The Commission seeks comment on
whether recent evidence shows
otherwise. Recognizing that repeal of
the rule would potentially allow for the
acquisition of a limited number of
additional radio stations in some
markets by incumbent television
broadcasters, the Commission seeks
comment on the impact that elimination
of the rule would have on media
consolidation and thus on small
broadcast owners, including minority
and women owners. As noted above, the
current radio/television rule already
allows for a significant degree of crossownership of radio and television
stations in a market. Second, the crossownership rule has always been
accompanied by the ownership
limitations contained in the local
television and local radio rules, which
the Commission proposes to retain
substantively unchanged in order to
protect competition in local markets.
The Commission seeks comment on
whether the local ownership rules are
sufficient to protect minority and female
broadcast owners from the competitive
effects of media consolidation.
170. Moreover, while the Commission
acknowledges the concerns raised by
NABOB and others advocating for
additional minority ownership
opportunities, it agrees with
commenters, including NAB, that the
low level of minority and female
broadcast ownership cannot be
attributed solely or primarily to
consolidation. Nor has any commenter
shown that these low levels of
ownership are a result of the existing
radio/television cross-ownership rule.
The Commission recognizes the
presence of many disparate factors,
including, most significantly, access to
capital, as longstanding, persistent
impediments to ownership diversity in
broadcasting. As discussed below, such
factors require further study and
consideration.
171. In this Further Notice of
Proposed Rulemaking, the Commission
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reaffirms its commitment to broadcast
ownership diversity as an important
goal. The 2010 Quadrennial Review
record, however, does not appear to
establish that elimination of the radio/
television cross-ownership rule would
adversely affect ownership diversity.
The Commission asks commenters to
provide any demonstrable evidence of
such a link that may have become
available since the 2010 Quadrennial
Review.
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5. Dual Network Rule
a. Introduction
172. The Commission tentatively
finds that the dual network rule, which
permits common ownership of multiple
broadcast networks, but prohibits a
merger between or among the ‘‘top-four’’
networks (ABC, CBS, Fox, and NBC),
continues to be necessary to promote
competition and localism and should be
retained without modification. In
particular, the Commission tentatively
finds that the top-four broadcast
networks have a distinctive ability to
attract, on a regular basis, larger
primetime audiences than other
broadcast and cable networks, which
enables them to earn higher rates from
those advertisers willing to pay a
premium for such audiences. Thus, the
Commission believes that a combination
between top-four broadcast networks
would reduce the choices available to
advertisers seeking large, national
audiences, which could substantially
lessen competition and lead the
networks to pay less attention to viewer
demand for innovative, high quality
programming. The Commission also
tentatively find that the rule remains
necessary to preserve the balance of
bargaining power between the top-four
networks and their affiliates, thus
improving the ability of affiliates to
exert influence on network
programming decisions in a manner that
best serves the interests of their local
communities. The Commission
tentatively concludes that the benefits of
retaining the rule outweigh any
potential burdens. The Commission
seeks comment on these tentative
findings, particularly with respect to
any relevant developments that may
have occurred since the NPRM. The
Commission seeks comment also on the
costs and benefits of its proposal to
retain the existing dual network rule. To
the greatest extent possible, commenters
should quantify the expected costs or
benefits of the rule and provide detailed
support for any actual or estimated
values provided, including the source of
such data and/or the method used to
calculate reported values.
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b. Background
173. In the NPRM, the Commission
sought comment on its tentative
conclusion that the existing dual
network rule should be retained without
modification in order to promote
competition. The Commission also
sought comment on the potential impact
of top-four network mergers on
localism. The Commission invites
commenters to augment the 2010
Quadrennial Review record with any
new or different evidence, data, or
information relevant to its consideration
of the dual network rule in this
consolidated docket.
c. Discussion
174. Competition. Consistent with the
Commission’s tentative conclusion in
the NPRM, the Commission tentatively
finds that the dual network rule remains
necessary in the public interest to foster
competition in the provision of
primetime entertainment programming
and the sale of national advertising
time. Specifically, as discussed in more
detail below, the Commission
tentatively finds that the primetime
entertainment programming supplied by
the top-four broadcast networks is a
distinct product, the provision of which
could be restricted if two of the four
major networks were to merge. The
Commission also tentatively finds that,
consistent with past Commission
findings, the top-four broadcast
networks comprise a ‘‘strategic group’’
in the national advertising market and
compete largely among themselves for
advertisers that seek to reach large,
national mass audiences. Accordingly,
the Commission continues to believe
that a top-four network merger would
substantially lessen competition for
advertising dollars in the national
advertising market, which would, in
turn, reduce incentives for the networks
to compete with each other for viewers
by providing innovative, high quality
programming. Based on their distinctive
characteristics relative to other
broadcast and cable networks, the
Commission tentatively finds that the
top-four broadcast networks serve a
unique role in the provision of
primetime entertainment programming
and the sale of national advertising time
that justifies retaining a rule specific to
them. The Commission seeks comment
on these tentative findings.
175. As noted in the NPRM, in
comparison to other broadcast and cable
networks, the top-four broadcast
networks achieve substantially larger
primetime audiences, as measured both
by the audience size for individual
programs and by the audience size for
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each network as a whole. Primetime
broadcast network programming is
generally designed to attract a mass
audience, and financing such
programming, in turn, requires the
substantial revenue that only a mass
audience can provide. The top-four
broadcast networks supply their
affiliated local stations with primetime
entertainment programming intended to
attract both mass audiences and the
advertisers that want to reach such
large, national audiences. By contrast,
other broadcast networks, and many
cable networks, tend to target more
specialized, niche audiences. As CBS
noted, in recent years, some cable
networks have moved away from
serving niche audiences and have
modified their primetime programming
lineups to more closely resemble those
of broadcast networks. Nonetheless,
with the exception of certain individual
sports events or mini-series, even the
highest rated primetime entertainment
programs on cable networks achieve
substantially smaller audiences than
their broadcast network counterparts.
For instance, during 2011, the highest
rated primetime entertainment programs
on cable networks attracted, at most,
between 8 and 9 million viewers. By
contrast, in any given week during the
2010–2011 television season, there were
typically a dozen or more primetime
entertainment programs on the top-four
broadcast networks that attracted more
than 10 million viewers, with the
highest rated broadcast programs
frequently attracting more than 20
million viewers, based on Nielsen data.
Thus, the audience size for individual
primetime entertainment programs
provided by each of the top-four
broadcast networks remains unmatched
by that of any other broadcast or cable
network.
176. Furthermore, as measured at the
network level, the average primetime
audience size for each of the top-four
broadcast networks remains
significantly larger than the audience
size for even the most popular cable
networks. The Commission recognizes
that consumers generally substitute
between broadcast and cable networks
and that the gap in size between
broadcast and cable audiences has
narrowed over time, such that the
aggregate audience for cable networks is
now larger. Nevertheless, as stated in
the NPRM, in 2009–2010 the average
primetime audience for a top-four
broadcast network remained
substantially larger than the average
primetime audience for other broadcast
and cable networks. The Commission
finds that this gap in audience size
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continued in 2011. In 2011, the average
primetime audience for a top-four
broadcast network was nearly three
times larger than the average primetime
audience for the highest rated cable
networks, based on SNL Kagan data. In
addition, the average primetime
audience for the top-four broadcast
networks was more than twice as large
as that of the fifth highest-rated
broadcast network, and more than five
times larger than that of the next
highest-rated English-language
broadcast network. As a result, based on
the 2010 Quadrennial Review record,
the Commission tentatively finds that,
despite the ability of certain primetime
cable network programs to achieve large
audiences on occasion, in general,
primetime entertainment programming
provided by the top-four broadcast
networks remains a distinct product
capable of attracting large audiences, the
size of which individual cable networks
cannot consistently replicate. The
Commission seeks comment on whether
this audience gap has narrowed
significantly since the NPRM.
177. Another indicator that the topfour broadcast networks are distinct
from cable networks is the wide
disparity in advertising prices between
them. Using data for 2009, the
Commission found in the NPRM that the
top-four broadcast networks generally
earn higher advertising rates than cable
networks. In 2011, based on SNL Kagan
data, the average advertising rate among
the top-four broadcast networks, as
measured in cost per thousand views
(referred to as cost per mille or CPM),
was $19.19. By contrast, the four highest
CPMs among non-sports cable networks
were for MTV, Bravo, Discovery
Channel, and TBS, which had an
average CPM of $10.95, or
approximately 43 percent less than that
of the top-four broadcast networks. The
appeal of the top-four broadcast
networks to advertisers seeking large,
national audiences is also reflected in
data on net advertising revenues. In
2011, the top-four broadcast networks
averaged $3.17 billion in net advertising
revenues, based on SNL Kagan data. By
contrast, the four non-sports cable
networks with the highest net
advertising revenue totals (Nickelodeon,
USA Network, TNT, and MTV) averaged
just under 1 billion dollars in net
advertising revenues, or less than onethird of the average amount that the topfour broadcast networks received. The
Commission invites commenters to
provide any relevant data that has
become available more recently.
178. The Commission tentatively
concludes that it should adopt the
proposal in the NPRM to retain the
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existing dual network rule without
modification in order to promote
competition. The Commission finds
force in WGAW’s view that the rule
remains necessary to promote
competition in the market for primetime
programming. Specifically, the
Commission believes that the top-four
broadcast networks have a distinctive
ability to attract, on a regular basis,
larger primetime audiences than other
broadcast and cable networks, which
enables them to earn higher rates from
those advertisers that are willing to pay
a premium for such audiences. Thus,
the Commission believes that a
combination between top-four broadcast
networks would reduce the choices
available to advertisers seeking large,
national audiences, which could
substantially lessen competition and
lead the networks to pay less attention
to viewer demand for innovative, high
quality programming. The Commission
therefore tentatively concludes that the
primetime entertainment programming
provided by the top-four broadcast
networks and national television
advertising time are each distinct
products, the availability, price, and
quality of which could be restricted, to
the detriment of consumers, if two of
the top-four networks were to merge.
Accordingly, the Commission
tentatively concludes that the dual
network rule remains necessary to foster
competition in the provision of
primetime entertainment programming
and the sale of national television
advertising time. The Commission seeks
comment on these tentative
conclusions.
179. Localism. In addition to
promoting its competition goal, the
Commission tentatively finds that,
consistent with past Commission
findings, the dual network rule remains
necessary to promote its localism goal.
Specifically, the Commission tentatively
finds that the rule remains necessary to
preserve the balance of bargaining
power between the top-four networks
and their affiliates, thus improving the
ability of affiliates to exert influence on
network programming decisions in a
manner that best serves the interests of
their local communities. Typically, a
critical role of a broadcast network is to
provide its local affiliates with high
quality programming. Because this
programming is distributed across the
country, broadcast networks have an
economic incentive to ensure that the
programming both appeals to a mass,
nationwide audience and is widely
shown by affiliates. A network’s local
affiliates serve a complementary role by
providing local input in network
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programming decisions and airing
programming that serves the specific
needs and interests of that specific local
community. As a result, the economic
incentives of the networks are not
always aligned with the interests of the
local affiliates or the communities they
serve.
180. In the context of this
complementary network-affiliate
relationship, the Commission believes
that the dual network rule is, as the
Affiliates Associations asserted, ‘‘an
important structural principle’’ that
helps to maintain equilibrium.
Specifically, the Commission tentatively
finds that a top-four network merger
would reduce the ability of a network
affiliate to use the availability of other
top, independently owned networks as
a bargaining tool to influence
programming decisions of its network,
including the affiliate’s ability to engage
in a dialogue with its network over the
suitability for local audiences of either
the content or scheduling of network
programming. The Commission seeks
comment on its tentative conclusion
that the dual network rule remains
necessary to foster localism.
181. The NPRM also sought comment
on whether antitrust laws and the
Commission’s public interest standard
are sufficient to address any harms to
competition or localism that would
result from a top-four network merger.
As discussed above, the Commission is
concerned here that a top-four network
merger would restrict the availability,
price, and quality of primetime
entertainment programming to the
detriment of consumers. The
Commission is also concerned that the
bargaining power and influence of
affiliates would be reduced. As the
Commission has previously noted, it
does not think antitrust enforcement
would adequately protect against these
harms. The Commission seeks comment
on these concerns.
182. Dual Affiliation. Some
commenters urged the Commission to
prohibit a TV station from affiliating
with two or more top-four broadcast
networks in a single market, because
they contended that the practice allows
stations to circumvent the intent of the
dual network rule. Specifically,
commenters claimed that dual
affiliation allows a broadcaster to ‘‘do
locally what the networks are forbidden
from doing nationally,’’ which is to
consolidate the bargaining power of
multiple top-four network signals under
the control of a single entity. The
Commission notes, however, that the
dual network rule addresses harms to
competition and localism that would
result from the consolidation of top-four
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network ownership at the national level.
In particular, as discussed above, the
Commission tentatively finds that a
combination between top-four broadcast
networks would reduce the number of
networks competing for national
advertisers and would reduce the ability
of a local affiliate to use the availability
of other top, independently owned
networks as a bargaining tool to
influence network programming
decisions. By contrast, the Commission
believes that dual affiliation does not
give rise to either of these harms
because it does not reduce the number
of network owners. Although
commenters are invited to offer
opposing views, the Commission does
not perceive arguments related to dual
affiliation as relevant to consideration of
the dual network rule. Instead, it believe
that issues related to dual affiliation,
including the potential consolidation of
market power by a single station owner
in a local market, are more relevant to
the local television ownership rule, and
the Commission discusses them above
in that context.
will encourage innovation and enhance
viewpoint diversity.
185. For the reasons explained below,
the Commission tentatively concludes
that the Commission is not in a position
at this time to adopt a socially
disadvantaged business (SDB) eligibility
standard, which expressly would
recognize the race and ethnicity of
applicants, or any other race- or gendertargeted measures. The Commission
invites further input on ways to expand
the participation of minorities and
women in the broadcast industry. It also
seeks comment on specific measures, in
addition to those that that the
Commission tentatively concludes
should be reinstated, that may provide
further opportunities for minorities and
women to own and operate broadcast
outlets.
186. The Commission discusses below
the actions that it currently believes are
appropriate in response to the Third
Circuit remand of the Diversity Order.
D. Diversity Order Remand
187. In addition to promoting
viewpoint diversity generally through
the broadcast ownership rules, the
Commission has a long history of
promulgating rules and regulations
intended to foster diversity in terms of
minority and female ownership.
Although the Commission and Congress
previously made available race- and
gender-conscious measures intended
specifically to assist minorities and
women in their efforts to acquire
broadcast properties, such as tax
certificates and distress sale policies,
those policies and programs were
discontinued following the Supreme
Court’s 1995 decision in Adarand
˜
Constructors, Inc. v. Pena. The Supreme
Court held in Adarand that any federal
program in which the ‘‘government
treats any person unequally because of
his or her race’’ must satisfy the ‘‘strict
scrutiny’’ constitutional standard of
judicial review. Under strict scrutiny,
racial classifications are constitutional
only if they are narrowly tailored
measures that further a compelling
governmental interest. As a result, the
Commission currently does not use race
or ethnic origin as a factor in its
ownership diversification policies. In
addition, Congress repealed the tax
certificate policy in 1995 as part of its
budget approval process.
188. The Commission announced in
October 2013 that it is conducting a
study of Hispanic television viewing.
The study is the Commission’s first
systematic examination of the Hispanic
television market, a market that
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1. Introduction
183. In addition to assessing each of
the broadcast ownership rules, the
Commission is considering in this
proceeding the Third Circuit’s remand
of certain aspects of the Commission’s
2008 Diversity Order. In Prometheus II,
the Third Circuit concluded that the
decision in the Diversity Order to adopt
a revenue-based eligible entity
definition as a race-neutral means of
facilitating ownership diversity was
arbitrary and capricious, because the
Commission did not show how such a
definition specifically would assist
minorities and women, who were
among the intended beneficiaries of this
action. In light of this conclusion, the
Third Circuit remanded each of the
measures adopted in the Diversity Order
that relied on the revenue-based
definition.
184. Based on its analysis of the
preexisting eligible entity standard as
well as the measures to which it
applied, the Third Circuit’s remand
instructions, and the record thus far in
this proceeding, the Commission
tentatively concludes that the revenuebased eligible entity standard should be
reinstated and applied to the regulatory
policies set forth in the Diversity Order.
The Commission believes that small
businesses benefit from flexible
licensing policies and that making it
easier for small business applicants to
participate in the broadcast industry
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2. Background
a. Commission Diversity Initiatives
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implicates an important and growing
segment of the nation’s population. It
incorporates comprehensive data from
the improved Form 323 biennial
ownership reports, described below.
Specifically, the study will consider: (1)
The impact of Hispanic-owned
television stations on Hispanic-oriented
programming and Hispanic viewership
in selected local television markets; (2)
the extent of Hispanic-oriented
programming on U.S. broadcast
television; and (3) the role of digital
multicasting in increasing the amount of
Hispanic-oriented programming.
b. Data Collection Concerning Minority
and Female Ownership
189. Collection of Biennial Ownership
Data. As explained in detail in the
NPRM, the Commission actively has
sought in recent years to improve its
collection and analysis of broadcast
ownership information. Among other
initiatives, the Commission has
implemented major changes to its Form
323 biennial ownership reports to
improve the reliability and utility of the
data reported in the form, including
data regarding minority and female
broadcast ownership.
3. Discussion
a. Remand Review of the Revenue-Based
Eligible Entity Standard
190. Background. The Commission
solicited comment in the NPRM on
whether the Commission should
reinstate the pre-existing revenue-based
eligible entity definition to support the
measures the Third Circuit vacated and
remanded as well as other measures the
Commission may implement in the
future. In light of the Third Circuit’s
conclusion that the Commission
previously had failed to demonstrate a
nexus between this definition and its
stated goal of promoting female and
minority ownership, the Commission
asked commenters to supply any
available evidence demonstrating that a
revenue-based definition would support
this specific policy objective. In
addition, the Commission sought
comment on whether re-adoption of the
revenue-based standard would support
its traditional diversity, localism, and
competition goals in other ways,
particularly by enhancing ownership
opportunities for small businesses and
other new entrants.
191. The Commission adopted its
revenue-based eligible entity definition
in the 2002 Biennial Review Order as an
exception to the prohibition on the
transfer of grandfathered station
combinations that violated then newly
adopted local radio ownership limits.
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The Commission ruled that licensees
would be allowed to transfer control of
or assign a grandfathered combination
to an eligible entity, which was defined
as any entity that would qualify as a
small business consistent with SBA
standards for its industry grouping,
based on revenue. In addition, the
Commission ruled that eligible entities
would be permitted, with limited
restrictions, to sell existing
grandfathered combinations intact to
new owners. The Commission adopted
this transfer policy as a means to
promote diversity of ownership and
observed more generally that policies
supporting the entry of new participants
into the broadcasting industry also may
promote innovation in the field.
192. Thereafter, in the Diversity
Order, the Commission concluded that
additional uses of the eligible entity
definition would advance its objectives
of promoting diversity of ownership in
the broadcast industry by making it
easier for small businesses and new
entrants to acquire licenses and attract
the capital necessary to compete in the
marketplace with larger and better
financed companies. In this regard, the
Commission stated that the adoption of
new measures relying on this definition
would ‘‘be effective in creating new
opportunities for broadcast ownership
by a variety of small businesses and new
entrants, including those owned by
women and minorities.’’ The
Commission further observed that
facilitating market entry by new entrants
into the broadcast industry would
promote new programming services,
particularly those that are responsive to
local needs, interests, and audiences
currently underserved. Thus, between
2002 and the Third Circuit’s remand of
the measures relying on the eligible
entity definition in 2011, the
Commission used the revenue-based
standard to support a range of measures
intended to encourage ownership
diversity.
193. Several commenters, including
AWM and NAB, supported
reinstatement of a revenue-based
eligible entity definition and the
measures to which it previously applied
as a means to diversify broadcast
ownership. UCC et al. recommended
that, instead of abandoning or
repurposing the current eligibility
definition, the Commission should
assess whether it has had any
measurable effect on the ownership of
broadcast stations by minorities and
women. As discussed in more detail
below, DCS believed that the
Commission should adopt a revised
eligible entity definition that
incorporates the Overcoming
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Disadvantage Preference (ODP) standard
proposed by the Commission’s Diversity
Advisory Committee in 2010. According
to DCS, no meaningful impact on
minority ownership will be achieved by
relying on a definition based solely
upon the SBA’s revenue limits for small
businesses.
194. Discussion. The Commission
tentatively concludes that a revenuebased eligible entity standard is an
appropriate and worthwhile approach
for expanding ownership diversity
whether or not the standard is effective
in promoting ownership of broadcast
stations by women and minorities. The
Commission concedes that it does not
have an evidentiary record
demonstrating that this standard
specifically increases minority and
female broadcast ownership. The
Commission invites commenters to
supplement the record with any new
data or analysis that may bear on this
issue. Nonetheless, even in the absence
of such evidence, the Commission
believes that reinstatement of the
revenue-based standard would serve the
public interest by promoting smallbusiness participation in the broadcast
industry. The Commission believes that
small-business applicants and licensees
benefit from flexible licensing, auction,
transactions, and construction policies.
Often, small-business applicants have
financing and operational needs distinct
from those of larger broadcasters. By
easing certain regulations for small
broadcasters, the Commission believes
that it will promote its public interest
goal of making access to broadcast
spectrum available to a broad range of
applicants. The Commission also
believes that enabling more small
businesses to participate in the
broadcast industry will encourage
innovation and expand ownership and
viewpoint diversity.
195. The Commission seeks comment
on these tentative conclusions. The
Commission also seeks input on other
potential public interest benefits or
detriments that could result from
reinstating the eligible entity standard.
It is interested in hearing from eligible
entity broadcasters that have used one
or more of the measures adopted in the
Diversity Order. What measures were
used? Did the eligible entity definition
facilitate entry into broadcast
ownership? Was increased financing
and investment available to eligible
entity broadcasters as a result of the
existence of the eligible entity standard
or any of the measures? The experiences
of such broadcasters could aid the
Commission’s assessment of this
standard and the measures that utilize
the definition.
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196. The Commission’s records
indicate that a large number of
Commission permittees and licensees
previously have availed themselves of
policies based on the revenue-based
eligible entity standard. In particular,
the Diversity Order afforded eligible
entities that acquire broadcast
construction permits through an
assignment from another permittee
additional time to construct their
facilities under certain circumstances,
and many small businesses made use of
this measure. FCC Form 314 requires
that assignees in broadcast transactions
indicate whether the assignee is an
eligible entity as that term is defined in
the Diversity Order. Between the
implementation of the eligible entity
definition and the suspension of the
definition following the Prometheus II
decision, Commission staff processed
approximately 247 Form 314
construction permit assignment
applications in which the assignee selfidentified as an eligible entity. Of those
247 applications, approximately 132
(53.4 percent) of the eligible entities
have constructed their broadcast
facilities and are now on the air. The
data also reveal that the largest group of
broadcasters that availed themselves of
the eligible entity definition are
noncommercial educational
broadcasters. Of the 247 total eligible
entities, 160 (64.7 percent) are NCE
permittees or licensees.
197. On the whole, the Commission
believes that these data indicate that the
revenue-based eligible entity standard
has been used successfully by small
firms and has aided their entry into, as
well as sustained their presence in,
broadcasting in furtherance of the
Commission’s public interest goals.
While these data may not include the
total number of applicants and
permittees that have availed themselves
of one or more of the measures to which
the eligible entity standard applied, this
information nonetheless suggests that
providing additional time to construct
broadcast facilities and other measures
have assisted market entry by small
broadcasters.
198. The Commission also tentatively
concludes that, if the Commission
reinstates the eligible entity definition,
it would be appropriate to readopt each
measure relying on this definition that
was remanded in Prometheus II. These
measures include: (1) Revision of Rules
Regarding Construction Permit
Deadlines (The Commission proposes
that this exception to its strict broadcast
station construction policy, if reinstated
by the Commission, would be limited to
one 18-month extension based on one
assignment to an eligible entity.
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Moreover, to ensure realization of its
policy goals, in reviewing the permit
sale to the eligible entity, the
Commission proposes to assess the bona
fides of both the arms-length structure of
the transaction and the assignee’s status
as an eligible entity.); (2) Modification
of Attribution Rule (In addition,
pursuant to the new entrant bidding
credits available under the
Commission’s broadcast auction rules,
the modified EDP attribution standard
was available to interest holders in
eligible entities that are the winning
bidders in broadcast auctions. The
Commission proposes to reinstate this
application of the modified EDP
standard.); (3) Distress Sale Policy; (4)
Duopoly Priority for Companies that
Finance or Incubate an Eligible Entity;
(5) Extension of Divestiture Deadline in
Certain Mergers; and (6) Assignment or
Transfer of Grandfathered Radio Station
Combinations.
199. The Commission proposes to
define an eligible entity as any entity,
commercial or noncommercial, that
would qualify as a small business
consistent with SBA standards for its
industry grouping, based on revenue.
The Commission proposes to include
both commercial and noncommercial
entities within the scope of the term
‘‘eligible entity’’ to the extent that they
otherwise meet the criteria of this
standard. The Commission previously
applied the SBA standards to define
eligible entities, and the Commission
seeks comment on whether those
standards should apply if it re-adopts
the eligible entity standard. The
Commission requests comment on
whether there is any reason to use
different eligible entity definitions for
commercial and noncommercial
entities. For all SBA programs, a radio
or television station with no more than
$35.5 million dollars in annual revenue
currently is considered a small business.
To determine qualification as a small
business, the SBA considers the
revenues of the parent corporation and
affiliates of the parent corporation, not
just the revenues of individual
broadcast stations. The Commission
proposes to do the same. In addition, in
order to ensure that ultimate control
rests in an eligible entity that satisfies
the revenue criteria, the Commission
proposes that the entity must satisfy one
of several control tests. Specifically, the
eligible entity would have to hold: (1)
30 percent or more of the stock/
partnership shares and more than 50
percent voting power of the corporation
or partnership that will hold the
broadcast license; (2) 15 percent or more
of the stock/partnership shares and
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more than 50 percent voting power of
the corporation or partnership that will
hold the broadcast licenses, provided
that no other person or entity owns or
controls more than 25 percent of the
outstanding stock or partnership
interest; or (3) more than 50 percent of
the voting power of the corporation if
the corporation that holds the broadcast
licenses is a publicly traded company.
200. The Commission seeks comment
on the costs and benefits of the proposal
to adopt a revenue-based eligible entity
definition and the measures relying on
this definition as proposed herein. To
the greatest extent possible, commenters
should quantify the expected costs or
benefits of the proposals and provide
detailed support for any actual or
estimated values provided, including
the source of such data and/or the
method used to calculate reported
values.
b. Remand Review of a Race- or GenderConscious Eligible Entity Standard
(i) Background
201. The Third Circuit in Prometheus
II instructed the Commission to address
on remand the other eligible entity
definitions it had considered when the
revenue-based definition was adopted.
Specifically, in the Diversity Third
FNPRM, the Commission sought
comment on the possibility of replacing
the revenue-based standard with a
standard based on the SBA’s definition
of SDBs used for purposes of its
Business Development Program.
Pursuant to the SBA’s program, persons
of certain racial or ethnic backgrounds
are presumed to be disadvantaged; all
other individuals may qualify for the
program if they can show by a
preponderance of the evidence that they
are disadvantaged. In response to the
court’s directive, the Commission
sought comment in the NPRM on the
benefits and risks of adopting an SDB
standard to support the various
ownership diversity measures remanded
by the court. The Commission also
solicited input on other proposals that
were included in the Diversity Third
FNPRM as well as any other race- or
gender-conscious standards the
Commission should consider.
202. Under the SBA’s 8(a) Business
Development Program, certain
individuals are presumed to be socially
disadvantaged: African-Americans,
Hispanic Americans, Asian Pacific
Americans, Native Americans
(American Indians, Eskimos, Aleuts, or
Native Hawaiians), and Subcontinent
Asian Americans. Additionally, the SBA
permits the applicant to show through
a ‘‘preponderance of the evidence’’
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social disadvantage due to gender,
physical handicap, long-term residence
in an environment isolated from the
mainstream of American society, or
other similar causes.
203. To the extent an SDB standard
includes race-specific criteria, it would
be subject to strict constitutional
scrutiny. As explained in the NPRM,
rules and policies that operate based on
race, ethnic origin, or gender are subject
to an exacting constitutional analysis.
All race-based classifications imposed
by the government ‘‘‘must be analyzed
by a reviewing court under strict
scrutiny’ . . . [and] are constitutional
only if they are narrowly tailored to
further compelling governmental
interests.’’ The U.S. Supreme Court to
date has accepted only two justifications
for race-based action as compelling for
purposes of strict scrutiny: student body
diversity in higher education and
remedying past discrimination. Genderbased classifications are evaluated
under an intermediate standard of
review and will be upheld as
constitutional if the government’s
actions are deemed substantially related
to the achievement of an important
objective. In the NPRM, commenters
were asked to explain in detail, based
on relevant case law, whether and how
the Commission could overcome the
application of strict or intermediate
constitutional scrutiny to any race- or
gender-based standard. The Commission
sought data and explanation for whether
and how proposals could be supported
and applied in a consistent and rational
manner. In particular, the Commission
solicited input on whether the
Commission could demonstrate a
compelling governmental interest in
fostering viewpoint diversity, redressing
past discrimination, or some other
interest and, if so, whether policies
based on a race-conscious standard
would be a narrowly tailored means of
addressing any such interest.
204. The Commission acknowledged
in the NPRM that its ownership data
and other empirical evidence in the
record at that time likely were
insufficient to support the adoption of a
race- or gender-based standard. In
recognition of the fact that such data are
not by themselves sufficient to satisfy
the constitutional hurdle that has been
established for race- and gender-based
measures, the Commission asked in the
NPRM that commenters supply any
relevant evidence, including peerreviewed studies, which could assist in
supporting a race-conscious approach.
With respect to any proposals for a
gender-conscious standard, commenters
similarly were asked to address the
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relevant constitutional standards and to
provide any available empirical support.
205. A number of commenters
supported the adoption of a race- or
gender-conscious standard as a means to
increase minority and female
ownership. Based on the Third Circuit’s
instructions in Prometheus II,
commenters asserted that the
Commission must fully consider the
feasibility of adopting an SDB standard
in this proceeding and that the
Commission is not permitted to defer
consideration of race- or gender-based
action until a future proceeding. Some
commenters also asserted that, prior to
the conclusion of this proceeding, the
Commission must provide any further
data and complete any additional
empirical studies that may be necessary
to evaluate or justify the adoption of an
SDB standard. Similarly, several
commenters asked the Commission not
to make any changes to any of the media
ownership rules until it collects and
analyzes data on broadcast ownership
by women and minorities in a manner
that they view as consistent with the
court’s remand of the eligible entity
standard.
206. Several commenters further
asserted that Prometheus II not only
obligates the Commission to consider
fully the feasibility of implementing a
race-conscious eligible entity standard
in this proceeding, but also requires the
Commission to adopt such a standard.
NABOB maintained that in this
proceeding the Commission ‘‘must
establish policies, similar to those it had
prior to the Adarand decision, which
were designed to specifically increase
minority ownership of broadcast
stations.’’ NABOB also stated that
‘‘[f]ailure to adopt a policy to promote
minority ownership in this proceeding
is contrary to the mandate of the Third
Circuit in the Prometheus II case.’’
NABOB argued that ‘‘the Commission is
obligated by the Prometheus II decision
to continue this proceeding until it has
completed the studies required and
adopted a policy to promote minority
ownership.’’ In addition, NABOB
asserted that if the Commission does not
take these actions in the instant
proceeding, then it must, at a minimum,
provide a specific timetable for
developing a policy to promote minority
ownership.
207. Advocates of a race- or genderconscious standard cited the Supreme
Court’s rulings in Grutter v. Bollinger
and Metro Broadcasting v. FCC as
precedent for establishing a compelling
interest in facilitating broadcast
ownership diversity
208. Some commenters suggested that
the Commission currently lacks
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evidence sufficient to implement a raceor gender-targeted standard. In light of
this perceived deficiency, DCS
suggested that the Commission
promptly implement an ODP standard,
which it described as race- and genderneutral, while the Commission develops
the record necessary to adopt a
constitutionally sustainable raceconscious definition. Similarly, UCC et
al. argued that ‘‘there are problems with
the Commission’s data collection and
analysis that need to be fixed’’ prior to
the adoption of race- or genderconscious measures. UCC et al. further
argued that, because ‘‘the Commission
will have to show that it tried raceneutral solutions and found them
insufficient’’ in order to ‘‘defend against
a constitutional challenge to any future
policy that uses race as a factor,’’ the
Commission should move forward in
this proceeding to ‘‘evaluat[e] whether
its current race- and gender-neutral
policies designed to promote
opportunities for minorities and women
are in fact working as intended.’’ NHMC
et al. opined that ‘‘any consideration of
[SDBs] is premature’’ until the
Commission resolves the existing
problems with its data and analysis and
that any SDB proposal ‘‘would lack
requisite supporting data and analysis
necessary to withstand scrutiny from
the court based on the current record.’’
(ii) Discussion
209. The Commission tentatively
concludes that it does not have
sufficient evidence at this time to satisfy
the constitutional standards necessary
to adopt race- or gender-conscious
measures. In evaluating the possibility
of adopting an SDB standard, or any
other race-conscious standard, the first
question the Commission must consider
is whether the standard could be
justified by a ‘‘compelling governmental
interest.’’ Assuming that such an
interest could be established, the
Commission then would have to be able
to demonstrate that the application of
the race-conscious standard to specific
measures or programs would be
‘‘narrowly tailored’’ to further that
interest. The Commission discusses
below its preliminary approach to this
analysis. While the Commission
tentatively finds that a reviewing court
could deem the Commission’s interest
in promoting a diversity of viewpoints
compelling, the Commission believes
that it does not have sufficient evidence
at this time to demonstrate that
adoption of race-conscious measures
would be narrowly tailored to further
that interest. The Commission also
discusses the constitutional analysis
that would apply if it sought to adopt
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gender-conscious measures based on
that interest. Further, the Commission
tentatively finds that it does not have
sufficient evidence to establish a
compelling interest in remedying past
discrimination. The Commission seeks
comment on both its preliminary
analysis and its tentative findings.
210. As a threshold matter, the
Commission rejects commenters’
arguments that the Commission is
required to adopt an SDB standard or
another race-conscious eligible entity
standard in this proceeding in light of
the court’s instructions in Prometheus
II. The Commission also disagrees with
arguments that the Commission is not
permitted to conclude this proceeding
until it has completed any and all
studies or analyses that may enable it to
take such action in the future consistent
with current standards of constitutional
law. The Commission intends to follow
the Third Circuit’s direction that the
Commission consider adopting an SDB
definition before completion of this
proceeding and evaluate the feasibility
of adopting a race-conscious eligibility
standard based on an extensive analysis
of the available evidence. The
Commission does not believe that the
Third Circuit intended to prejudge the
outcome of the Commission’s analysis
of the evidence or the feasibility of
implementing a race-conscious standard
that would be consistent both with
applicable legal standards and the
Commission’s practices and procedures.
(i) Constitutional Analysis of
Commission Interest in Enhancing
Viewpoint Diversity
211. Compelling Governmental
Interest Analysis. In the NPRM, the
Commission reaffirmed its longstanding
commitment to advancing a diversity of
viewpoints. The Commission noted that
it ‘‘has relied on its media ownership
rules to ensure that diverse viewpoints
and perspectives are available to the
American people in the content they
receive over the broadcast airwaves,’’
and stated that ‘‘media ownership limits
are necessary to preserve and promote
viewpoint diversity.’’ In this regard, the
Commission further explained that it
has ‘‘regulated media ownership as a
means of enhancing viewpoint diversity
on the premise that diffuse ownership
among media outlets promotes the
presentation of a larger number of
viewpoints in broadcast content’’ than
otherwise would be available. The
NPRM also noted that, in addition to
viewpoint diversity, the Commission
has considered the impact of its rules on
program, outlet, source, and minority
and female ownership diversity.
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212. As the Third Circuit observed in
Prometheus II, the Supreme Court long
has recognized the Commission’s
interest in broadcast diversity. In Metro
Broadcasting, the Supreme Court held,
based on the application of intermediate
constitutional scrutiny, that ‘‘the
interest in enhancing broadcast
diversity is, at the very least, an
important governmental objective.’’ In
reaching this determination, the Court
stated that ‘‘[s]afeguarding the public’s
right to receive a diversity of views and
information over the airwaves is . . . an
integral component of the FCC’s
mission’’ and that the Commission’s
‘‘‘public interest’ standard necessarily
invites reference to First Amendment
principles.’’ That opinion was issued
prior to Adarand, however, which
overruled the application of
intermediate scrutiny in Metro
Broadcasting. Notably, Adarand did not
disturb other aspects of Metro
Broadcasting, including the recognition
of an important governmental interest in
broadcast diversity. Nonetheless, in the
aftermath of Adarand, it is clear that the
Commission would have to establish
that its interest in promoting diversity is
not only important, but compelling, in
order to adopt a race-conscious
standard. In addition, the Supreme
Court held in 2003 in Grutter v.
Bollinger that diversity is a compelling
governmental interest in the realm of
higher education. That finding was
based on the Court’s determination that
‘‘universities occupy a special niche in
our constitutional tradition’’ and on
substantial evidence, including
numerous expert studies and reports,
regarding the educational benefits that
flow from student body diversity.
213. The Commission believes that its
interest in promoting a diversity of
viewpoints could be deemed
sufficiently compelling to survive strict
scrutiny analysis. In a different context,
the Supreme Court has recognized
viewpoint diversity as an interest ‘‘of
the highest order.’’ In addition, the
Supreme Court in Metro Broadcasting
recognized similarities between
broadcast diversity and the interest in
promoting student body diversity the
Court later recognized as compelling in
Grutter: ‘‘Just as a ‘diverse student body’
contributing to a ‘‘‘robust exchange of
ideas’’’ is a ‘constitutionally permissible
goal’ on which a race-conscious
university admissions program may be
predicated, the diversity of views and
information on the airwaves serves
important First Amendment values.’’
Other similarities between Metro
Broadcasting and Grutter further
strengthen the conclusion that
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viewpoint diversity may qualify as a
compelling interest. In both cases, the
Supreme Court recognized that there
were important First Amendment
interests at stake and acknowledged that
diversity was central to the relevant
institution’s mission. In addition, just as
the Grutter Court acknowledged the
longstanding recognition of education’s
‘‘fundamental role’’ in American
society, the Court long has recognized
that broadcasting is ‘‘an essential part of
the national discourse on subjects across
the whole broad spectrum of speech,
thought, and expression.’’
214. The Commission notes, however,
that some decisions applying strict
scrutiny have cast doubt on the
likelihood that courts would accept the
Commission’s interest in viewpoint
diversity as the basis for race-conscious
action. In 2007, the Supreme Court
declined to recognize a compelling
interest in diversity outside of ‘‘the
context of higher education.’’ Moreover,
the DC Circuit held in Lutheran ChurchMissouri Synod v. FCC that broadcast
diversity does not rise to the level of a
compelling governmental interest. The
DC Circuit reasoned that ‘‘even the
majority’’ of the Supreme Court ‘‘who
thought the government’s interest
‘important’ [in Metro Broadcasting]
must have concluded implicitly that it
was not ‘compelling’; otherwise, it is
unlikely that the majority would have
adopted a wholly new equal protection
standard to decide the case as it did.’’
That reading is not compelled, however.
The Metro Broadcasting Court actually
stated that ‘‘enhancing broadcast
diversity is, at the very least, an
important governmental objective,’’
thereby leaving open the possibility that
broadcast diversity might be a
compelling interest.
215. The Commission seeks comment
on this preliminary analysis, including
any other factors or relevant precedent
that it should consider. The
Commission also seeks comment on
other relevant interests that a reviewing
court might recognize as compelling and
the analysis of such interests under
applicable judicial precedent.
216. Narrow Tailoring Analysis. Even
assuming that the Commission were
able to establish a compelling interest in
diversity, it still would be required to
demonstrate that the adoption of a raceconscious SDB standard, as well as the
programs to which it would apply,
would be ‘‘narrowly tailored’’ to further
that interest. As the Supreme Court has
stated, ‘‘[e]ven in the limited
circumstance when drawing racial
distinctions is permissible to further a
compelling state interest, government is
still ‘constrained in how it may pursue
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that end: [T]he means chosen to
accomplish the [government’s] asserted
purpose must be specifically and
narrowly framed to accomplish that
purpose.’’ The Commission tentatively
concludes that the evidence in the
record at this time does not satisfy this
requirement for two reasons. First, the
Commission tentatively finds that it
does not demonstrate that the
connection between minority ownership
and viewpoint diversity is direct and
substantial enough to satisfy strict
scrutiny. Second, it believes that the
record does not reveal a feasible means
of carrying out the type of
individualized consideration the
Supreme Court has held is required for
a diversity-based program to pass
constitutional muster.
217. The Commission disagrees with
commenters who argued that a nexus
between minority ownership and
viewpoint diversity sufficient to satisfy
strict scrutiny already has been
established and accepted by the
Supreme Court in Metro Broadcasting.
The Commission believes that empirical
evidence of a stronger nexus between
minority ownership and broadcast
diversity than was demonstrated in
Metro Broadcasting would be required
for a race-conscious SDB standard to
withstand strict scrutiny. In finding that
the Commission’s minority ownership
policies were substantially related to
achieving broadcast diversity, the
Supreme Court in Metro Broadcasting
deferred to the judgment of Congress
and the Commission, as corroborated by
various social science studies. As stated
above, however, the Supreme Court
since has repudiated Metro
Broadcasting’s application of
intermediate scrutiny, and under strict
scrutiny, the Commission’s judgment
regarding the relationship between
minority ownership and broadcast
diversity is unlikely to receive the same
deference. In her dissent in Metro
Broadcasting, Justice O’Connor argued
that the Court should have applied strict
scrutiny and that, under such scrutiny,
the available evidence fell far short of
the requisite direct and substantial
connection, establishing at best ‘‘the
existence of some rational nexus.’’
Subsequent developments in
constitutional jurisprudence further
suggest that empirical evidence of a
stronger nexus between broadcast
diversity and minority ownership than
was shown in Metro Broadcasting
would be required to withstand strict
scrutiny.
218. As explained below, there is a
significant amount of evidence in this
proceeding regarding the role and status
of minorities in the broadcast industry.
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Although this evidence contributes
valuable information to the record in
this proceeding and informs the
Commission’s broader review of the
broadcast ownership rules, it tentatively
concludes that the evidence in the
record would not satisfy strict scrutiny.
Commenters are invited to address the
Commission’s tentative conclusions and
evaluations of this evidence. In
addition, the Commission invites
commenters to provide any additional
evidence that may be relevant to this
analysis. With regard to any such
evidence, commenters should explain
whether and, if so, how the evidence
would bolster the Commission’s ability
to satisfy the requisite narrow tailoring
standard.
219. The two recent studies in the
record that directly address the impact
of minority ownership on viewpoint
diversity are Media Ownership Studies
8A and 8B. Media Ownership Study 8A
focuses on the relationship between
local media ownership and viewpoint
diversity in local television news. The
authors calculate a measure of
viewpoint diversity based on program
audience data and then analyze the
relationship of this measure to certain
aspects of the Commission’s broadcast
ownership rules, finding either that the
relationship is not statistically
distinguishable from zero or very small
in absolute magnitude. In particular,
this study finds that the relationship
between minority ownership and
viewpoint diversity is not statistically
distinguishable from zero. As a result,
this study does not appear to provide
evidence that the Commission could
rely upon to justify race-conscious
action.
220. Media Ownership Study 8B
examines viewpoint diversity in local
television news through an analysis of
television news transcripts. In general,
the authors find very little evidence of
a robust relationship between available
measures of market structure and
viewpoint diversity, perhaps due to the
fact that the measures of market
structure are, in the words of the
authors, ‘‘rather blunt.’’ With respect to
minority ownership in particular, the
authors find almost no statistically
significant relationship between such
ownership and their measure of
viewpoint diversity. Notably, the study
does find a positive relationship
between minority ownership and
coverage of minority politicians, which
suggests that minority-owned stations
may focus on certain types of minorityoriented content more than other
stations and which could be viewed as
a measure of one form of viewpoint
diversity. Despite this finding, the
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Commission tentatively concludes that
Media Ownership Study 8B does not
provide sufficient evidence to satisfy the
requirements of strict scrutiny. First, the
effects of minority ownership revealed
in the study are quite limited overall,
and minority ownership does not have
an effect on most variables and disparity
measures analyzed. Second, in the vast
majority of cases the authors study, the
relationship between minority
ownership and viewpoint diversity is
not statistically different from zero.
221. Other studies in the record
examine the relationship between
minority ownership of broadcast outlets
and other aspects of the Commission’s
diversity goal, such as programming or
format diversity. The Commission does
not believe that evidence regarding
program or other forms of diversity is as
relevant as evidence regarding
viewpoint diversity for the purpose of
establishing narrow tailoring to a
compelling interest. The Commission
tentatively concludes that, of any
diversity-related interest that the
Commission has authority to advance,
viewpoint diversity currently is most
likely to be accepted as a compelling
governmental interest under strict
scrutiny. Although the Metro
Broadcasting Court did not define
broadcast diversity with this level of
precision, a court applying strict
scrutiny is likely to require such
precision, and the Supreme Court’s
prior recognition of broadcast diversity
as an interest ‘‘of the highest order’’
seems to pertain to viewpoint diversity.
Media Ownership Study 7 assesses the
relationship between ownership
structure and the provision of radio
programming, as measured by program
formats, to minority (African-American
and Hispanic) audiences between 2005
and 2009. The study finds that minority
audiences have different format tastes
than white audiences and that minorityowned stations disproportionately cater
to these tastes. In addition, the
regression analyses included in Media
Ownership Study 7 show that, on a
market-wide basis, the presence of
minority-owned stations increases the
amount of minority-targeted
programming and that the availability of
minority-targeted formats attracts more
minorities to listening. The study also
concludes that most stations with
minority-targeted formats are not
minority-owned and that group
ownership, including particularly
ownership by non-minority owners,
within a local market allows for greater
format diversification. Because this
study is focused on format diversity and
shows that non-minority stations
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provide a significant amount of
minority-targeted programming, the
Commission tentatively finds that it
would have limited value as a
justification for adopting race-conscious
measures.
222. In addition to the Media
Ownership Studies commissioned for
this proceeding, commenters have
submitted a number of studies into the
record that analyze issues related to
minority broadcast ownership. The
Commission discusses those studies that
appear to relate most closely to the
impact of minority ownership on its
diversity goals. Commenters are invited
to supplement this discussion with
additional views of the relevance of
these studies and to submit additional
evidence that may be pertinent to the
Commission’s analysis. For example,
‘‘Media Ownership Matters: Localism,
the Ethnic Minority News Audience and
Community Participation,’’ a 2006 study
commissioned by the Benton
Foundation, finds that there is a
‘‘nexus’’ between minority ownership
and service to underserved
communities. This study used
ethnographic and survey research to
discern patterns in news consumption
among minorities in the Washington,
DC, metropolitan area. It finds that of
the 18 percent of minority listeners who
reported that they prefer to obtain news
programming from radio, a majority of
those listeners preferred minorityowned stations. While this finding is
informative, the Commission tentatively
finds that the evidentiary value of this
study in the context of a strict scrutiny
analysis would be limited because it
covered only three neighborhoods in
one metropolitan area. In addition, the
study does not provide any statistical
analysis of or adjust for factors aside
from minority ownership that may
explain this result. Additionally, this
finding represents only a small
percentage of the individuals the
authors surveyed (i.e., a majority of 18
percent of the listeners surveyed).
Furthermore, the study does not analyze
the news content on minority-owned
radio stations or provide analysis
comparing such content to the news
content on other stations.
223. In sum, the Commission believes
that the body of evidence contained in
the recent Media Ownership Studies
and the studies submitted in the record
by commenters do not demonstrate the
‘‘nearly complete’’ or ‘‘tightly bound’’
nexus between diversity of viewpoint
and minority ownership that would be
required to justify a race-based
eligibility entity definition.
Nevertheless, the Commission believes
that the studies strengthen the evidence
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of a link between broadcast diversity
and minority ownership. They also
begin to answer questions raised by
Justice O’Connor’s Metro Broadcasting
dissent, such as how to define minority
programming and whether such
programming is underrepresented, that
the Supreme Court found it unnecessary
to address under intermediate scrutiny.
In particular, existing studies show that
minority groups have distinct
preferences, and that expanding
minority ownership increases the
amount of programming targeted to such
preferences. As stated above, however,
the evidence largely concerns program
or format diversity rather than the
viewpoint diversity that the Supreme
Court has recognized as an interest ‘‘of
the highest order’’ and that the
Commission believes is most central to
First Amendment values. Many of the
studies also support only limited
conclusions and reflect a need for
further analysis. Given the
Commission’s tentative assessments of
these studies and other data, it cannot
conclude at this time that the evidence
demonstrates a sufficient nexus between
minority ownership of broadcast
stations and viewpoint diversity to
withstand strict scrutiny.
224. In response to NABOB’s request
that the Commission provide a specific
timetable for completing future studies
necessary to adopt a policy to promote
minority ownership, the Commission
has identified in detail in this Further
Notice of Proposed Rulemaking the
studies in the current record that it have
found establish useful information
regarding the relationship between
viewpoint diversity and minority and
female ownership of broadcast stations.
In addition, the Commission has
outlined ongoing and additional efforts
to achieve important further analysis of
the status and impact of minority
ownership, including, but not limited
to, the studies being conducted by
OCBO and the Hispanic television
viewing study discussed above. In
addition, as indicated in the NPRM,
Form 323 ownership data will continue
to be collected and analyzed and
considered in connection with future
media ownership reviews. The process
for doing so will continue to be refined
and improved. The Commission cannot
firmly establish herein a timetable for
release of future biennial ownership
data or the completion of studies,
examinations, or assessments.
Commenters may submit additional
studies that the Commission should
consider in its analysis.
225. In addition, the Commission
tentatively finds that the record in this
proceeding does not reveal a feasible
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means of carrying out the type of
individualized consideration the
Supreme Court has held is required to
pass constitutional muster under strict
scrutiny. Where race-conscious
governmental action is concerned, the
Supreme Court previously has found
that narrow tailoring requires
individualized review, serious, goodfaith consideration of race-neutral
alternatives, minimal adverse impact on
third parties, and temporal limits. In
particular, the Court found in Grutter
that narrow tailoring demands that race
be considered ‘‘in a flexible, nonmechanical way’’ alongside other factors
that may contribute to diversity and that
consideration of race was permissible
only as one among many disparate
factors in order to evaluate individual
applicants for admission to an
educational institution. The manner in
which the Commission allocates
broadcast licenses is different in many
important respects from university
admissions, and the Commission
believes that implementing a program
for awarding or affording preferences
related to broadcast licenses based on
the ‘‘individualized review’’ required in
other contexts would pose a number of
administrative and practical challenges
for the Commission. The Supreme Court
has held, however, that ‘‘[t]he fact that
the implementation of a program
capable of providing individualized
consideration might present
administrative challenges does not
render constitutional an otherwise
problematic system.’’ The Commission
seeks comment on its tentative
conclusion and potential ways in which
an individualized review process
feasibly, effectively, and efficiently
could be incorporated into any raceconscious measures adopted by the
Commission.
226. Commenters generally did not
suggest criteria, other than race and
ethnic origin, that could be considered
in an individualized, holistic evaluation
system like that approved in Grutter.
DCS recommended that the Commission
replace its revenue-based eligible entity
definition with an ODP standard as a
race-neutral means of advancing
ownership diversity. The Commission
notes that it is not entirely clear whether
the proposed ODP standard would be
subject to heightened constitutional
scrutiny. Moreover, the Commission
believes that it does not have a
sufficient record at present on a number
of issues that would need to be resolved
prior to the implementation of an ODP
standard. Among other issues, no
commenter provided input on (1) what
social or economic disadvantages
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should be cognizable under an ODP
standard, (2) how the Commission could
validate claims of eligibility for ODP
status, (3) whether applicants should
bear the burden of proving specifically
that they would contribute to diversity
as a result of having overcome certain
disadvantages, (4) how the Commission
could measure the overcoming of a
disadvantage if an applicant is a widely
held corporation rather than an entity
with a single majority shareholder or a
small number of control persons, and (5)
how the Commission could evaluate the
effectiveness of the use of an ODP
standard. Even if the Commission could
develop an adequate record on these
issues, it is concerned that it may lack
the resources to conduct such
individualized reviews. Moreover, the
Commission would have to walk a very
fine line in order to fully evaluate the
potential diversity contributions of
individual applicants without running
afoul of First Amendment values. The
Commission is concerned that the type
of individualized consideration that
would be required under an ODP
standard could prove to be
administratively inefficient, unduly
resource-intensive, and inconsistent
with First Amendment values. The
Commission seeks comment on these
issues and its foregoing analysis
regarding the feasibility of adopting an
ODP standard.
227. Analysis of Gender-Based
Diversity Measures. The Supreme Court
has held that gender-based
classifications must satisfy intermediate
scrutiny and, as such, must be
substantially related to the achievement
of an important objective. As noted
above, the Supreme Court found in
Metro Broadcasting, based on the
application of intermediate
constitutional scrutiny, that ‘‘the
interest in enhancing broadcast
diversity is, at the very least, an
important governmental objective.’’
Applying intermediate scrutiny, the DC
Circuit overturned the Commission’s
former gender preference policy in
Lamprecht v. FCC. Recognizing that
Metro Broadcasting established
broadcast diversity as an important
government objective, the DC Circuit
focused on its relationship to female
ownership. The court stated that the
existence of such a relationship rests on
several assumptions, but chose to
address only one: that women who own
broadcast stations are more likely than
white men to broadcast ‘‘women’s
programming.’’ The court concluded
that the only available study failed to
establish a statistically meaningful link
between ownership by women and
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programming of any particular kind. At
this time, the Commission cannot
conclude that the record evidence
establishes a relationship between the
Commission’s interest in viewpoint
diversity and the ownership of
broadcast stations by women that would
satisfy intermediate scrutiny. While the
Commission acknowledges that the data
show that women-owned stations are
not represented in proportion to the
presence of women in the overall
population, the Commission does not
believe that the evidence available at
this time reveals that the content
provided via women-owned broadcast
stations substantially contributes to
viewpoint diversity in a manner
different from other stations or
otherwise varies significantly from that
provided by other stations. The only
study included in the record of this
proceeding that analyzes the
relationship between female ownership
and broadcast content is the Turner
Radio Study, which finds that markets
that contain radio stations with either
female or minority ownership are more
likely to broadcast certain progressive
and conservative talk shows. This study
does not appear to demonstrate a causal
relationship between female or minority
ownership and the diversity of
viewpoints or content available, as it
does not control for other factors that
may explain both the presence of a
greater diversity of talk shows and a
higher percentage of female or minority
ownership in certain markets. In any
event, the Commission tentatively
concludes that this study is too limited
in scope to establish a substantial
relationship between female ownership
and viewpoint diversity. Other studies
in the record establish that female
ownership of broadcast stations is well
below the proportion of women in the
population, a fact that is not in dispute
in this proceeding. Because these
studies do not indicate that increased
female ownership will increase
viewpoint diversity, the Commission
believes that they do not provide a
rationale under the foregoing analysis
for gender-based diversity measures.
However, the Commission seeks
comment on this preliminary
determination as well as any relevant
evidence regarding this issue.
(ii) Constitutional Analysis of the
Commission’s Interest in Remedying
Past Discrimination
228. As an alternative to establishing
a compelling interest in viewpoint
diversity, race- or gender-based
measures are permissible as a remedy to
past or present discrimination. To
justify race-based remedial measures,
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the Commission would have to establish
a ‘‘strong basis in evidence’’ of
discrimination, i.e., evidence
‘‘approaching a prima facie case of a
constitutional or statutory violation.’’ To
substantiate this approach, the
Commission would have to identify,
with specificity, evidence of public
discrimination within the broadcast
industry or private discrimination in
which the government acted as a
‘‘passive participant.’’ Less evidence is
required for gender-based measures,
although an ‘‘exceedingly persuasive
justification’’ is still necessary. The
Commission never has asserted a
remedial interest in race- or genderbased broadcast regulation, and courts
primarily have considered such
measures in the context of public
contracting decisions. Most commenters
in this proceeding have not focused on
establishing a case for remedial
measures, although DCS argued that
‘‘remedying the present effects of past
discrimination provides a compelling
interest.’’ While some evidence supports
a finding of discrimination in the
broadcast industry, the Commission
tentatively concludes that it is not of
sufficient weight to satisfy
constitutional standards. The
Commission seeks comment on the
preliminary analysis described below,
including any other relevant precedent
or data it should consider.
229. As the Commission concedes in
this Further Notice of Proposed
Rulemaking, the proportions of
minorities and females that own
broadcast stations are lower than their
proportions in the general population.
An inference of discrimination may
arise ‘‘when there is a significant
statistical disparity between the number
of qualified minority contractors willing
and able to perform a particular service
and the number of such contractors
actually engaged.’’ But ‘‘[w]hen special
qualifications are required to fill
particular jobs, comparisons to the
general population (rather than to the
smaller group of individuals who
possess the necessary qualifications)
may have little probative value.’’ Thus,
the raw numbers reflecting existing
levels of minority or female ownership
by themselves are not sufficient to
overcome the constitutional hurdle that
has been established for race- and
gender-based remedial measures. In
Croson, the Supreme Court warns
against the ‘‘completely unrealistic
assumption that minorities will choose
a particular trade in lockstep proportion
to their representation in the local
population.’’ There is no evidence in the
current record demonstrating a
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statistically significant disparity
between the number of minority- and
women-owned broadcast stations and
the number of qualified minority and
women-owned firms. Commenters are
asked to address whether evidence of
such a disparity is ascertainable,
particularly given the low number of
minority and women-owned firms.
Based on relevant precedent, the
Commission tentatively concludes that
it cannot demonstrate a compelling
interest in remedying discrimination in
the Commission’s licensing process in
the absence of such evidence. The
Commission seeks comment on this
tentative conclusion.
230. Anecdotal or historical evidence
of discrimination also can establish that
a strong basis in evidence exists for
remedial measures, although such
evidence generally is helpful only when
it reinforces statistical evidence. DCS
argued that a 2000 study comprising
more than 100 interviews demonstrates
that broadcast licensing procedures
present challenges to minority and
female access to spectrum and licenses.
In the Historical Study, minorities and
women repeatedly report encountering
discrimination in their efforts to obtain
capital to finance their broadcast and
wireless businesses, secure advertising
on their stations, gain exposure and
experience to qualify for ownership
through employment opportunities, and
learn of ownership opportunities. The
Historical Study reports no evidence,
however, of actual discrimination by the
Commission.
231. DCS also argued that another
2000 study establishes that barriers
inhibiting minority and female access to
capital amount to industry
discrimination in which the government
has passively participated. The Capital
Markets Study found that both minorityand women-owned businesses were
significantly less likely to obtain
wireless licenses in auctions than were
non-minority businesses and that among
current broadcast licensees, minority
(but not female) applications for debt
financing were significantly less likely
to be approved than non-minority
applications, and minority applicants
paid higher interest rates. The study
also contains a literature survey of
empirical studies using data over two
decades, which is not specific to the
broadcast industry, finding or
suggesting that racial discrimination
exists in U.S. capital markets in both
denial rates and interest rates. However,
the study indicates that its results are
not fully conclusive and emphasizes the
need for further analysis to control for
potentially important variables. Also,
the focus on wireless auctions and other
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non-broadcast industry information
makes it less probative of discrimination
in the broadcast licensing process.
Further, the study does not address the
secondary market for licenses.
232. While the evidence offered is
informative on these subjects, the
Commission preliminarily finds that it
is insufficient to satisfy the
constitutional requirements to support a
race- or gender-based remedial action.
In this regard, comparison is instructive
to Adarand v. Slater, a leading public
contracting case in which the Tenth
Circuit found the requisite strong basis
in evidence. The court found
‘‘significant’’ evidence of public
discrimination in that case: the record
contained 39 studies revealing an
aggregate 13 percent disparity between
minority business availability and
utilization in government contracting, a
figure which the court found to be
‘‘significant,’’ if not overwhelming,
evidence of discrimination.
Nevertheless, the court relied
principally on evidence of private
discrimination. The evidence was
similar in nature to that discussed
above—denial of access to capital, as
well as the existence of racially
exclusionary ‘‘old boy’’ networks and
union discrimination that prevented
access to the skills and experience
needed to form a business—but greater
in extent and weight. The court had the
benefit of a Department of Justice report,
prepared in response to the Supreme
Court’s decision in Adarand,
summarizing 30 congressional hearings
and numerous outside studies providing
both statistical and anecdotal evidence
of such private discrimination. Here, in
contrast, the only statistical evidence
pertains to discriminatory access to
capital. The rest of the evidence
available at this time is anecdotal and,
therefore, of more limited value. Thus,
it tentatively appears that the existing
evidence of past discrimination in this
case is not nearly as substantial as that
accepted by courts in other contexts.
c. Additional Proposals Related to
Minority and Female Ownership
233. As explained above, the
Commission tentatively concludes that,
if it reinstate the revenue-based eligible
entity standard, it also would be
appropriate to readopt each of the
regulatory policies the Third Circuit
remanded in Prometheus II that rely on
this standard. Several commenters
asked the Commission to consider
additional measures that they believed
would foster ownership diversity. For
example, DCS submitted 47 proposals
that it claimed would ‘‘address the
barriers to diverse participation in
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media ownership and . . . increase
minority and women participation in
broadcasting.’’ Although DCS advocated
adoption of all of these proposed
measures, it focused on four that it
believed the Commission ‘‘should
immediately begin implementing.’’
These recommendations include: (1)
Relaxing the foreign ownership
limitations under Section 310(b)(4) of
the Communications Act; (2)
encouraging Congress to reinstate and
update tax certificate legislation; (3)
granting waivers of the local radio
ownership rule to parties that
‘‘incubate’’ qualified entities; and (4)
migrating AM radio to VHF Channels 5
and 6. In addition, AWM asked the
Commission to consider several actions
to address the ‘‘historic
underrepresentation of women’’ in
ownership of broadcast stations and
managerial positions in the broadcast
industry.
234. As discussed below, the
Commission has implemented some of
these recommendations. Because the
Commission believes that the remainder
of these proposals would raise public
interest concerns, may not provide
meaningful assistance to the intended
beneficiaries, or are outside of the
proper scope of this broadcast
ownership proceeding, the Commission
tentatively concludes that it should not
adopt them here. The Commission seeks
comment on this tentative conclusion.
235. Foreign Ownership Restrictions.
DCS recommended that the Commission
relax its policies under Section 310(b)(4)
of the Communications Act, which
restricts foreign ownership and voting
interests in entities that control
Commission licensees. DCS claimed
that this action would provide ‘‘U.S.
broadcasters, particularly minorities,
who have difficulty access[ing] capital’’
with ‘‘access to new sources of capital
that are not available to them under the
current regulatory paradigm.’’
Additionally, in a separate proceeding a
broad coalition of broadcasters, public
interest groups, and media brokers
(Coalition for Broadcast Investment or
CBI) sought clarification of the
Commission’s policies and procedures
in reviewing applications or
transactions that propose foreign
broadcast ownership that would exceed
the 25 percent benchmark contained in
Section 310(b)(4). The Media Bureau
issued a public notice inviting comment
on the CBI Request. The majority of
comments filed in response to the
public notice supported CBI’s position.
236. In November 2013, the
Commission issued a Declaratory Ruling
(78 FR 75563, Dec. 12, 2013, FCC 13–
150, rel. Nov. 14, 2013) clarifying that
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the plain language of Section 310(b)(4)
provides the Commission the authority
to review applications for approval of
foreign investment in the controlling
U.S. parent of a broadcast licensee
above the 25 percent benchmark on a
case-by-case basis. The Commission
stated that such applications may be
granted unless it finds that a denial will
serve the public interest. In issuing the
Declaratory Ruling, the Commission
observed the range of changes in the
media landscape and marketplace since
enactment of the foreign ownership
restriction and noted that limited access
to capital is a concern in the broadcast
industry, particularly for small entities,
including entities owned by minorities
and women. The Commission further
noted that a clear articulation of its
‘‘approach to Section 310(b)(4) in the
broadcast context has the potential to
spur new and increased opportunities
for capitalization for broadcasters, and
particularly for minority, female, small
business entities, and new entrants.’’
237. Tax Certificate Legislation. DCS
also urged the Commission to ‘‘continue
to support and encourage Congress to
reinstate and expand’’ the former tax
certificate policy, which permitted firms
to defer capital gains taxation on the
sale of media properties to minorities. It
also suggested that an updated tax
certificate policy could address previous
congressional concerns if it were raceneutral, encompassed both media and
telecommunications entities, and
included limits on the size of eligible
transactions and programs. The
Commission agrees that tax deferral
legislation could prove an effective
means to enhance broadcast ownership
diversity. The Commission’s most
recent Section 257 Report to Congress
addresses the benefits of tax certificate
legislation to ownership diversity and
includes a recommendation that
Congress pass such legislation.
238. Incubation. DCS requested that
the Commission provide waivers of the
local radio ownership rule to
broadcasters that finance or incubate an
SDB or a ‘‘valid eligible entity.’’
Specifically, DCS proposed that an
entity that engages in a specified list of
‘‘qualifying incubating activities’’ be
granted, under certain conditions, a
waiver of the local radio ownership cap
‘‘by one station per incubating activity.’’
239. The Commission shares concerns
that proposals like DCS’s incubation
proposal that would allow blanket
waivers of the local radio ownership
rule could create a substantial loophole
to the ownership caps without sufficient
offsetting benefits. The Commission’s
local radio rules have been carefully
calibrated to protect competition and
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new entry. By allowing broadcasters to
exceed these caps, DCS’s proposal could
result in more local radio consolidation
than is presently permitted under the
Commission’s rules. Moreover, it is
unclear based on the record in this
proceeding what kind of entities should
be eligible to benefit from incubation.
Bonneville/Scranton suggested that the
guidelines for determining entities that
would be eligible to be incubated could
be based on the diversity channel setaside requirement adopted by the
Commission as a condition to the
approval of the merger of XM and
Sirius. In that decision, the Commission
ordered the combined new satellite
radio entity to set aside channels to
encourage new market entry, enhance
viewpoint diversity, and promote the
delivery of programming content to
underserved audiences. Bonneville/
Scranton suggested that a voluntary
broadcast incubation program modeled
on this condition could permit a
currently licensed broadcaster to select
a ‘‘New Voice’’ to incubate based on
certain minimal Commission
requirements and general selection
considerations, such as small business
size and independence from the
broadcaster. NABOB cautioned,
however, that ‘‘[a]ny policies the
Commission adopts which do not have
the effect of making it desirable for
industry insiders to seek out minorities
for broadcast ownership opportunities
will be ineffective in increasing
minority ownership.’’ The Commission
is concerned that implementation of
such proposals would pose substantial
legal, administrative, and practical
challenges. To the extent that the
program were limited to SDBs, it would
pose the Equal Protection concerns
described in detail above. If it were
instead extended in the manner
suggested by Bonneville/Scranton, it
would be difficult for the Commission
to administer as a broad-based program
and could potentially open a wide
loophole in the ownership rules, while
possibly having little or no significant
effect on minority and female
ownership.
240. In addition, the Commission is
concerned that it would not be feasible
for it to monitor adequately the
activities that would qualify an entity
for an incubation waiver. As proposed
by DCS, qualifying activities would
encompass a broad array of
arrangements, including, among others,
underwriting or financing the
operations of eligible entities, providing
loans or other financial assistance to
eligible entities, and local marketing
arrangements between independent
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programmers and commercial
broadcasters. Given the challenges of
monitoring over time the types of
complex financing and other
arrangements suggested under DCS’s
incubation proposal, there is a
substantial risk that the Commission
would not be able to ensure that such
arrangements would be, or
prospectively would remain, beneficial
to eligible entities or other intended
beneficiaries. Accordingly, the
Commission tentatively declines to
adopt this proposal in this proceeding.
241. Migration of VHF Channels 5
and 6. In addition, DCS recommended
that the Commission migrate most AM
service to VHF channels 5 and 6. Aside
from DCS, it does not appear that any
party to this proceeding has supported
this proposal. The Commission
tentatively concludes that this proposal,
which would involve extensive changes
to the Commission’s current licensing
rules and spectrum policies, exceeds the
proper scope of this broadcast
ownership proceeding. Moreover, the
Commission notes that Congress has
directed the Commission to conduct an
incentive auction of television broadcast
spectrum and to reassign the remaining
broadcast channels in order to make
more spectrum available for wireless
use. Migrating AM services to VHF
channels 5 and 6 has the potential to
interfere with the Commission’s
implementation of Congress’s directive.
242. Additional DCS Proposals. Many
of DCS’s remaining proposals
recommend changes to a wide range of
Commission licensing, service, and
engineering rules and policies. Several
of these recommendations propose
modifications to the AM broadcast
service. The Commission recently
adopted a notice of proposed
rulemaking which seeks to revitalize the
AM band by identifying ways to
enhance AM broadcast quality and
proposing technical rules that would
enable AM stations to improve their
service. The AM Revitalization NPRM
(78 FR 69629, Nov. 20, 2013, FCC 13–
139, rel. Oct. 29, 2013) solicits comment
on some of the technical issues DCS has
raised in this proceeding, including
modification of: (1) Daytime community
coverage standard for existing AM
stations; (2) nighttime community
coverage standards for existing AM
stations; and (3) AM antenna efficiency
standards. The Commission anticipates
that the AM Revitalization NPRM will
lead to an examination of important
issues regarding the viability of AM
broadcast service, and thus, address
many of the concerns of minority
broadcasters regarding the technical
aspects of their licensed services.
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243. Some of DCS’s proposals extend
into areas that are beyond the
Commission’s authority, including
proposals that ultimately would require
legislative action or action by other
federal entities aside from the
Commission in order to create changes
in rules or policies. Other proposals
involve cable operators and other nonbroadcast services that are outside the
scope of the quadrennial review
proceedings. Although these proposals
are accompanied by detailed and
thoughtful analysis, and some of them
may warrant further consideration, the
Commission believes that they are
outside the scope of this proceeding.
Thus, the Commission does not
anticipate taking further action within
this or successive quadrennial review
dockets on these proposals because they
extend beyond its statutory mandate
under Section 202(h).
244. AWM Proposals. AWM’s
proposals include (1) preparing a primer
on investment in broadcast ownership
for smaller and regional lenders willing
to provide loans to new broadcast
entrants; (2) preparing a primer for new
entrants that provides guidance on how
to find financing; (3) establishing a link
on the Commission’s Web site to
provide information on stations that
may be available for sale to small
businesses; and (4) allowing sellers to
hold a reversionary interest in a
Commission license in certain
circumstances. Although several parties
broadly stated that they support some of
these proposals, there is little record on
these subjects in the current proceeding.
While the Commission agrees that
primers on investment and financing
could be useful to new entrants, the
Commission notes that OCBO already
engages in activities that provide similar
resources to broadcasters and potential
investors, including the regularly
scheduled Capitalization Strategies
Workshops noted above and in the
NPRM. The Commission also believes
that specific advice about investment
and financing is more appropriately
provided by private parties that are
directly involved in the financial
marketplace than by the Commission.
245. In response to AWM’s proposal
that the Commission create a public
listing of stations that may be available
for sale to small businesses, the
Commission note that the Commission
currently does not have at its disposal
the information that would be necessary
to create such a resource. In addition,
the Commission believes that many
licensees would object to any
requirement that would obligate them to
make publicly available information
regarding their plans to sell specific
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stations. Finally, the Commission
tentatively finds that AWM’s proposal
to allow sellers to hold a reversionary
interest in broadcast licensees as a
means of financing sales of broadcast
stations to women and minorities does
not address the Commission’s historical
concerns about reversionary interests
and is insufficiently developed to
support departure from the
Commission’s longstanding policy
against the holding of such interests. At
this time, therefore, the Commission
does not believe there is sufficient
justification to adopt these proposed
measures.
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E. Disclosure of Shared Service
Agreements
1. Introduction
246. In this Further Notice of
Proposed Rulemaking, the Commission
considers whether to require broadcast
stations to disclose agreements for
sharing services and/or resources with
other broadcast stations that are not
commonly owned, as discussed in
greater detail below, to the extent that
such agreements are not already
separately defined and required to be
filed and/or disclosed under the
Commission’s rules (e.g., LMAs and
JSAs). Commenters in a number of
proceedings have expressed concern
about the impact on competition,
localism, and diversity of agreements
whereby one station shares studio
space, operational support, staff,
programming, and/or other services or
support with a separately owned
station. Often these sharing agreements
are executed in conjunction with an
option, right of first refusal, put/call
arrangement, or other similar contingent
interest, or a loan guarantee. Because
the Commission does not currently
require the filing or disclosure of all
such agreements, the Commission and
the public lack information about the
content or breadth of the agreements or
the frequency of their use, inhibiting a
thorough analysis of the impact of these
arrangements on the Commission’s rules
and policy goals. Accordingly, in order
to enable the Commission and the
public to better understand the terms,
operation, and prevalence of these
agreements, the Commission proposes
to define a class of sharing agreements
that could impact its rules and policy
goals and to require the disclosure of
those agreements to enable a
comprehensive assessment of their
impact. Specifically, in this Further
Notice of Proposed Rulemaking the
Commission proposes to define a
category of sharing agreements
designated herein as Shared Service
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Agreements (SSAs), it proposes to
require the disclosure of SSAs by
commercial television stations, and it
seeks comment on the appropriate
method for achieving such disclosure.
While considering whether to require
the filing of SSAs and how the term
SSA should be defined for this purpose
in order to obtain information that will
inform the Commission’s decision about
what, if any, general rules might be
appropriate with respect to such
agreements, the Commission will, of
course, continue to consider such joint
agreements, as relevant and appropriate,
in deciding whether particular
individual transactions serve the public
interest. Once disclosure is achieved,
the Commission will be able to study
these agreements and to determine what
further regulatory action, if any, it
should take with respect to them.
2. Background
247. In the Enhanced Disclosure
FNPRM (76 FR 71267, Nov. 17, 2011,
FCC 11–162, rel. Oct. 27, 2011), the
Commission sought comment on
whether to require the disclosure of
sharing agreements that were not
already defined and required to be
disclosed under the Commission’s rules
(as are, for example, LMAs and JSAs),
and whether to require stations to
include such agreements in their online
public files. Commercial television
stations (full-power and Class A) are
required under Section 73.3526 of the
Commission’s rules to maintain a local
public inspection file, the contents of
which include, inter alia, the station’s
current authorization, citizen
agreements, issues/programs lists, radio
and television LMAs, and radio and
television JSAs. Historically, the file
was located at the station’s main studio;
however, in the Enhanced Disclosure
proceeding, among other actions, the
Commission modified Section 73.3526
for commercial television stations to
require that most of the contents of the
public file (e.g., LMAs and JSAs) be
included in an online public file hosted
by the Commission. In the Enhanced
Disclosure Second R&O (77 FR 27631,
May 11, 2012, FCC 12–44, rel. Apr. 27,
2012), the Commission declined to
adopt any new disclosure requirements
for sharing agreements but indicated
that it would continue to monitor the
issue and revisit the disclosure
requirement in the future.
248. Concurrent with the pendency of
the Enhanced Disclosure proceeding,
the Commission sought comment in the
NPRM about various types of sharing
agreements, noting that commenters to
the NOI had specifically identified
sharing agreements and a subcategory of
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agreements, local news sharing (LNS)
agreements, as matters of concern, but
acknowledging that these terms were
not defined in Commission rules. The
NPRM invited views on the potential
impact of such agreements on the
Commission’s ownership rules and
fundamental policy goals. It identified
potential concerns about such
agreements and potential benefits and
invited submissions of further
information about how to define such
agreements and comment on whether
they should be attributed or disclosed.
249. The records in the Enhanced
Disclosure proceeding and in the 2010
Quadrennial Review proceeding do not
contain comprehensive data or
information about the breadth, content,
or prevalence of sharing agreements
between stations that are not commonly
owned. The Commission is not aware of
any public source for this information.
Although some such agreements are
filed with the Commission in
connection with applications for
assignment or transfer of control of
broadcast licenses, the Commission has
no way of knowing how many of these
agreements exist or what they cover.
The comments in the earlier
proceedings make clear that there are
various types of sharing agreements,
including those that implicate local
news production, that can involve
differing levels of coordination—from
those that involve back office functions
or leases of property or equipment, to
the sharing of raw video footage, to
rebroadcasts of another station’s entire
newscast, to near-total outsourcing of a
station’s day-to-day operations.
Accordingly, any impact on viewers or
markets could vary depending on the
substance of the agreement and the level
of coordination. In the absence of
greater information about the number of
agreements that exist in the market and
their content, the Commission and the
public cannot fully evaluate the
potential public interest harms and
benefits of various arrangements, which
is necessary for the Commission to
formulate sound public policy.
3. Discussion
250. The Commission believes that
commenters have raised important
issues about how and to what extent
sharing agreements implicate the
Commission’s competition, localism,
and diversity policy objectives.
Consideration of these issues is
impeded because so little is known
about the content, scope, and
prevalence of sharing agreements. In
order to assess these issues, however,
the Commission must first define the
agreements between stations that are
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relevant to its improved understanding
of how stations share services and
resources and then create a mechanism
for making such arrangements
transparent to the public and the
Commission. Accordingly, the
Commission seeks comment on a
proposed definition of SSAs and a
requirement that commercial television
stations be required to disclose these
agreements to the public and the
Commission. This is a necessary first
step in determining whether the
Commission’s public interest goals will
be furthered through additional
regulation of these agreements, as some
commenters suggest.
a. Definition of Shared Service
Agreement
251. Commenters refer to sharing
agreements using various terms, such as
sharing agreements, SSAs, or LNS
agreements; however the Commission’s
rules do not define these terms. LMAs
and JSAs are two types of sharing
agreements that are defined in the
Commission’s rules. A single sharing
agreement, however named, may
include provisions for time brokerage,
local news production, joint advertising
sales, and various other station-related
services. All of these different kinds of
arrangements present questions about
the level and type of coordinated
activity that may exist between stations
and the impact of such cooperation on
the public interest. Therefore, the
Commission tentatively concludes that
it should define SSAs broadly enough to
capture all types of resource sharing and
collaboration that may take place
between stations as the best means to
inform the public and the Commission
about the scope of any joint activities
between stations. This information will
provide the basis for informed decision
making about any necessary future
Commission regulation impacting SSAs
or particular categories of SSAs.
252. Accordingly, for the purpose of
implementing the proposed disclosure
requirements discussed below, the
Commission tentatively defines an SSA
as any agreement or series of
agreements, whether written or oral, in
which (1) a station, or any individual or
entity with an attributable interest in the
station, provides any station-related
services, including, but not limited to,
administrative, technical, sales, and/or
programming support, to a station that
is not under common ownership (as
defined by the Commission’s attribution
rules); or (2) stations that are not under
common ownership (as defined by the
Commission’s attribution rules), or any
individuals or entities with an
attributable interest in those stations,
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collaborate to provide or enable the
provision of station-related services,
including, but not limited to,
administrative, technical, sales, and/or
programming support, to one or more of
the collaborating stations.
253. The Commission believes that
this definition, by focusing on the
provision of station-related services and
collaboration by and between broadcast
stations, encompasses the universe of
agreements that are broadly referred to
as ‘‘sharing agreements.’’ This would
include, for example, the provision of
back office services by one
independently owned station to
another; a joint news-gathering
operation; or the joint negotiation of
retransmission consent agreements.
Each such example is a type of resource
sharing, among many others, and the
agreements that govern such
arrangements are appropriately referred
to as SSAs. These agreements, including
those that relate to ‘‘back office’’
functions, reflect the range of
interaction between stations, and the
Commission believes that disclosure of
all such agreements will permit it to
understand the scope of station
interactions so that it can more
effectively advance its public policy
goals in this area.
254. Moreover, the Commission
believes that the definition of SSA
should not be limited to only those
agreements to which station licensees
are parties, as the licensees are not
always a party to the sharing agreement
that affects their station’s operations.
For example, the parent company of one
station may contract with the parent
company of another independently
owned station to provide station-related
services for the first station, using the
same employees for both stations. If the
definition were limited to agreements
that involved licensees, this type of
agreement would arguably not be
included, even though this is certainly
an example of the type of sharing
agreement the Commission seeks to
identify. Accordingly, limiting the
definition of SSAs to agreements
between licensees would exclude
existing agreements that the
Commission intends to include in the
definition, as well as afford a means to
evade any disclosure requirements.
Neither outcome would serve the public
interest.
255. The Commission seeks comment
on the tentative conclusion that SSAs
should be defined broadly to enable the
Commission and the public to
understand the potential concerns and
benefits of these agreements. Is a broad
definition the most appropriate way to
inform the Commission and the public
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about the breadth and prevalence of
agreements across the marketplace? The
Commission seeks comment also on the
proposed definition. Is it broad enough
to include all types of resource sharing
and service agreements between stations
that may be relevant to the
Commission’s policy making initiatives?
Is the definition too broad, such that it
would apply to agreements that do not
involve the provision of station-related
services and/or collaboration between
stations to enable the provision of such
services? Is there an alternate definition
that would better serve the
Commission’s purpose? The
Commission’s transaction review
experience indicates that SSAs are often
accompanied by contingent interest
agreements. The Commission seeks
comment on whether this is also the
case for SSAs that are not part of a
transaction. If so, the Commission seeks
comment on whether and how it should
seek to achieve additional transparency
concerning such contingent interest
arrangements in this this proceeding.
The Commission encourages those who
disagree with the proposed definition to
provide specific alternative language to
define SSAs for purposes of this
proceeding.
256. Should the term SSA instead be
defined more narrowly, and if so how?
For example, are there sharing
agreements that are insignificant to the
operation of the station(s), such that
disclosure would not meaningfully
benefit the Commission’s or the public’s
understanding of station operations, and
that should thus be excluded from the
definition of SSA for this purpose? If so,
what types of exclusions to the
definition should the Commission
adopt? Would a de minimis financial
exception be appropriate (i.e., if the total
dollar amount of the goods or services
provided under the agreement is below
a certain total dollar amount)? If so,
what should the cutoff be? How should
the Commission determine where to set
the cutoff? Could such an exclusion
omit significant agreements that involve
in-kind contributions? Should the
Commission define SSAs to implicate
only agreements that involve local news
operations or the provision or
production of programming? Is so, how
would such a definition be crafted?
Would it implicate any special legal or
Constitutional considerations? If so,
how could the Commission address
such issues? Should the Commission
limit the definition of SSAs only to
those involving stations in the same
local market? Could such a limitation
exclude agreements that have a
significant impact on station operations
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or programming? As discussed in the
following section, the Commission
proposes to limit disclosure of SSAs to
commercial television stations.
Accordingly, should the Commission
limit the definition of SSAs to only
those agreements involving exclusively
commercial television stations? The
Commission notes that commenters
focus primarily on sharing agreements
involving commercial television
stations; accordingly, the Commission
tentatively concludes that any
disclosure requirement for SSAs should
be limited to agreements involving
exclusively commercial television
stations. The Commission seeks
comment on whether to expand the
disclosure requirement to include
agreements involving commercial radio
stations and/or noncommercial stations.
Are there many examples of agreements
between commercial television stations
and other types of stations (e.g.,
noncommercial stations, AM/FM
stations)? What are the costs and
benefits of the definition the
Commission proposes and of any
alternate definitions offered? How
would a narrower definition be
reconciled with the Commission’s and
the public’s interest in understanding
the breadth and prevalence of
agreements across the marketplace?
b. Disclosure of Shared Service
Agreements
257. Although the Commission
believes that commenters have raised
meaningful concerns about the potential
impact of sharing agreements on
competition, diversity, and localism in
television markets, it also acknowledges
that broadcast commenters have
provided evidence that such agreements
may produce public interest benefits.
Currently, the Commission and the
public lack a full understanding of the
agreements and the ability to assess the
impact of the agreements on
Commission policy goals. Thus, the
Commission tentatively concludes that
disclosure of SSAs as defined in this
proceeding is necessary to inform the
Commission and the public of joint
operations and collaborations between
independently owned commercial
television stations. Section 73.3613,
which governs the filing of contracts
with the Commission, requires that a
summary of the substance of oral
contracts subject to filing under that
section must be reported in writing. The
Commission proposes that any
disclosure requirement it may adopt for
SSAs similarly require that the
substance of oral SSAs be reported in
writing. The Commission seeks
comment on this proposal.
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258. The Commission believes that
disclosure of such agreements involving
commercial television stations will
permit the Commission to better
understand the operation of stations and
to assess the impact, if any, of SSAs on
the television marketplace.
Furthermore, members of the public
will be able to gain a greater
understanding of the relationships
between independently owned stations
that are parties to SSAs, which will
allow them to evaluate whether such
interaction has an impact on
programming or other station
operations. The Commission seeks
comment on its tentative conclusion
that disclosure of SSAs as defined
herein is necessary to enable the
Commission and the public to assess the
implications of these agreements for the
marketplace and the Commission’s
public policy goals. Does the
Commission have any alternate means
of assessing the breadth and prevalence
of these agreements or their impact and
implications? If so, what means are
currently available to the Commission
and the public?
259. The Commission seeks comment
on the manner in which SSAs are to be
disclosed to the public and the
Commission. For example, should a
television station be required to place a
copy of each SSA for the station in its
public inspection file? Under such a
requirement, should the Commission
require that these agreements be placed
in the local public inspection file
located in the station’s main studio or
in the station’s online public file, or
both? Should the disclosure
requirement apply to each station that is
involved in the agreement (e.g., the
recipient of services and the provider of
the services)? Would a requirement to
disclose only in a physical (i.e., not
online) public inspection file limit the
Commission’s and the public’s ability to
learn about the content, scope, and
prevalence of sharing agreements? The
Commission already requires that all
radio and television LMAs and JSAs
between commercial broadcast stations
be disclosed by placing them in the
station’s public file, regardless of
whether the agreements are attributable
or filed with the Commission. Should
the Commission extend this existing
requirement for LMAs and JSAs to
include all SSAs for commercial
television stations? What are the costs
and benefits of each method of
disclosure? As noted above, certain
types of sharing agreements are already
specifically defined in the
Commission’s rules and are already
subject to various regulations and
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policies (e.g., LMAs and JSAs). The
Commission does not believe that the
adoption of any proposal in this Further
Notice of Proposed Rulemaking should
result in a duplicate disclosure
obligation for such agreements. For
example, if the Commission were to
extend the existing public inspection
file disclosure requirement for LMAs
and JSAs to SSAs, an agreement that
satisfies the definition of a JSA and an
SSA would only need to be placed in
the public inspection file once.
However, in the event that the
Commission adopts a disclosure
requirement for SSAs that is different
than the disclosure requirements
already in existence for other types of
sharing agreements—for example, a
dedicated docket in the Commission’s
Electronic Comment Filing System
(ECFS) or a new form—the Commission
seeks comment on the extent to which
that disclosure requirement should
apply to other sharing agreements that
are already subject to various disclosure
requirements, as well as the associated
benefits, burdens, and costs of any such
approach.
260. Should the Commission consider
a requirement that SSAs be filed
pursuant to Section 73.3613 of the
Commission’s rules? What are the
benefits or drawbacks of this
alternative? Pursuant to Section
73.3613, licensees or permittees of
commercial or noncommercial AM, FM,
television, or International broadcast
stations must file copies of certain
contracts (including written summaries
of oral contracts) with the Commission
within 30 days of execution. These
contracts cover a broad array of
agreements that relate to station
ownership and operation. Because the
Commission proposes to limit the
disclosure of SSAs to commercial
television stations, as noted above, any
new filing requirement under 73.3613
would be similarly tailored. How would
such a requirement be structured?
Should the Commission consider
adopting a different filing process? For
example, should the Commission create
a new form to be filed with the
Commission or open a dedicated docket
in ECFS, in which licensees, permittees,
or applicants would file copies of
agreements? What would such a process
entail and what would be the benefits
and/or drawbacks of that process?
261. In addition, the Commission
proposes that any disclosure
requirement it may adopt be subject to
the same redaction allowances made
available with respect to the filing of
LMAs and JSAs, namely, that licensees
may redact confidential or proprietary
information. Currently, stations are
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permitted to redact confidential or
proprietary information when disclosing
LMAs and JSAs, though the information
must be made available to the
Commission upon request. The
Commission proposes that the same
procedure apply to the disclosure of
SSAs. Would this approach be desirable
with respect to the disclosure
requirements the Commission is
proposing here? Should it consider
limiting any disclosure or filing
requirement to larger markets, such as
the top 50 or 100 Designated Market
Areas? What considerations would
justify any proposed limitation, and
what other factors should the
Commission consider in evaluating any
limitation? While such an approach
might reduce burdens on stations in
smaller markets, is the impact of SSAs
in smaller markets potentially greater
due to the typically smaller number of
stations in these markets, such that
limiting disclosure to larger markets
would not be advisable? For each
potential alternative proposed, the
Commission seeks comment on the
associated benefits, burdens, and costs.
How much time should it provide for
stations to come into compliance with
this proposed filing requirement? What
burdens would the proposed disclosure
requirement place on stations, and what
costs are associated with those burdens?
How often would these burdens or costs
be incurred? Do SSAs as defined herein
typically last for a period of multiple
years, and if so does that fact mitigate
any associated burdens or costs, and by
how much? How would the possible
exclusions from the definition of SSA
discussed above impact the burdens and
costs?
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II. Procedural Matters
A. Ex Parte Rules
262. Permit-But-Disclose. The
proceeding for this Further Notice of
Proposed Rulemaking shall be treated as
a ‘‘permit-but-disclose’’ proceeding in
accordance with the Commission’s ex
parte rules. Persons making ex parte
presentations must file a copy of any
written presentation or a memorandum
summarizing any oral presentation
within two business days after the
presentation (unless a different deadline
applicable to the Sunshine period
applies). Persons making oral ex parte
presentations are reminded that
memoranda summarizing the
presentation must (1) list all persons
attending or otherwise participating in
the meeting at which the ex parte
presentation was made, and (2)
summarize all data presented and
arguments made during the
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presentation. If the presentation
consisted in whole or in part of the
presentation of data or arguments
already reflected in the presenter’s
written comments, memoranda or other
filings in the proceeding, the presenter
may provide citations to such data or
arguments in his or her prior comments,
memoranda, or other filings (specifying
the relevant page and/or paragraph
numbers where such data or arguments
can be found) in lieu of summarizing
them in the memorandum. Documents
shown or given to Commission staff
during ex parte meetings are deemed to
be written ex parte presentations and
must be filed consistent with rule
1.1206(b). In proceedings governed by
rule 1.49(f) or for which the
Commission has made available a
method of electronic filing, written ex
parte presentations and memoranda
summarizing oral ex parte
presentations, and all attachments
thereto, must be filed through the
electronic comment filing system
available for that proceeding, and must
be filed in their native format (e.g., .doc,
.xml, .ppt, searchable .pdf). Participants
in this proceeding should familiarize
themselves with the Commission’s ex
parte rules.
B. Comment Filing Procedures
263. Comments and Replies. Pursuant
to §§ 1.415 and 1.419 of the
Commission’s rules, 47 CFR 1.415 and
1.419, interested parties may file
comments and reply comments on or
before the dates indicated on the first
page of this document. Comments may
be filed using the Commission’s
Electronic Comment Filing System
(ECFS). See Electronic Filing of
Documents in Rulemaking Proceedings,
63 FR 24121 (1998).
D Electronic Filers: Comments may be
filed electronically using the Internet by
accessing the ECFS: https://
fjallfoss.fcc.gov/ecfs2/.
D Paper Filers: Parties who choose to
file by paper must file an original and
one copy of each filing. If more than one
docket or rulemaking number appears in
the caption of this proceeding, filers
must submit two additional copies for
each additional docket or rulemaking
number.
Filings can be sent by hand or
messenger delivery, by commercial
overnight courier, or by first-class or
overnight U.S. Postal Service mail. All
filings must be addressed to the
Commission’s Secretary, Office of the
Secretary, Federal Communications
Commission.
D All hand-delivered or messengerdelivered paper filings for the
Commission’s Secretary must be
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delivered to FCC Headquarters at 445
12th St. SW., Room TW–A325,
Washington, DC 20554. The filing hours
are 8:00 a.m. to 7:00 p.m. All hand
deliveries must be held together with
rubber bands or fasteners. Any
envelopes and boxes must be disposed
of before entering the building.
D Commercial overnight mail (other
than U.S. Postal Service Express Mail
and Priority Mail) must be sent to 9300
East Hampton Drive, Capitol Heights,
MD 20743.
D U.S. Postal Service first-class,
Express, and Priority mail must be
addressed to 445 12th Street SW.,
Washington, DC 20554.
264. People with Disabilities: To
request materials in accessible formats
for people with disabilities (braille,
large print, electronic files, audio
format), send an email to fcc504@fcc.gov
or call the Consumer & Governmental
Affairs Bureau at (202) 418–0530
(voice), (202) 418–0432 (tty).
C. Supplemental Initial Regulatory
Flexibility Analysis
265. As required by the Regulatory
Flexibility Act of 1980, as amended
(RFA), an Initial Regulatory Flexibility
Analysis (IRFA) was incorporated in the
NPRM in this proceeding. The
Commission sought written public
comment on the proposals in the NPRM,
including comment on the IRFA. The
Commission received no comments in
direct response to the IRFA.
Additionally, the Commission has
prepared this Supplemental IRFA of the
possible significant economic impact on
small entities of the proposals in the
Further Notice of Proposed Rulemaking.
Written public comments are requested
on this Supplemental IRFA. Comments
must be identified as responses to the
Supplemental IRFA and must be filed
by the deadlines for comments provided
on the first page of the Further Notice
of Proposed Rulemaking. The
Commission will send a copy of the
Further Notice of Proposed Rulemaking,
including this Supplemental IRFA, to
the Chief Counsel for Advocacy of the
Small Business Administration (SBA).
In addition, the Further Notice of
Proposed Rulemaking and
Supplemental IRFA (or summaries
thereof) will be published in the Federal
Register.
1. Need for, and Objectives of, the
Further Notice of Proposed Rulemaking
266. The Further Notice of Proposed
Rulemaking initiates the 2014
Quadrennial Review of the broadcast
ownership rules, which was initiated
pursuant to Section 202(h) of the
Telecommunications Act of 1996 (1996
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Act). This review will incorporate and
build on the record of the ongoing 2010
Quadrennial Review. The Commission
is required by statute to review its
media ownership rules every four years
to determine whether they ‘‘are
necessary in the public interest as the
result of competition’’ and to ‘‘repeal or
modify any regulation it determines to
be no longer in the public interest.’’
267. The media ownership rules that
are subject to this quadrennial review
are the local television ownership rule,
the local radio ownership rule, the
newspaper/broadcast cross-ownership
rule, the radio/television crossownership rule, and the dual network
rule. As discussed in more detail below,
the Further Notice of Proposed
Rulemaking proposes to retain two rules
without modification—the local radio
ownership rule and the dual network
rule—and seeks comment on potential
changes to two others—the local
television ownership rule and the
newspaper/broadcast cross-ownership
rule. The Further Notice of Proposed
Rulemaking also seeks comment on
whether to eliminate the radio/
television cross-ownership rule. In
addition, the Further Notice of Proposed
Rulemaking seeks comment on issues
referred to the Commission in the Third
Circuit’s remand in Prometheus Radio
Project v. FCC (Prometheus II) of certain
aspects of the Commission’s 2008
Diversity Order. Lastly, the Further
Notice of Proposed Rulemaking seeks
comment on the proposed disclosure of
certain sharing agreements.
268. Local Television Ownership Rule.
In the Further Notice of Proposed
Rulemaking, the Commission seeks
comment on whether the current local
television ownership rule remains
necessary in the public interest and
should be retained with a limited
modification. Specifically, the
Commission seeks comment on whether
to retain the existing ownership limits,
including the top-four prohibition and
the eight voices test, but replace the
Grade B contour overlap test used to
determine when to apply the local
television ownership rule with a digital
noise limited service contour (NLSC)
test, rather than the DMA-based
approach proposed in the NPRM.
269. The item tentatively concludes
that the current local television
ownership rule remains necessary in the
public interest and should be retained
with a limited modification. Based on
the current media marketplace and the
record in this proceeding, the public
interest would be best served by
replacing the Grade B contour overlap
test used to determine when to apply
the local television ownership rule with
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a digital NLSC test, rather than the
DMA-based approach proposed in the
NPRM. The Commission believes that
the local television ownership rule is
necessary to promote competition. The
Commission further believes that the
competition-based rule proposed in the
Further Notice of Proposed Rulemaking
also would promote viewpoint diversity
by helping to ensure the presence of
independently owned broadcast
television stations in local markets and
would be consistent with the
Commission’s localism goal. The
Commission finds that the local
television ownership rule proposed in
the Further Notice of Proposed
Rulemaking would be consistent with
the goal of promoting minority and
female ownership of broadcast
television stations. The Commission
believes that the competition-based rule
would also indirectly advance the
Commission’s viewpoint diversity goal
by helping to ensure the presence of
independently owned broadcast
television stations in the local market,
thereby increasing the likelihood of a
variety of viewpoints. In addition, while
the Commission does not propose to
retain the rule with the specific purpose
of preserving the current levels of
minority and female ownership, the
Commission tentatively finds that
retaining the existing rule would
effectively address the concerns of those
commenters who suggested that
additional consolidation would have a
negative impact on minority and female
ownership of broadcast television
stations. Ultimately, the Commission
believes that its proposed limited
modification of the rule will better
promote competition, and that this
benefit would outweigh any burdens,
which would be minimized by the
proposal to grandfather combinations.
270. The Further Notice of Proposed
Rulemaking also tentatively concludes
that retaining the existing failed/failing
station waiver criteria would be in the
public interest. The Commission
evaluated the various proposed waiver
standards proffered by commenters, and
is concerned that many of the proposed
waiver criteria would be difficult to
monitor or enforce, are not rationally
related to the ability of each station to
compete in the local market, and could
be manipulated in order to obtain a
waiver. Ultimately, the Commission
predicts that such standards would
significantly expand the circumstances
in which a waiver of the local television
ownership rule would be granted. The
Commission is concerned that such
relaxation would be inconsistent with
the tentative conclusion that the public
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interest is best served by retaining the
existing television ownership limits.
Moreover, the Commission believes that
the existing waiver standard is not
unduly restrictive and that it provides
appropriate relief in markets of all sizes.
Waiver of the Commission’s rules is
meant to be exceptional relief, and the
item tentatively finds that the existing
waiver criteria strike an appropriate
balance between enforcing the
ownership limits and providing relief
from the rule on a case-by-case basis.
271. Local Radio Ownership Rule. The
Further Notice of Proposed Rulemaking
seeks comment on whether the current
local radio ownership rule remains
necessary in the public interest and
should be retained without
modification. The Further Notice of
Proposed Rulemaking seeks comment
also on whether to retain the existing
AM/FM subcaps.
272. The Commission tentatively
finds that the current local radio
ownership rule remains necessary in the
public interest and should be retained
without modification. The Commission
believes that the rule is necessary to
promote competition. In addition, the
Commission believes that the radio
ownership limits promote viewpoint
diversity ‘‘by ensuring a sufficient
number of independent radio voices and
by preserving a market structure that
facilitates and encourages new entry
into the local media market.’’ Similarly,
the Commission tentatively finds that a
competitive local radio market helps to
promote localism, as a competitive
marketplace will lead to the selection of
programming that is responsive to the
needs and interests of the local
community. The Commission
tentatively finds also that the local radio
ownership rule is consistent with the
goal of promoting minority and female
ownership of broadcast television
stations. Ultimately, the Commission
believes that these benefits outweigh
any burdens that may result from its
proposal to retain the rule without
modification.
273. The Commission agrees with
commenters that supported retention of
the AM subcaps in order to promote
new entry. The Commission believes
that broadcast radio, in general,
continues to be a more likely avenue for
new entry in the media marketplace—
including entry by small businesses and
entities seeking to serve niche
audiences—as a result of radio’s ability
to more easily reach certain
demographic groups and the relative
affordability of radio stations compared
to other mass media. AM stations are
generally the least expensive option for
entry into the radio market, often by a
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significant margin, and therefore permit
new entry for far less capital investment
than is required to purchase an FM
station. While some commenters
suggested that eliminating the subcaps
could result in divestiture of properties
that could be acquired by new entrants,
the Commission tentatively finds that
this speculative rationale is not
persuasive. Therefore, consistent with
Commission precedent, the Commission
believes that the public interest is best
served by retaining the existing AM
subcaps, which would continue to
further competition, and possibly also
viewpoint diversity, by promoting new
entry.
274. In addition, the Commission
tentatively finds that there continue to
be technical and marketplace
differences between AM and FM
stations that justify retention of both the
AM and FM subcaps in order to
promote competition in local radio
markets. As the Commission has noted
previously, FM stations enjoy unique
technical advantages over AM stations,
such as increased bandwidth and
superior audio signal fidelity. In
addition, AM signal propagation varies
with the time of day (i.e., AM signals
travel much farther at night than during
the day), and many AM stations are
required to cease operation at sunset.
These technological differences often,
but not always, result in greater
listenership and revenues for FM
stations.
275. While the technological and
marketplace differences between AM
and FM stations generally benefit FM
stations, and thus support retention of
the FM subcaps, there continue to be
many markets in which AM stations are
‘‘significant radio voices.’’ For example,
a study provided by Clear Channel
found that throughout the 300 Arbitron
Metro markets, there are 187 a.m.
stations ranked in the top five in terms
of all-day audience share. And
according to NAB, AM stations are
among the top revenue earners in some
of the largest radio markets (e.g., New
York, Chicago, and Los Angeles).
Therefore, the Commission tentatively
finds that retention of the existing AM
subcaps is necessary to prevent a single
station owner from acquiring excessive
market power through concentration of
ownership of AM stations in markets in
which AM stations are significant radio
voices.
276. In addition, the Commission
tentatively concludes that it is not in the
public interest to tighten the numerical
ownership limits; therefore, the
Commission sees no need to reassess the
subcaps associated with each numerical
tier, as proposed by Mt. Wilson. Indeed,
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tightening the subcaps absent a
concurrent tightening of the numerical
ownership limits would result in an
internal inconsistency in the rule, as an
entity would be unable to own all the
stations otherwise permitted under
certain numerical tiers. For example, in
markets with 30–44 stations, an entity
currently may own up to seven stations,
provided that no more than four of the
stations are in the same service. If the
subcap was tightened to three stations
in the same service, an entity could then
only own up to six stations, even though
the rule’s premise is that the public
interest is best served by permitting
ownership of up to seven stations in this
particular market.
277. Newspaper/Broadcast CrossOwnership Rule. The Further Notice of
Proposed Rulemaking seeks comment
on the Commission’s previous finding,
which has been upheld in the courts,
that the current absolute ban on
newspaper/broadcast cross-ownership,
first adopted in 1975, is overly broad.
The Commission continues to believe
that some restriction on newspaper/
broadcast cross-ownership is necessary
to protect and promote viewpoint
diversity in local markets; this view is
consistent with the Commission’s
longstanding rationale for the NBCO
rule. The Supreme Court has recognized
the importance of the Commission’s role
in promoting viewpoint diversity,
calling it a ‘‘basic tenet of national
communications policy.’’
278. In addition, the Further Notice of
Proposed Rulemaking seeks further
comment on whether the restriction on
newspaper/broadcast cross-ownership is
necessary to protect and promote
viewpoint diversity in local markets.
The Further Notice of Proposed
Rulemaking seeks comment on whether
the absolute ban should be revised to
allow combinations that would not
unduly harm viewpoint diversity or
localism. The Further Notice of
Proposed Rulemaking specifically
requests comment on whether the
prohibition on newspaper/radio
combinations should be eliminated. The
Further Notice of Proposed Rulemaking
seeks comment on approaches that
would retain a ban on newspaper/
television combinations in all markets
and further seeks comment on whether
to entertain waiver requests on a pure
case-by-case approach, assessing each
request independently and considering
the totality of the circumstances each
proposed transaction presents, or on a
case-by-case waiver approach that
would include presumptions that favor
or disfavor the grant of waiver requests
in accordance with certain prescribed
guidelines. The Further Notice of
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Proposed Rulemaking seeks comment
on whether the Commission should
provide for an exception to a
newspaper/television cross-ownership
prohibition if the merger applicant
demonstrates that either the television
station or the newspaper has failed or is
failing. The Further Notice of Proposed
Rulemaking also seeks comment on
possible modifications to the 2006 rule
to adjust for aspects of that rule that
may be obsolete, difficult to prove or
enforce, or ineffectual.
279. In the event that the newspaper/
television restriction were to be revised,
the Further Notice of Proposed
Rulemaking seeks comment on the
following aspects of the rule. First,
should the obsolete analog Grade A
contour be replaced with an approach
that uses both the DMA and the digital
the principal community contour (PCC)
to determine when the newspaper/
television prohibition applies in order
to approximate the former analog
contour approach as closely as possible?
Second, should the four-factor test that
all waiver applicants, even those
entitled to a favorable presumption,
were required to satisfy under the 2006
rule be eliminated? The Further Notice
of Proposed Rulemaking suggests that
the factors were vague, subjective,
difficult to prove and enforce, and/or
not directly linked to viewpoint
diversity. Third, should the previous
local news exception permitted by the
2006 rule under which the Commission
reversed the negative presumption
against a waiver when the proposed
combination involved a broadcast
station that had not been offering local
newscasts and the applicants committed
to airing at least seven hours of local
news per week after the transaction be
eliminated? The Commission tentatively
concludes that the potential difficulties
in monitoring and enforcing such an
exception would render it meaningless.
280. Radio/Television CrossOwnership Rule. The Further Notice of
Proposed Rulemaking seeks comment
on whether the radio/television crossownership rule, which limits the
combined number of commercial radio
and television stations a single entity
may own in the same market, is no
longer necessary in the public interest,
and whether it should be repealed.
Based on the current media marketplace
and the evidence adduced in this
proceeding, the Further Notice of
Proposed Rulemaking seeks comment
on whether the local television
ownership rule and the local radio
ownership rule, which the Further
Notice of Proposed Rulemaking
proposes to retain with limited
modification, adequately serve the goals
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this rule was intended to promote,
namely, competition and diversity in
local markets. Thus, the Further Notice
of Proposed Rulemaking seeks comment
on whether this additional prohibition
on the cross-ownership of broadcast
facilities is unnecessary. Further, the
Further Notice of Proposed Rulemaking
seeks comment on whether this
simplification of the rules will have
minimal effects in most markets.
281. The Commission tentatively
finds that the radio/television crossownership rule is not necessary to
promote competition. The Commission
has found previously that most
advertisers do not consider radio and
television to be good substitutes for one
another, and that television and radio
stations neither compete in the same
product market nor do they bear any
vertical relation to one another. This
position is consistent with the longstanding conclusion of the Department
of Justice, which considers radio
advertising as a separate antitrust
market for purposes of its competition
analysis. Similarly, the Commission
tentatively finds that most consumers
do not consider radio and television
stations to be substitutes for one another
and do not switch between television
viewing and radio listening based on
program content. Nothing in the current
record undermines the Commission’s
previous conclusion that a televisionradio combination, therefore, cannot
adversely affect competition in any
relevant product market. Given that
radio and television stations do not
appear to compete in the same market
and that the local television and radio
rules would prevent significant
additional consolidation even in the
absence of this rule, the record does not
suggest that repeal of the radio/
television cross-ownership rule would
harm competition.
282. The Commission tentatively
finds that the radio/television crossownership rule is not necessary to
promote localism. The Commission
agrees with industry commenters who
maintained that some limited crossownership could create efficiencies that
could benefit the public should
broadcasters choose to invest additional
resources in the production of local
news and information programming.
When broadcasters engage in joint
operations, whether those operations are
focused on programming and news
gathering or back office matters, the
Commission believes it likely that
financial efficiencies result. Such
efficiencies could lead ultimately to
consumer benefits in the form of
additional station investments in
equipment for radio or television
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newsrooms, an increase in staffing for
news and informational programs, or
additional local news coverage on radio
stations.
283. The Commission considered
carefully whether there is evidence in
the current record that elimination of
the radio/television cross-ownership
rule would likely adversely affect
minority and female ownership. The
Commission believes that the current
record does not establish that such harm
is likely. Furthermore, the Commission
does not believe that record evidence
shows that the cross-ownership ban has
protected or promoted minority or
female ownership of broadcast stations,
or that it could be expected to do so in
the future. Notably, radio/television
cross-ownership combinations were not
the focus of commenters’ concerns
raised in response to the NPRM. In fact,
no commenter to the NPRM presented
empirical data or other analyses that
established that repeal of this rule
would harm competition, localism, or
viewpoint diversity in local markets.
The Commission tentatively concludes
that the rule is not necessary to promote
competition or localism, and the record
reflects that most radio commercial
stations do not broadcast significant
amounts of local news and information.
The current record does not suggest that
minority/female-owned radio stations
contribute more significantly to
viewpoint diversity than other radio
stations or broadcast more meaningful
amounts of local news on which
consumers rely as a primary source of
information.
284. Moreover, while the Commission
acknowledges the concerns raised by
NABOB and others advocating for
additional minority ownership
opportunities, the Commission agrees
with commenters, including NAB, that
the low level of minority and female
broadcast ownership cannot be
attributed solely or primarily to
consolidation. Nor has any commenter
shown that these low levels of
ownership are a result of the existing
radio/television cross-ownership rule.
The Commission recognizes the
presence of many disparate factors,
including, most significantly, access to
capital, as longstanding, persistent
impediments to ownership diversity in
broadcasting.
285. Dual Network Rule. The Further
Notice of Proposed Rulemaking
tentatively concludes that the dual
network rule, which permits common
ownership of multiple broadcast
networks, but prohibits a merger
between or among the ‘‘top-four’’
networks (ABC, CBS, Fox, and NBC),
continues to be necessary to promote
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competition and localism and should be
retained without modification.
286. The Commission tentatively
finds that the dual network rule remains
necessary in the public interest to foster
competition in the provision of
primetime entertainment programming
and the sale of national advertising
time. Specifically, the Commission
tentatively finds that the primetime
entertainment programming supplied by
the top-four broadcast networks is a
distinct product, the provision of which
could be restricted if two of the four
major networks were to merge. The
Commission also tentatively finds that,
consistent with past Commission
findings, the top-four broadcast
networks comprise a ‘‘strategic group’’
in the national advertising market and
compete largely among themselves for
advertisers that seek to reach large,
national mass audiences. Accordingly,
the Commission continues to believe
that a top-four network merger would
substantially lessen competition for
advertising dollars in the national
advertising market, which would, in
turn, reduce incentives for the networks
to compete with each other for viewers
by providing innovative, high quality
programming. Based on their distinctive
characteristics relative to other
broadcast and cable networks, the
Commission tentatively finds that the
top-four broadcast networks serve a
unique role in the provision of
primetime entertainment programming
and the sale of national advertising time
that justifies retaining a rule specific to
them.
287. In addition, the Commission
tentatively finds that, consistent with
past Commission findings, the dual
network rule remains necessary to
promote the Commission’s localism
goal. Specifically, the Commission
tentatively finds that the rule remains
necessary to preserve the balance of
bargaining power between the top-four
networks and their affiliates, thus
improving the ability of affiliates to
exert influence on network
programming decisions in a manner that
best serves the interests of their local
communities. Typically, a critical role
of a broadcast network is to provide its
local affiliates with high quality
programming. Because this
programming is distributed across the
country, broadcast networks have an
economic incentive to ensure that the
programming both appeals to a mass,
nationwide audience and is widely
shown by affiliates. A network’s local
affiliates serve a complementary role by
providing local input in network
programming decisions and airing
programming that serves the specific
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needs and interests of that specific local
community. As a result, the economic
incentives of the networks are not
always aligned with the interests of the
local affiliates or the communities they
serve.
288. Diversity Order Remand and
Eligible Entity Definition. In addition to
evaluating each of the broadcast
ownership rules, the Further Notice of
Proposed Rulemaking addresses the
Third Circuit’s remand of certain
aspects of the 2008 Diversity Order.
Based on the Commission’s analysis of
the preexisting eligible entity standard
as well as the measures to which it
applied, the Third Circuit’s remand
instructions, and the record in this
proceeding, the Further Notice of
Proposed Rulemaking proposes to
reinstate the revenue-based eligible
entity standard and to apply it to the
regulatory policies set forth in the
Diversity Order. While the Commission
does not have an evidentiary record
demonstrating that this standard
specifically increases minority and
female broadcast ownership, the
Commission anticipates that reinstating
the previous revenue-based standard
will promote small business
participation in the broadcast industry.
The Commission believes that small
businesses benefit from flexible
licensing policies and that making it
easier for small business applicants to
participate in the broadcast industry
will encourage innovation and enhance
viewpoint diversity. The Commission
also believes that the benefits of
reinstating the eligible entity standard
and applying it to the regulatory
measures set forth in the Diversity Order
would outweigh any potential costs of
the decision to do so. Accordingly, the
Commission tentatively determines that
this action will advance the policy
objectives that traditionally have guided
the Commission’s analyses of broadcast
ownership issues and will serve the
public interest.
289. Shared Service Agreements. The
Further Notice of Proposed Rulemaking
provides further consideration of the
regulatory treatment of various
agreements for the sharing of services
between broadcast stations. Because the
Commission does not currently require
the filing or disclosure of all sharing
agreements that do not contain time
brokerage or joint advertising sales
provisions, the Commission has limited
information about the content or
breadth of such agreements or the
frequency of their use. Accordingly, in
order to allow the Commission and the
public to better understand the terms,
operation, and prevalence of these
agreements and their potential impact
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on the Commission’s competition,
localism, and diversity goals, the
Further Notice of Proposed Rulemaking
seeks comment on proposals to require
the disclosure of such agreements.
Specifically, the Further Notice of
Proposed Rulemaking proposes a
specific definition for a category of
sharing agreements designated in the
Further Notice of Proposed Rulemaking
as Shared Service Agreements (SSAs).
Because the Commission desires to
expand its knowledge of these
agreements, the Further Notice of
Proposed Rulemaking proposes to adopt
a broad definition of SSAs. The Further
Notice of Proposed Rulemaking,
however, seeks comment on whether to
narrow the scope of the definition,
seeking comment, for example, on
whether a de minimis financial
exception would be appropriate. The
Further Notice of Proposed Rulemaking
then seeks comment on various
proposals for the disclosure of SSAs,
including that commercial television
stations be required to place copies of
such agreements in their public
inspection files, the filing of SSAs
pursuant to 47 CFR 73.3613, or the
adoption of a new filing process (e.g., a
new form or a dedicated docket in the
Commission’s Electronic Comment
Filing System (ECFS)). The Commission
proposes that any disclosure
requirement it may adopt be subject to
the same redaction allowances made
available to local marketing agreements
and joint sales agreements, namely, that
licensees may redact confidential or
proprietary information.
290. The Commission believes that
disclosure of these agreements will
further its understanding of the
television marketplace and inform
future policy decisions to address any
potential negative impacts of SSAs on
the Commission’s competition,
localism, and diversity goals. The
Further Notice of Proposed Rulemaking
tentatively concludes that disclosure
will permit the Commission to better
understand the operation of stations and
to assess the impact, if any, of such
combined operation on the television
marketplace and that members of the
public will be able to gain a greater
understanding of the relationship
between independently owned stations
that are parties to SSAs, which will
allow them to evaluate whether this
interaction has an impact on
programming or other station
operations.
2. Legal Basis
291. The Further Notice of Proposed
Rulemaking is adopted pursuant to
Sections 1, 2(a), 4(i), 303, 307, 308, 309,
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310, and 403 of the Communications
Act of 1934, as amended, 47 U.S.C. 151,
152(a), 154(i), 303, 307, 308, 309, 310,
and 403, and Section 202(h) of the
Telecommunications Act of 1996.
3. Description and Estimate of the
Number of Small Entities to Which the
Proposed Rules Will Apply
292. 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. The RFA generally
defines the term ‘‘small entity’’ as
having the same meaning as the terms
‘‘small business,’’ ‘‘small organization,’’
and ‘‘small governmental jurisdiction’’
In addition, the term ‘‘small business’’
has the same meaning as the term
‘‘small business concern’’ under the
Small Business Act. A ‘‘small business
concern’’ is one which: (1) Is
independently owned and operated; (2)
is not dominant in its field of operation;
and (3) satisfies any additional criteria
established by the Small Business
Administration (SBA). The final rules
adopted herein affect small television
and radio broadcast stations and small
entities that operate daily newspapers.
A description of these small entities, as
well as an estimate of the number of
such small entities, is provided below.
293. Television Broadcasting. The
SBA defines a television broadcasting
station that has no more than $35.5
million in annual receipts as a small
business. The definition of business
concerns included in this industry
states that establishments are primarily
engaged in broadcasting images together
with sound. These establishments
operate television broadcasting studios
and facilities for the programming and
transmission of programs to the public.
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
studio, from an affiliated network, or
from external sources. Census data for
2007 indicate that 2,076 such
establishments were in operation during
that year. Of these, 1,515 had annual
receipts of less than $10.0 million per
year and 561 had annual receipts of
more than $10.0 million per year. Based
on this data and the associated size
standard, the Commission concludes
that the majority of such establishments
are small.
294. The Commission has estimated
the number of licensed commercial
television stations to be 1,387.
According to Commission staff review
of the BIA Kelsey Inc. Media Access Pro
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Television Database (BIA) as of
November 26, 2013, 1,249 (or about 90
percent) of an estimated 1,387
commercial television stations in the
United States have revenues of $35.5
million or less and, thus, qualify as
small entities under the SBA definition.
295. The Commission notes, however,
that in assessing whether a business
concern qualifies as small under the
above definition, business (control)
affiliations must be included. This
estimate, therefore, likely overstates the
number of small entities that might be
affected by this 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. The
Commission is unable at this time to
define or quantify the criteria that
would establish whether a specific
television station is dominant in its field
of operation. Accordingly, the estimate
of small businesses to which rules may
apply does not exclude any television
station from the definition of a small
business on this basis and is therefore
possibly over-inclusive to that extent.
296. Radio Broadcasting. The
proposed policies could apply to radio
broadcast licensees, and potential
licensees of radio service. The SBA
defines a radio broadcast station as a
small business if such station has no
more than $35.5 million in annual
receipts. Business concerns included in
this industry are those ‘‘primarily
engaged in broadcasting aural programs
by radio to the public.’’ According to
Commission staff review of the BIA
Publications, Inc. Master Access Radio
Analyzer Database as of November 26,
2013, about 11,331 (or about 99.9
percent) of 11,341 commercial radio
stations have revenues of $35.5 million
or less and thus qualify as small entities
under the SBA definition. The
Commission notes, however, that, in
assessing whether a business concern
qualifies as small under the above
definition, business (control) affiliations
must be included. This estimate,
therefore, likely overstates the number
of small entities that might be affected
by this action, because the revenue
figure on which it is based does not
include or aggregate revenues from
affiliated companies.
297. In addition, an element of the
definition of ‘‘small business’’ is that the
entity not be dominant in its field of
operation. The Commission is unable at
this time to define or quantify the
criteria that would establish whether a
specific radio station is dominant in its
field of operation. Accordingly, the
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estimate of small businesses to which
rules may apply does not exclude any
radio station from the definition of a
small business on this basis and
therefore may be over-inclusive to that
extent. Also, as noted, an additional
element of the definition of ‘‘small
business’’ is that the entity must be
independently owned and operated.
The Commission notes that it is difficult
at times to assess these criteria in the
context of media entities and the
estimates of small businesses to which
they apply may be over-inclusive to this
extent.
298. Daily Newspapers. The SBA has
developed a small business size
standard for the census category of
Newspaper Publishers; that size
standard is 500 or fewer employees.
Business concerns included in this
category are those that ‘‘carry out
operations necessary for producing and
distributing newspapers, including
gathering news; writing news columns,
feature stories, and editorials; and
selling and preparing advertisements.’’
Census Bureau data for 2007 show that
there were 4,852 firms in this category
that operated for the entire year. Of this
total, 4,771 firms had employment of
499 or fewer employees, and an
additional 33 firms had employment of
500 to 999 employees. Therefore, the
Commission estimates that the majority
of Newspaper Publishers are small
entities that might be affected by this
action.
4. Description of Projected Reporting,
Recordkeeping, and Other Compliance
Requirements
299. The Further Notice of Proposed
Rulemaking proposes rule changes that
will affect reporting, recordkeeping, and
other compliance requirements. Each of
these changes is described below.
300. The Further Notice of Proposed
Rulemaking proposes modifications to
several of the media ownership rules as
set forth in Section A above. The
proposals, if ultimately adopted, would
modify several FCC forms and their
instructions: (1) FCC Form 301,
Application for Construction Permit For
Commercial Broadcast Station; (2) FCC
Form 314, Application for Consent to
Assignment of Broadcast Station
Construction Permit or License; and (3)
FCC Form 315, Application for Consent
to Transfer Control of Corporation
Holding Broadcast Station Construction
Permit or License. The Commission may
have to modify other forms that include
in their instructions the media
ownership rules or citations to media
ownership proceedings, including Form
303–S and Form 323. The impact of
these changes will be the same on all
entities, and the Commission does not
anticipate that compliance will require
the expenditure of any additional
resources.
301. In addition, the Further Notice of
Proposed Rulemaking proposes changes
that would affect reporting,
recordkeeping, or other compliance
requirements with regard to the
proposed disclosure of SSAs. If this
proposal is ultimately adopted,
commercial television stations will be
required to disclose all SSAs to the
public and the Commission. Depending
on the method of disclosure for SSAs
that may ultimately be adopted,
commercial television stations may be
required to upload all SSAs to their
online public file or place a copy of all
SSAs in their physical local public
inspection file. In addition, if the
Commission were to require the filing of
SSAs pursuant to 47 CFR 73.3613,
commercial television stations would be
required to file a paper copy of such
contracts with the Commission; list the
contracts on their FCC Form 323,
Ownership Report for Commercial
Broadcast Station; and either place the
SSAs in their local public inspection
file or maintain an up-to-date list of all
contracts reported on Form 323 and
make such contracts available on
request. Other proposed alternatives
may include the creation of a new form
for the filing of SSAs or the creation of
a dedicated docket in the Commission’s
Electronic Comment Filing System that
could be used for filing purposes.
5. Steps Taken To Minimize Significant
Economic Impact on Small Entities, and
Significant Alternatives Considered
302. 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.
303. In conducting the quadrennial
review, the Commission has three chief
alternatives available for each of the
Commission’s media ownership rules —
eliminate the rule, modify it, or, if the
Commission determines that the rule is
‘‘necessary in the public interest,’’ retain
it. The Commission believes that the
rules proposed in the Further Notice of
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Proposed Rulemaking, which are
intended to achieve its policy goals of
competition, localism, and diversity,
will continue to benefit small entities by
fostering a media marketplace in which
they are able to compete effectively and
by promoting additional broadcast
ownership opportunities, as described
below, among a diverse group of
owners, including small entities. This
Supplemental IRFA discusses below
several ways in which the rules may
benefit small entities as well as steps
taken, and significant alternatives
considered, to minimize any potential
burdens on small entities.
304. Local Television Ownership Rule.
The Commission proposes to retain the
local television ownership rule with
only a minor modification, consistent
with the proposal in the NPRM. In the
NPRM, the Commission proposed to
retain the rule but sought comment on
a number of alternatives to this
proposal. Specifically, the NPRM
proposed to retain the top-four
prohibition, eight-voices test, and
numerical limits of the existing rule,
while proposing to replace the Grade B
contour overlap provision with a DMAbased approach. The NPRM also invited
comment on whether to adopt a market
size waiver standard, the impact of
multicasting on the local television
ownership rule, and the impact of the
proposed rule on minority and female
ownership.
305. Multiple commenters asserted
that the Commission should retain, or
tighten, the local television ownership
rule to promote competition and create
ownership opportunities for new
entrants. In contrast, broadcast
commenters asserted that the local
television ownership rule should be
eliminated or substantially relaxed as a
result of competition for viewers and
advertising revenue from non-broadcast
video alternatives. A number of
commenters argued that such relief is
warranted particularly for
broadcasters—including small entities—
that operate in small and mid-sized
markets. Broadcast commenters also
support adoption of a more flexible
waiver standard for small and mid-sized
markets.
306. In the Further Notice of Proposed
Rulemaking, the Commission tentatively
finds that the local television ownership
rule remains necessary in the public
interest and should be maintained with
a limited modification. Accordingly,
under the proposed modified television
ownership rule an entity may own up to
two television stations in the same DMA
if (1) the digital NLSCs of the stations
(as determined by Section 73.622(e)) do
not overlap; or (2) at least one of the
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stations is not ranked among the top
four stations in the market and at least
eight independently owned television
stations will remain in the DMA
following the combination. In
calculating the number of stations
remaining post-merger, only those
stations whose digital NLSC overlaps
with the digital NLSC of at least one of
the stations in the proposed
combination will be considered. In
addition, the Commission proposes to
retain the existing failed/failing station
waiver policy.
307. As noted above, the NPRM
proposed to replace the Grade B contour
overlap provision with a DMA-based
approach. The Commission tentatively
finds, however, that adoption of a DMAbased approach to replace the analog
Grade B contour as the trigger for the
rule would unduly expand the reach of
the local television ownership rule in
some DMAs, particularly in those DMAs
that cover large rural areas in the
western United States where numerous
small television stations operate. Thus,
the Further Notice of Proposed
Rulemaking proposes to adopt instead
the use of a digital NLSC as the
functional equivalent of the analog
Grade B contour, which is no longer
relevant following the digital television
transition. In the Further Notice of
Proposed Rulemaking, the Commission
tentatively affirms the NPRM’s proposal
to grandfather existing ownership
combinations that would exceed the
numerical limits under the revised
contour approach, though the
Commission proposes that, going
forward, the sale of such combinations
must comply with the local television
ownership rule then in effect. The
Commission believes that this approach
will avoid disruption of settled
expectations and prevent any impact on
the provision of television service by
smaller stations operating in rural areas.
Moreover, the Commission believes that
by preventing stations with the largest
market shares from combining to
achieve excessive market power, the
local television ownership rule protects
against potential harm to broadcasters
with smaller market shares, including
small entities. Accordingly, the
Commission believes that the rule, as
modified, will continue to ensure that
local television markets do not become
too concentrated and, by doing so, will
allow more firms, including those that
are small entities, to enter local markets
and compete effectively.
308. The Further Notice of Proposed
Rulemaking also addresses the
competitive challenges faced by
broadcasters that operate in small
markets—including small entities—by
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proposing to retain the existing failed/
failing station waiver policy. The
Commission finds that the existing
waiver standard is not unduly
restrictive and provides appropriate
relief in markets of all sizes. In
particular, the Commission notes that a
review of recent transactions
demonstrates that waivers under the
failed/failing station policy are
frequently granted in small and midsized markets, which often provides
relief for small entities. Moreover,
waiver of the Commission’s rules is
meant to be exceptional relief, and the
Commission believes that the existing
waiver criteria strike an appropriate
balance between enforcing the
ownership limits and providing relief
from the rule in circumstances where it
is truly appropriate. However, the
Further Notice of Proposed Rulemaking
seeks comment on whether to relax the
failed/failing station waiver criteria or
establish additional grounds for waiver.
For example, the items asks whether
there are circumstances in which the
Commission should refrain from
applying the four-percent all-day
audience share requirement or adopt a
higher threshold.
309. Local Radio Ownership Rule. The
Further Notice of Proposed Rulemaking
proposes to retain the local radio
ownership rule without modification,
consistent with the NPRM. In the
NPRM, the Commission proposed to
retain the rule and sought comment on
alternatives to this proposal.
Specifically, the NPRM proposed to
retain the AM/FM subcaps, which limit
the number of radio stations in the same
service that an entity can own. The
Commission also sought comment on
whether and, if so, how, to incorporate
new audio platforms into the rule and
sought additional comment on the
impact of such platforms on the
broadcast radio industry. In addition,
the NPRM sought comment on whether
to adopt a specific waiver standard for
the local radio ownership rule and on
how the proposed rule would affect
minority and female ownership
opportunities.
310. Several commenters supported
the tentative conclusion to retain the
local radio ownership rule, including
the AM/FM subcaps. They asserted that
the AM band, in particular, is a critical
point of new entry in the marketplace.
By contrast, many broadcast
commenters supported eliminating or
loosening the rule, including the AM/
FM subcaps. In particular, NAB
disputes the tentative conclusion that
the subcaps promote new entry,
asserting instead that elimination of the
subcaps could spur market activity that
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leads to divested properties that could
be purchased by new entrants,
including small businesses and minority
and women-owned businesses.
311. The Commission proposes to
retain the local radio ownership rule,
including the AM/FM subcaps, finding
that AM subcaps in particular promote
new entry in the broadcast radio
marketplace. Accordingly, an entity may
own: (1) Up to eight commercial radio
stations in radio markets with 45 or
more radio stations, no more than five
of which can be in the same service (AM
or FM); (2) up to seven commercial
radio stations in radio markets with 30–
44 radio stations, no more than four of
which can be in the same service (AM
or FM); (3) up to six commercial radio
stations in radio markets with 15–29
radio stations, no more than four of
which can be in the same service (AM
or FM); and (4) up to five commercial
radio stations in radio markets with 14
or fewer radio stations, no more than
three of which can be in the same
service (AM or FM), provided that an
entity may not own more than 50
percent of the stations in such a market,
except that an entity may always own a
single AM and single FM station
combination.
312. The Commission tentatively
concludes that, consistent with previous
Commission findings, broadcast radio
continues to be a viable avenue for new
entry in the media marketplace,
including by small businesses,
minorities, women, and entities seeking
to serve niche audiences. Specifically,
the Commission tentatively finds that
AM stations are generally the least
expensive option for entry into the radio
market, often by a significant margin,
and therefore permit new entry for far
less capital investment than is required
to purchase an FM station. The
Commission believes that retention of
the local radio ownership limits,
including the AM/FM subcaps, will
foster opportunities for new entry in
local radio markets, particularly by
small entities. Moreover, the
Commission believes that by limiting
the consolidation of market power
among the dominant groups, the rule
will ensure that small radio station
owners remain economically viable.
313. Newspaper/Broadcast CrossOwnership Rule. The Further Notice of
Proposed Rulemaking seeks additional
comment on the NPRM’s proposals
regarding the newspaper/broadcast
cross-ownership (NBCO) rule. The
NPRM offered a myriad of tentative
conclusions and inquired about detailed
scenarios. In particular, the NPRM
sought comment on a number of
alternatives, including whether to
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modify the top 20 DMA distinction, the
top-four restriction, or the eight voices
test. The NPRM also proposed to
eliminate the use of a station’s analog
signal contour in favor of a DMA-based
approach for triggering the rule.
314. The Commission received a
substantial number of comments on the
NBCO rule, several of which discuss
issues that may be of interest to small
entities. For instance, several
commenters claimed that lifting the
newspaper/radio cross-ownership
restriction will revitalize local news on
radio stations and will provide
struggling newspapers with a broader
base of financial support and an
increased ability to reach audiences. In
the Further Notice of Proposed
Rulemaking, the Commission seeks
comment on whether the restriction on
newspaper/radio cross-ownership is no
longer necessary to promote viewpoint
diversity and therefore should be
eliminated from the NBCO rule.
315. Additionally, in the Further
Notice of Proposed Rulemaking, the
Commission tentatively concludes that
it should not adopt a bright-line rule
allowing some newspaper/television
combinations, even under narrowly
prescribed circumstances. The
Commission is aware that bright-line
rules are more likely to produce
predictable and consistent outcomes in
an expeditious and less costly manner
than rules that incorporate a waiver
process, which is inherently more
uncertain. The Commission is
concerned, however, that a bright-line
rule is too blunt an instrument to be
used for allowing newspaper/television
cross-ownership, no matter how limited.
Of particular interest to small entities,
the Commission also is concerned that
a bright-line rule allowing only certain
combinations in the largest markets
could foreclose merger opportunities in
smaller markets where a combination
might be acceptable.
316. Although the Commission
tentatively concludes that a general
prohibition on newspaper/television
combinations in all markets is the
appropriate starting point when
considering the impact of newspaper/
television cross-ownership on
viewpoint diversity, it recognizes that
particular combinations might be shown
to be consistent with its diversity goal.
Therefore, it proposes to entertain
requests for waiver of the general
prohibition. An approach that
incorporates a waiver process would
provide the Commission with the
flexibility to take into account the
particular circumstances of a proposed
merger and potentially provide relief for
broadcasters—including small entities—
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by allowing the combination of a
newspaper and a television station
where appropriate.
317. The Commission requests
comment on what type of waiver
process would enable it to identify any
acceptable newspaper/television
combinations most accurately and
effectively. It asks whether it should
implement a pure case-by-case approach
that evaluates the totality of the
circumstances for each individual
transaction, considering each waiver
request anew without measuring it
against a set of defined criteria or
awarding the applicant an automatic
presumption based on a prima facie
showing of particular elements.
Additionally, the Commission seeks
comment on an approach whereby the
Commission would ascribe a favorable
presumption to certain waiver
applicants in the top-20 DMAs and a
negative presumption to all other waiver
applicants. It seeks comment on
requiring as conditions for a favorable
presumption that: (1) The proposed
merger does not involve a television
station ranked among the top-four
television stations in the DMA and (2)
at least eight major media voices remain
in the DMA following the transaction.
The Commission seeks comment on the
pros and cons, costs and benefits of both
these approaches.
318. As noted above, the NPRM also
proposed to eliminate the use of a
station’s Grade A contour in favor of a
DMA-based approach for triggering the
rule. As commenters note, however,
because DMAs can be much larger in
size than the former Grade A contour
areas, the proposed DMA-based
approach could expand the reach of the
rule and prohibit cross-ownership when
there is no overlap between the
community in which a newspaper is
published and the primary service area
of a broadcast station. To avoid that
possibility, the Further Notice of
Proposed Rulemaking proposes instead
to prohibit cross-ownership of a fullpower television station and a daily
newspaper when: (1) The community of
license of the television station and the
community of publication of the
newspaper are in the same Nielsen
DMA, and (2) the Principal Community
Contour (PCC) of the television station,
as defined in Section 73.625 of the
Commission’s rules, encompasses the
entire community in which the
newspaper is published. Under this
proposal, both conditions must be met
in order for the cross-ownership
prohibition to be triggered. Furthermore,
the Commission proposes to grandfather
those existing combinations that would
exceed the ownership limit by virtue of
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the change to this new DMA/PCC
approach. The Commission believes that
this approach will avoid disruption of
settled expectations and prevent any
impact on the provision of television
service by smaller stations. Moreover,
the Commission believes that the
newspaper/television cross-ownership
limits—including the top 20 DMA
distinction, the top-four restriction, and
the eight voices test—will continue to
foster diffuse ownership among media
outlets and thereby create more
ownership opportunities for small
entities.
319. Radio/Television CrossOwnership Rule. In the Further Notice
of Proposed Rulemaking, the
Commission seeks comment on whether
to eliminate the radio/television crossownership rule, which limits the
combined number of commercial radio
and television stations a single entity
may own in the same market. In the
NPRM, the Commission tentatively
concluded that the radio/television
cross-ownership rule is not currently
necessary to promote the public interest.
The Commission sought comment on a
range of issues, including whether radio
and television stations constitute
different markets, whether repeal of the
rule would encourage more and better
competition in local media markets,
whether repeal of the rule would result
in additional broadcast consolidation,
and what impact, if any, repeal would
have on small, independent
broadcasters, including those stations
owned by minorities and women. The
Commission indicated in the NPRM that
changes in the marketplace and
evidence from the media ownership
studies specifically supported the
tentative conclusion that the rule is not
necessary to promote viewpoint
diversity in local media markets.
320. Most broadcast commenters
supported the Commission’s tentative
conclusion, and asserted that the crossownership rule is no longer necessary to
protect the public interest, particularly
in light of competition from new media
technologies and Internet-based
information outlets. Not all
broadcasters, however, agreed. Mt.
Wilson, an independent broadcaster,
asserted that CBS, its primary
competitor, is able to wield significant
power in the radio market because of its
ability to leverage its non-radio
holdings, which, in turn, adversely
affects the ability of independent radio
owners in the market to compete
effectively. Mt. Wilson argued that
elimination of the radio/television
cross-ownership rule will benefit group
owners, such as CBS, by allowing them
to acquire additional co-owned radio
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stations in a market, and thereby giving
them a further competitive benefit to the
disadvantage of independent
broadcasters.
321. Commenters who supported
retention of the rule also expressed
concern about the potential loss of
viewpoint diversity in local markets if
the rule were to be repealed. They were
skeptical of conclusions in the media
ownership studies that consolidated
broadcast stations air more local
content, and thus, contribute more to
viewpoint diversity than independent
voices. Commenters also asserted that
the Commission must take into account
the public’s reliance on broadcast
stations and newspapers as the primary
sources of information for individuals to
learn about their local communities and
to participate in local civic affairs.
322. In addition, public interest
commenters claimed that broadcast
radio is one of the few remaining entry
points into media ownership for women
and minorities, and that its usefulness
as such would potentially be limited if
the radio/television cross-ownership
rule were eliminated. Other commenters
argued more generally that any media
consolidation disproportionately affects
opportunities for women and minorities
to become and remain broadcast station
owners and that female- and minorityowned stations thrive in markets that
are less concentrated. NHMC et al.
contended that strengthening, or at least
retaining, broadcast ownership limits is
one of the few race- and gender-neutral
ways to increase broadcast station
ownership by women and minorities,
thereby, avoiding the constitutional
concerns raised by race- and genderspecific remedies. NABOB asked that
the Commission not take any action that
would further erode minority broadcast
ownership, particularly given that new
media outlets are not positioned to
replace traditional broadcasters and the
information services they provide to
minority communities. NABOB
contended that any deregulation allows
consolidation and it asserted that
consolidation enhances an entity’s
competitive advantage in obtaining
advertising.
323. Consistent with prior
Commission holdings, the Commission
tentatively finds that the radio/
television cross-ownership rule is not
necessary to promote competition. The
Commission has found previously that
most advertisers do not consider radio
and television to be good substitutes for
one another and that television and
radio stations do not compete in the
same product market. This position is
consistent with the long-standing
conclusion of the Department of Justice,
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which considers radio advertising as a
separate antitrust market for purposes of
its competition analysis. The Further
Notice of Proposed Rulemaking
tentatively finds that most consumers
do not consider radio and television
stations to be substitutes for one another
and do not switch between television
viewing and radio listening based on
program content. Contrary to Mt.
Wilson’s conflicting opinion, the
Commission believes that the weight of
the evidence in the record of this
proceeding and precedent supports
these tentative conclusions.
324. The Further Notice of Proposed
Rulemaking tentatively concludes that
the radio/television cross-ownership
rule is not necessary to promote
localism. The Commission agrees with
industry commenters who maintained
that some limited cross-ownership
could create efficiencies that could
benefit the public should broadcasters
choose to invest additional resources in
the production of local news and
information programming. When
broadcasters engage in joint operations,
whether those operations are focused on
programming and news gathering or
back office matters, the Commission
believes it likely that financial
efficiencies result. Such efficiencies
could lead ultimately to consumer
benefits in the form of additional station
investments in equipment for radio or
television newsrooms, an increase in
staffing for news and informational
programs, or additional local news
coverage on radio stations.
325. The Commission seeks comment
on whether the radio/television crossownership rule is not necessary to
promote viewpoint diversity. In
addition, the Further Notice of Proposed
Rulemaking tentatively finds that the
current record does not support claims
that elimination of the radio/television
cross-ownership rule would have a
negative impact on minority and female
ownership. Notably, radio/television
cross-ownership combinations were not
the focus of commenters’ concerns
raised in response to the NPRM. In fact,
no commenter to the NPRM presented
empirical data or other analyses that
established that repeal of this rule
would harm competition, localism, or
viewpoint diversity in local markets.
Moreover, while the Commission
acknowledges the concerns raised by
those advocating for additional minority
ownership opportunities, the
Commission agrees with commenters,
including NAB, that the low level of
minority and female broadcast
ownership cannot be attributed solely or
primarily to consolidation. Nor has any
commenter shown that these low levels
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of ownership are a result of the existing
radio/television cross-ownership rule.
The Commission recognizes the
presence of many disparate factors,
including, most significantly, access to
capital, as longstanding, persistent
impediments to ownership diversity in
broadcasting.
326. Shared Service Agreements. The
proposed filing requirement for SSAs is
not expected to have a significant
economic impact on any entities,
whether small or otherwise. The filing
requirement is limited to commercial
television stations, so any small entities
that are licensees of commercial radio
stations and any small entities that are
licensees of noncommercial television
or radio stations are exempt from the
filing requirement. Furthermore, the
Commission believes that SSAs are
generally executed for a period of
multiple years, which likely limits the
number of agreements that will be
subject to the proposed disclosure
requirement. However, the Further
Notice of Proposed Rulemaking seeks
comment on ways to limit the
disclosure requirement that could
reduce the burden while not negatively
impacting the policy justifications for
requiring disclosure. For example, the
Commission asks whether any category
of agreements between stations should
be excluded from the definition of SSA
in this proceeding, for instance by
adopting a de minimis financial
exclusion, limiting the definition to
agreements that involve local news
production or that only involve stations
from the same local market. The Further
Notice of Proposed Rulemaking also
seeks comment on how much time
should be provided for compliance with
the proposed requirement, which could
reduce the burden on all stations.
Finally, the Further Notice of Proposed
Rulemaking seeks comment on whether
to limit the disclosure requirement to
certain larger markets (e.g., the top 50 or
100 Designated Market Areas).
327. In addition, the Further Notice of
Proposed Rulemaking seeks comment
on multiple alternatives for the
proposed disclosure requirement. These
alternatives include placing the SSAs in
the stations’ public inspection files
(online or physical), filing the
agreements with the Commission, the
creation of a new form for the filing of
SSAs, or the creation of a dedicated
docket in ECFS that could be used for
filing purposes. This gives commenters
the opportunity to demonstrate that one
of these alternatives may have less of an
economic impact on small businesses
and/or all entities. The Commission will
consider all such comments.
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328. Diversity Order Remand/Eligible
Entity Definition. The Commission
solicited comment in the NPRM on
whether the Commission should
reinstate the preexisting revenue-based
eligible entity definition to support the
measures the Third Circuit vacated and
remanded as well as other measures the
Commission may implement in the
future. In addition, the Commission
sought comment on whether readoption of the revenue-based standard
would support the Commission’s
traditional diversity, localism, and
competition goals in other ways,
particularly by enhancing ownership
opportunities for small businesses and
other new entrants.
329. As noted above, the Further
Notice of Proposed Rulemaking
tentatively concludes that the
Commission should reinstate the
preexisting revenue-based eligible entity
definition, which includes those
entities, commercial or noncommercial,
that would qualify as small businesses
consistent with SBA standards for its
industry grouping, based on revenue.
Specifically, the Commission believes
that reinstating the revenue-based
standard will promote small business
participation in the broadcast industry.
The Commission believes that smallsized applicants and licensees benefit
from flexible licensing, auctions,
transactions, and construction policies.
Often, small-business applicants have
financing and operational needs distinct
from those of larger broadcasters. By
easing certain regulations for small
broadcasters, the Commission believes
that it will promote the public interest
goal of making access to broadcast
spectrum available to a broad range of
applicants. The Commission also
believes that enabling more small
businesses to participate in the
broadcast industry will encourage
innovation and expand viewpoint
diversity.
330. In addition, the Commission
proposes to readopt each measure
relying on the eligible entity definition
that was remanded in Prometheus II.
These measures include: (1) Revision of
Rules Regarding Construction Permit
Deadlines; (2) Modification of
Attribution Rule; (3) Distress Sale
Policy; (4) Duopoly Priority for
Companies that Finance or Incubate an
Eligible Entity; (5) Extension of
Divestiture Deadline in Certain Mergers;
and (6) Transfer of Grandfathered Radio
Station Combinations. The
Commission’s intent in proposing the
reinstatement of the previous revenuebased eligible entity definition—and in
applying it to the construction,
licensing, transaction, and auction
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measures to which it previously
applied—is to expand broadcast
ownership opportunities for new
entrants, including small entities.
Therefore, the Commission anticipates
that the measures proposed in the
Further Notice of Proposed Rulemaking
will benefit small entities, not burden
them.
331. The Commission tentatively
concludes that it does not have
sufficient evidence at this time to satisfy
the constitutional standards necessary
to adopt race- or gender-conscious
measures. In evaluating the possibility
of adopting a socially disadvantaged
business (SDB) standard based on the
definition employed by the SBA, or any
other race-conscious standard, the first
question the Commission must consider
is whether the standard could be
justified by a ‘‘compelling governmental
interest.’’ Assuming that such an
interest could be established, the
Commission then would have to be able
to demonstrate that the application of
the race-conscious standard to specific
measures or programs would be
‘‘narrowly tailored’’ to further that
interest. While the Commission
tentatively finds that a reviewing court
could deem the Commission’s interest
in promoting a diversity of viewpoints
compelling, the Commission believes
that it does not have sufficient evidence
at this time to demonstrate that
adoption of race-conscious measures
would be narrowly tailored to further
that interest. Additionally, the
Commission tentatively finds that it
cannot conclude that the record
evidence establishes a relationship
between the Commission’s interest in
viewpoint diversity and the ownership
of broadcast stations by women that
would satisfy intermediate scrutiny.
While the Commission acknowledges
that the data show that women-owned
stations are not represented in
proportion to the presence of women in
the overall population, the Commission
does not believe that the evidence
available at this time reveals that the
content provided via women-owned
broadcast stations substantially
contributes to viewpoint diversity in a
manner different from other stations or
otherwise varies significantly from that
provided by other stations. Further, the
Commission tentatively finds that it
does not have sufficient evidence to
establish a compelling interest in
remedying past discrimination.
332. In addition, the Commission
reject commenters’ arguments that the
Commission is required to adopt an SDB
standard or another race-conscious
eligible entity standard in this
proceeding in light of the court’s
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instructions in Prometheus II. The
Commission also disagrees with
arguments that the Commission is not
permitted to conclude this proceeding
until the Commission has completed
any and all studies or analyses that may
enable it to take such action in the
future consistent with current standards
of constitutional law. The Commission
intends to follow the Third Circuit’s
direction that the Commission consider
adopting an SDB definition before
completion of this proceeding and
evaluate the feasibility of adopting a
race-conscious eligibility standard based
on an extensive analysis of the available
evidence. The Commission does not
believe that the Third Circuit intended
to prejudge the outcome of the
Commission’s analysis of the evidence
or the feasibility of implementing a raceconscious standard that would be
consistent both with applicable legal
standards and the Commission’s
practices and procedures.
333. The Commission also declined to
adopt at this time an eligible entity
definition that incorporates the
Overcoming Disadvantage Preference
(ODP) standard proposed by the
Commission’s Diversity Advisory
Committee in 2010. Commenters
generally did not suggest criteria, other
than race and ethnic origin, that could
be considered in an individualized,
holistic evaluation system like that
approved in Grutter. Commenters
recommended that the Commission
replace its revenue-based eligible entity
definition with an ODP standard as a
race-neutral means of advancing
ownership diversity. The Commission
notes that it is not entirely clear whether
the proposed ODP standard would be
subject to heightened constitutional
scrutiny. Moreover, the Commission
believes that it does not have a
sufficient record at present on a number
of issues that would need to be resolved
prior to the implementation of an ODP
standard. Among other issues, no
commenter provided input on (1) what
social or economic disadvantages
should be cognizable under an ODP
standard, (2) how the Commission could
validate claims of eligibility for ODP
status, (3) whether applicants should
bear the burden of proving specifically
that they would contribute to diversity
as a result of having overcome certain
disadvantages, (4) how the Commission
could measure the overcoming of a
disadvantage if an applicant is a widely
held corporation rather than an entity
with a single majority shareholder or a
small number of control persons, and (5)
how the Commission could evaluate the
effectiveness of the use of an ODP
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standard. Even if the Commission could
develop an adequate record on these
issues, the Commission is concerned
that it may lack the resources to conduct
such individualized reviews. Moreover,
the Commission would have to walk a
very fine line in order to fully evaluate
the potential diversity contributions of
individual applicants without running
afoul of First Amendment values. The
Commission is concerned that the type
of individualized consideration that
would be required under an ODP
standard could prove to be
administratively inefficient, unduly
resource-intensive, and inconsistent
with First Amendment values.
334. The Commission also tentatively
declined to act on various
recommendations from commenters
regarding the promotion of minority and
female ownership. These
recommendations include: (1) Relaxing
the foreign ownership limitations under
section 310(b)(4) of the Communications
Act; (2) encouraging Congress to
reinstate and update tax certificate
legislation; (3) granting waivers of the
local radio ownership rule to parties
that ‘‘incubate’’ qualified entities; and
(4) migrating AM radio to VHF Channels
5 and 6. In addition, the Alliance for
Women in Media, Inc. (AWM) asked the
Commission to consider several actions
to address the ‘‘historic
underrepresentation of women’’ in
ownership of broadcast stations and
managerial positions in the broadcast
industry. The Commission has already
implemented some of these
recommendations. Because the
Commission believes that the remainder
of these proposals would raise public
interest concerns, may not provide
meaningful assistance to the intended
beneficiaries, or are outside of the
proper scope of this broadcast
ownership proceeding, the Commission
tentatively concludes that it should not
adopt them here.
6. Federal Rules That May Duplicate,
Overlap, or Conflict With the Proposed
Rule
335. None.
D. Ordering Clauses
336. Accordingly, it is ordered, that
pursuant to the authority contained in
sections 1, 2(a), 4(i), 303, 307, 309, 310,
and 403 of the Communications Act of
1934, as amended, 47 U.S.C. 151, 152(a),
154(i), 303, 307, 309, 310, and 403, and
section 202(h) of the
Telecommunications Act of 1996, this
Further Notice of Proposed Rulemaking
is adopted.
337. It is further ordered that the
Commission’s Consumer and
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29063
Governmental Affairs Bureau, Reference
Information Center, shall send a copy of
the Further Notice of Proposed
Rulemaking, including the
Supplemental Initial Regulatory
Flexibility Analysis, to the Chief
Counsel for Advocacy of the Small
Business Administration.
List of Subjects 47 CFR Part 73
Radio, Reporting and recordkeeping
requirements, Television.
Federal Communications Commission.
Marlene H. Dortch,
Secretary.
Proposed Rules
For the reasons discussed in the
preamble, the Federal Communications
Commission proposes to amend 47 CFR
part 73 as follows:
PART 73—RADIO BROADCAST
SERVICES
1. The authority citation for part 73
continues to read as follows:
■
Authority: 47 U.S.C. 154, 303, 334, 336,
and 339.
2. Amend § 73.3555 by revising
paragraph (b) to read as follows:
■
§ 73.3555
Multiple ownership.
*
*
*
*
*
(b) Local television multiple
ownership rule. An entity may directly
or indirectly own, operate, or control
two television stations licensed in the
same Designated Market Area (DMA) (as
determined by Nielsen Media Research
or any successor entity) if:
(1) The digital noise limited service
contours of the stations (as determined
by § 73.622) do not overlap; or
(i) At the time the application to
acquire or construct the station(s) is
filed, at least one of the stations is not
ranked among the top four stations in
the DMA, based on the most recent allday (9:00 a.m.-midnight) audience
share, as measured by Nielsen Media
Research or by any comparable
professional, accepted audience ratings
service; and
(ii) At least 8 independently owned
and operating, full-power commercial
and noncommercial TV stations would
remain post-merger in the DMA in
which the communities of license of the
TV stations in question are located.
Count only those TV stations the digital
noise limited service contours of which
overlap with the digital noise limited
service contour of at least one of the
stations in the proposed combination. In
areas where there is no Nielsen DMA,
count the TV stations present in an area
that would be the functional equivalent
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of a TV market. Count only those TV
stations the digital noise limited service
contours of which overlap with the
digital noise limited service contour of
at least one of the stations in the
proposed combination.
*
(2) [Reserved]
*
*
*
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[FR Doc. 2014–10870 Filed 5–19–14; 8:45 am]
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Agencies
[Federal Register Volume 79, Number 97 (Tuesday, May 20, 2014)]
[Proposed Rules]
[Pages 29009-29064]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-10870]
[[Page 29009]]
Vol. 79
Tuesday,
No. 97
May 20, 2014
Part III
Federal Communications Commission
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47 CFR Part 73
2014 Quadrennial Regulatory Review; Proposed Rule
Federal Register / Vol. 79 , No. 97 / Tuesday, May 20, 2014 /
Proposed Rules
[[Page 29010]]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 73
[MB Docket Nos. 14-50, 09-182, 07-294, and 04-256; FCC 14-28]
2014 Quadrennial Regulatory Review
AGENCY: Federal Communications Commission.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: This document solicits comment on proposed changes to the
broadcast ownership rules in compliance with section 202(h) of the
Telecommunications Act of 1996 requires the Commission to review its
broadcast ownership rules quadrennially to review these rules to
determine whether they are necessary in the public interest as a result
of competition. In addition, this document solicits comment on certain
aspects of the Commission's 2008 Diversity Order that the U.S. Court of
Appeals for the Third Circuit remanded and directed the Commission to
address in its quadrennial review proceeding. This document solicits
comment also on a potential disclosure requirement for certain
broadcast television shared service agreements.
DATES: Comments are due on or before July 7, 2014 and reply comments
are due on or before August 4, 2014. Written comments on the Paperwork
Reduction Act proposed information collection requirements must be
submitted by the public, Office of Management and Budget (OMB), and
other interested parties on or before July 21, 2014.
ADDRESSES: Federal Communications Commission, 445 12th Street SW.,
Washington, DC 20554. In addition to filing comments with the
Secretary, a copy of any comments on the Paperwork Reduction Act
information collection requirements contained herein should be
submitted to the Federal Communications Commission via email to
PRA@fcc.gov and to Nicholas A. Fraser, Office of Management and Budget,
via email to Nicholas_A._Fraser@omb.eop.gov or via fax at (202) 395-
5167.
FOR FURTHER INFORMATION CONTACT: Hillary DeNigro, Industry Analysis
Division, Media Bureau, FCC, (202) 418-2330. For additional information
concerning the PRA proposed information collection requirements
contained in the Further Notice of Proposed Rulemaking, contact Cathy
Williams at (202) 418-2918, or via the Internet at PRA@fcc.gov.
SUPPLEMENTARY INFORMATION: This Further Notice of Proposed Rulemaking,
in MB Docket Nos. 14-50, 09-182, 07-294, and 04-256; FCC 14-28, was
adopted on March 31, 2014, and released on April 15, 2014. The document
is available for download at https://fjallfoss.fcc.gov/edocs_public/.
The complete text of the document is available for inspection and
copying during normal business hours in the FCC Reference Center, 445
12th Street SW., Washington, DC 20554, and may also be purchased from
the Commission's copy contractor, BCPI, Inc., Portals II, 445 12th
Street SW., Washington, DC 20554. Customers may contact BCPI, Inc. at
their Web site https://www.bcpi.com or call 1-800-378-3160.
Initial Paperwork Reduction Act of 1995 Analysis
This Further Notice of Proposed Rulemaking proposes a new or
revised information collection requirement. The Commission, as part of
its continuing effort to reduce paperwork burdens, invites the general
public and the OMB to comment on the information collection
requirements contained in this document, as required by the Paperwork
Reduction Act of 1995, Public Law 104-13. Public and agency comments
are due July 21, 2014. Comments should address: (a) Whether the
proposed collection of information is necessary for the proper
performance of the functions of the Commission, including whether the
information shall have practical utility; (b) the accuracy of the
Commission's burden estimates; (c) ways to enhance the quality,
utility, and clarity of the information collected; (d) ways to minimize
the burden of the collection of information on the respondents,
including the use of automated collection techniques or other forms of
information technology; and (e) way to further reduce the information
collection burden on small business concerns with fewer than 25
employees. In addition, pursuant to the Small Business Paperwork Relief
Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), the
Commission seeks specific comment on how it might further reduce the
information collection burden for small business concerns with fewer
than 25 employees.
I. Synopsis of the Further Notice of Proposed Rulemaking
A. Introduction
1. The Commission takes another major step in its review of the
broadcast ownership rules. The Commission wishes to build on that
record to resolve the ongoing 2010 proceeding, and the Commission is
cognizant of its statutory obligation to review the broadcast ownership
rules every four years. To accomplish both objectives, with this
Further Notice of Proposed Rulemaking the Commission is initiating this
2014 Quadrennial Review; incorporating the existing 2010 record into
this proceeding; proposing rules that are formulated based on the
Commission's evaluation of that existing record; and seeking new and
additional information and data on market conditions and competitive
indicators as they exist today. The Commission issues this Further
Notice of Proposed Rulemaking to seek additional comment on the
appropriateness of the broadcast ownership rules to today's evolving
marketplace. Also, the Commission seeks additional comment on issues
referred to the Commission in the Third Circuit's remand in Prometheus
II of certain aspects of the Commission's 2008 Diversity Order (73 FR
28361, May 16, 2008, FCC 07-217, rel. March 5, 2008). Finally, the
Commission takes steps herein to address concerns about the use of a
variety of sharing agreements between independently owned television
stations--Shared Service Agreements or SSAs.
B. Background
2. The media ownership rules subject to this quadrennial review are
the local television ownership rule, the local radio ownership rule,
the newspaper/broadcast cross-ownership rule, the radio/television
cross-ownership rule, and the dual network rule. Congress requires the
Commission to review these rules every four years to determine whether
they ``are necessary in the public interest as the result of
competition'' and to ``repeal or modify any regulation [the Commission]
determines to be no longer in the public interest.'' The Third Circuit
has instructed that ``necessary in the public interest'' is a `` `plain
public interest' standard under which `necessary' means `convenient,'
`useful,' or `helpful,' not `essential' or `indispensable.' '' There is
no `` `presumption in favor of repealing or modifying the ownership
rules.' '' Rather, the Commission has the discretion ``to make [the
rule] more or less stringent.'' This 2014 Quadrennial Review will focus
on identifying a reasoned basis for retaining, repealing, or modifying
each rule consistent with the public interest.
3. Policy Goals. The media ownership rules have consistently been
found to be necessary to further the Commission's longstanding policy
goals of fostering competition, localism, and diversity.
[[Page 29011]]
The Commission seeks additional comment on the NPRM's (77 FR 2867, Jan.
19, 2012, FCC 11-186, rel. Dec. 22, 2011) tentative conclusion that
these policy goals continue to be the appropriate framework within
which to evaluate and address minority and female interests as they
relate to the broadcast ownership rules. Based on the record developed
in response to the NPRM, the Commission continues to believe that the
longstanding policy goals of competition, localism, and diversity are
broadly defined to promote the core responsibilities of broadcast
licensees. The Commission is not persuaded by the comments in the
record that it would be appropriate to adopt any additional formal
policy goals. The Commission seeks comment on this tentative
conclusion.
C. Media Ownership Rules
1. Local Television Ownership Rule
a. Introduction
4. Based on the record that was compiled for the 2010 Quadrennial
Review, the Commission tentatively concludes that the current local
television ownership rule remains necessary in the public interest and
should be retained with a limited modification. As discussed below, the
Commission believes that, based on the current media marketplace and
the record in this proceeding, the public interest would be best served
by replacing the Grade B contour overlap test used to determine when to
apply the local television ownership rule with a digital noise limited
service contour (NLSC) test, rather than the DMA-based approach
proposed in the NPRM. The Commission believes that the local television
ownership rule is necessary to promote competition. The Commission
further believes that the competition-based rule proposed in this
Further Notice of Proposed Rulemaking also would promote viewpoint
diversity by helping to ensure the presence of independently owned
broadcast television stations in local markets and would be consistent
with the Commission's localism goal. The Commission finds that the
local television ownership rule proposed in this Further Notice of
Proposed Rulemaking would be consistent with the goal of promoting
minority and female ownership of broadcast television stations.
Finally, the Commission believes that the proposed limited modification
of the rule will better promote competition, and that this benefit
would outweigh any burdens, which would be minimized by the proposal to
grandfather combinations as described herein.
5. The Commission proposes to modify the local television ownership
rule to allow an entity to own up to two television stations in the
same DMA if: (1) The digital NLSCs of the stations (as determined by
Sec. 73.622(e) of the Commission's rules) do not overlap; or (2) at
least one of the stations is not ranked among the top-four stations in
the market and at least eight independently owned television stations
would remain in the DMA following the combination. In calculating the
number of stations remaining post-merger, only those stations whose
digital NLSC overlaps with the digital NLSC of at least one of the
stations in the proposed combination would be considered, which would
be consistent with the contour overlap provision of the current rule.
In addition, the Commission proposes to retain the existing failed/
failing station waiver policy. The Commission seeks comment on these
proposed modifications to the local television ownership rule and ask
whether there have been any developments since the NPRM that the
Commission should take into account in the review of the rule. The
Commission seeks comment on the costs and benefits of the proposed
local television ownership rule. To the greatest extent possible,
commenters should quantify the expected costs or benefits of the
proposed rule and provide detailed support for any actual or estimated
values provided, including the source of such data and/or the method
used to calculate reported values.
b. Background
6. In the NPRM, the Commission proposed to retain the local
television ownership rule, with one modification. Specifically, the
NPRM proposed to retain the top-four prohibition, eight-voices test,
and numerical limits of the existing rule, while proposing to replace
the Grade B contour overlap provision with a DMA-based approach, under
which the Commission would prohibit ownership of two stations in the
same DMA unless at least one of the stations is not rated in the top
four and at least eight independent voices would remain after the
transaction. The NPRM also invited comment on whether to adopt a market
size waiver standard, the impact of multicasting on the local
television ownership rule, and the impact of the proposed rule on
minority and female ownership.
c. Discussion
7. Market. As proposed in the NPRM, the Commission tentatively
finds that the local television ownership rule continues to be
necessary to promote competition among broadcast television stations in
local television viewing markets. Although the Commission believes the
record in the 2010 Quadrennial Review proceeding supports its view of
the appropriate parameters for defining the market, the Commission
seeks comment on whether developments since the NPRM should cause the
Commission to shift the focus of its analysis.
8. First, the Commission believes that the video programming market
remains the relevant market for review of the local television
ownership rule. The Commission also believes that the video programming
market is distinct from the radio listening market. While multiple
broadcast commenters argued in favor of an expansive market definition
that would include nearly all forms of media, the Commission
tentatively finds such arguments to be unpersuasive. The Commission has
previously found that the video programming market is distinct from
other media markets because consumers do not view non-video
entertainment options (e.g., listening to music or reading) and non-
delivered video options (e.g., DVDs or movie theaters) as good
substitutes for watching television, and there is no evidence in the
current record that would cause the Commission to disturb these
findings. In addition, the Commission notes the NPRM's tentative
conclusion that it is not now appropriate to expand the relevant
product market beyond video programming to include non-video
information sources of local news and information. This tentative
conclusion was based on evidence that Internet-only Web sites provide
only a small amount of local news content and a lack of evidence that
non-video information sources modify their programming decisions based
on the actions of local broadcast television stations or vice versa.
The Commission did not receive significant comment on this specific
issue in the 2010 proceeding, and the Commission seeks comment on
whether it should confirm the NPRM's tentative conclusion for the
reasons discussed therein.
9. Second, the Commission believes that its analysis regarding the
local television ownership rule should continue to focus on promoting
competition among broadcast television stations in local television
viewing markets. In order to compete effectively
[[Page 29012]]
in its local market, and thereby gain market share, a broadcast
television station must invest in better programming and provide
programming tailored to the needs and interests of the local community,
including local news and public interest programming. By strengthening
their position in the local market, television broadcasters are better
able to compete for advertising revenue and retransmission consent
fees, an increasingly important source of revenue for many stations.
Viewers in the local market benefit from such competition among
numerous strong rivals in the form of higher quality programming.
10. While the Commission is keenly aware of the growing popularity
of video programming delivered via MVPDs and the Internet, it
tentatively find that competition from such video programming providers
is currently of limited relevance for the purposes of its analysis.
These programming alternatives compete largely in national markets--
cable network programming is generally uniform across all markets, as
is video programming content available via the Internet--and, unlike
local broadcast stations, such programming providers are not likely to
respond to conditions in local markets. Though certain broadcast
commenters disputed this notion, the Commission tentatively finds their
arguments to be unsupported by evidence of non-broadcast video
programmers modifying their programming decisions based on the
competitive conditions in a particular local market.
11. In addition, the Commission tentatively finds that broadcast
television's strong position in the local advertising market supports
its view that non-broadcast video programmers are not yet meaningful
substitutes in local television markets. Broadcasters asserted that the
Commission should expand the relevant market, in part because of
increased competition for advertising from non-broadcast sources of
video programming, particularly in the local advertising market. The
data do not support this claim. From 2008 through 2011, though overall
local advertising spending was down from its highs in 2005 and 2006,
local broadcast television's market share actually increased and
achieved the highest levels since 2004. While the shares of local
advertising on cable television and the Internet also increased during
this time period, those gains do not appear to be at the expense of
broadcast television stations. NAB asserted that the recent growth in
television station advertising revenue is temporary and not likely to
``address the structural changes that have taken place in the
[television] market'' because the predicted 2012 advertising revenues
for the broadcast television industry are below the levels achieved in
2006. While advertising revenues for broadcast television stations were
lower during this period, the Commission believes the evidence does not
support the conclusion that this was the result of a unique change in
the television marketplace; instead, the total advertising market for
all media experienced a significant contraction, which was most likely
the result of the global financial crisis that impacted nearly all
markets. Moreover, total station revenue for 2012 was predicted to
exceed the total station revenue for 2006 and to grow steadily through
2017. However, the Commission seeks comment on whether any structural
changes have occurred in the television marketplace and, if so, whether
to adjust the 2014 Quadrennial Review analysis to account for such
changes. The Commission seeks comment on whether there have been any
significant changes since these figures became available.
12. The Commission believes that broadcast television stations
continue to play a unique and vital role in local communities that is
not meaningfully duplicated by non-broadcast sources of video
programming. In addition to providing viewers with the majority of the
most popular programming on television, broadcast television stations
remain the primary source of local news and public interest
programming. Moreover, millions of U.S. households lack broadband
access at speeds sufficient to stream or download video programming
available via the Internet. Accordingly, the Commission tentatively
finds that the record continues to support a local television ownership
rule designed to promote competition among broadcast television
stations. The Commission believes the 2010 Quadrennial Review record
supports the use of this approach, and it seeks comment on whether this
market definition should apply for purposes of the 2014 Quadrennial
Review.
13. Contour Overlap. The NPRM proposed to eliminate the Grade B
contour overlap test and rely solely on Nielsen DMAs to determine when
to apply the local television ownership rule. The NPRM recognized that
the DMA approach could have a disproportionate impact in certain DMAs
and sought comment on the impact of such a change. As discussed below,
the Commission tentatively finds that the public interest is best
served by retaining the contour-based approach of the previous rule but
by replacing the analog Grade B contour with the digital NLSC. The
Commission seeks comment on whether any developments have occurred
since the NPRM that should cause it to reconsider this proposed
approach.
14. The Commission believes that the proposed DMA-only approach
would unnecessarily expand the reach of the local television ownership
rule in certain DMAs and thus would be overbroad. Therefore, the
Commission tentatively declines to adopt that approach. NAB argues that
relying instead on the digital NLSC, which the Commission has treated
as the functional equivalent of the Grade B contour, would serve the
purpose of establishing a trigger that would accurately reflect current
digital service areas while avoiding any potential disruptive impact,
and the Commission believes that approach is reasonable. By contrast,
there is no digital counterpart to a station's analog city grade
contour. Accordingly, consistent with case law developed after the
digital transition, the Commission would continue to evaluate all
future requests for new or continued satellite status on an ad hoc
basis. In addition, consistent with previous Commission decisions, the
Commission tentatively finds that retaining a contour-based approach
would serve the public interest by promoting local television service
in rural areas. In particular such an approach would continue to allow
station owners in rural areas to build or purchase an additional
station in remote portions of the DMA, so long as there is no digital
NLSC overlap. It is important that the local television ownership rule
take into account the current digital service area of a station. The
Commission confirms that the digital NLSC is an accurate measure of a
station's current service area and thus would be an appropriate
standard. Thus, under the modified rule proposed in the Further Notice
of Proposed Rulemaking, the Commission would continue to define the
geographic dimensions of the local television market by reference to
DMAs, but the Commission would replace the analog Grade B contour with
the digital NLSC, such that within a DMA an entity could own or operate
two stations in a market if the digital NLSCs of those stations did not
overlap. To the extent that the digital NLSC of two stations in the
same DMA overlapped, then the stations serve the same area, even if
there was no analog Grade B contour overlap prior to the digital
transition, and in that case the combination would be permitted
[[Page 29013]]
only if it satisfied the top-four prohibition and the eight-voices
test. In the 2002 Biennial Review Order (68 FR 46286, Aug. 5, 2003, FCC
03-127, rel. July 2, 2003), in which the local television ownership
rule was relaxed, the Commission eliminated the contour overlap
provision. However, in recognition of the unique circumstances
involving stations without Grade B contour overlap, the Commission
adopted waiver criteria that would permit common ownership if the
applicant could demonstrate ``that the stations have no Grade B overlap
and that the stations are not carried by any MVPD to the same
geographic area.'' The revised rule adopted in the 2002 Biennial Review
Order was overturned on appeal. The Commission believes its proposal to
adopt the digital NLSC standard is in the public interest and is
supported by the record, and it declines to propose alternate possible
solutions, such as waiver criteria similar to those adopted in the 2002
Biennial Review Order. However, the Commission invites commenters to
propose alternate solutions if they object to the Commission's
approach.
15. The NPRM described the potential benefits of a DMA-based
approach, including correlation with DMA-wide carriage of broadcast
signals pursuant to mandatory carriage requirements and benefits
similar to those realized by the geographic market definition in the
radio rule. For the reasons discussed above, however, that approach
could have a negative impact in certain DMAs. The Commission seeks
comment on the tentative conclusion that the alternative approach
proposed in this Further Notice of Proposed Rulemaking would avert the
negative impact of the DMA-based approach, accurately reflect current
digital service areas, and appropriately balance the Commission's
public interest goals.
16. Grandfathering. The Commission tentatively affirms the NPRM's
proposal to grandfather existing ownership combinations that would
exceed the numerical limits under the revised contour approach, though
it tentatively finds that the sale of such combinations must comply
with the local television ownership rule then in effect. In addition,
the Commission proposes that all permanent waivers from the prior rule
that previously have been granted would continue in effect under the
new rule, but, like any newly grandfathered combinations, could not be
transferred/assigned intact unless the combination complies with the
local television ownership rule in effect at the time of the transfer/
assignment. The Commission seeks comment on whether it should adopt
this approach in the 2014 quadrennial proceeding.
17. The Commission tentatively finds that the concerns raised by
those in favor of permitting grandfathering and the transfer of
grandfathered combinations would largely be addressed by the proposal
to retain a contour overlap provision in the local television ownership
rule and to substitute the digital NLSC for the Grade B contour. The
contour element of the rule would effectively maintain the status quo
for most, if not all, owners of duopolies formed as a result of the
previous Grade B contour overlap provision. Consistent with the
tentative conclusion in the NPRM, however, the Commission proposes to
grandfather ownership of existing combinations of television stations,
if any, that would exceed the ownership limit as a result of the change
to the digital NLSC test the Commission proposes herein. Even in
limited circumstances, compulsory divestiture is disruptive to the
marketplace and is a hardship for individual owners; the Commission
believes any benefits to its policy goals (including promoting
ownership diversity) would be outweighed by these countervailing
equitable considerations.
18. The Commission proposes, however, to require that the sale of
any such grandfathered combination comply with the local television
ownership rule in place at the time the transfer of control or
assignment application is filed. As stated above, the digital NLSC is
an accurate measure of a station's digital service area. If the digital
NLSC of two stations in the same DMA overlap, then the stations serve
the same area, even if there was no Grade B contour overlap prior to
the digital transition. Accordingly, requiring that the sale of a
grandfathered combination comply with the new standard would be
consistent with the Commission's rationale for adopting the digital
NLSC-based standard and would not cause hardship by requiring premature
divestiture. Consistent with the Commission's previous decisions, it
tentatively finds that the public interest would not be served by
allowing grandfathered combinations to be freely transferable in
perpetuity where a combination does not comply with the local
television ownership rule at the time of transfer/assignment. Under its
proposed approach, the Commission would continue to allow pro forma
changes in ownership and involuntary changes of ownership due to death
or legal disability of the licensee. The Commission seeks comment on
this tentative conclusion.
19. Numerical Limits. The Commission proposed in the NPRM to retain
the current numerical limits in the local television ownership rule.
The Commission seeks comment on whether to adopt that proposal, thereby
permitting a licensee to own up to two stations (i.e., a duopoly) in a
market, subject to the other requirements proposed in this Further
Notice of Proposed Rulemaking.
20. The Commission seeks comment on its preliminary view that the
local television marketplace has not changed significantly since the
NPRM to justify either tightening or loosening the current numerical
limits of the local television rule. Ownership of a second in-market
station can create substantial efficiencies, which may allow a local
broadcast station to invest in programming that meets the needs of its
local community, such as local news or other public interest
programming. Notably, the Commission tentatively finds that there is
substantial evidence in the record that the duopolies permitted subject
to the restrictions of the current rule have created tangible public
interest benefits for viewers in local television markets that more
than offset any potential harms that are associated with common
ownership. Moreover, as discussed in greater detail in the paragraphs
below on multicasting, the Commission believes that the ability to
multicast is not a substitute for common ownership of multiple stations
and, therefore, would not justify tightening the existing numerical
limits. The Commission seeks comment on these tentative findings.
21. Similarly, the Commission does not believe there have been
sufficient changes in the local television marketplace to justify
ownership of a third in-market station. The Commission seeks comment on
this tentative conclusion. The primary ``change'' in the marketplace
cited by those commenters in favor of loosening the rule is competition
from non-broadcast alternatives. As discussed above, however, the
Commission believes the local television ownership rule is designed to
promote competition among broadcast television stations in local
television markets, and the Commission has tentatively concluded that
it is not yet appropriate to consider competition from non-broadcast
sources in evaluating whether the rule remains necessary. Even if the
Commission were to consider such competition, Entravision, which
supported ownership of up to two stations in all markets and up to
three stations in markets with 18 or more television stations, conceded
that such
[[Page 29014]]
consolidation is likely to threaten the Commission's competition and
diversity goals by jeopardizing small and mid-sized broadcasters. To
combat these harms, Entravision proposed a series of ``behavioral
regulations'' that the Commission could adopt in tandem with loosening
the ownership restrictions. The Commission declined to adopt this
proposal in the 2006 Quadrennial Review proceeding, a decision that was
upheld in Prometheus II, and the Commission sees no changes in the
local television marketplace that would warrant reconsideration of the
Commission's previous decision. The Commission has long applied
structural local media ownership rules and has previously rejected
proposals for instituting behavioral rules. The Commission proposes to
affirm this approach, as it continues to believe that behavioral rules
are not appropriate substitutes for structural local media ownership
rules. The Commission seeks comment on this proposal. Without
significant evidence of the public interest benefits that could result
from the ownership of three stations in a local market, the Commission
does not believe that there is adequate justification at this time for
increasing the numerical limits.
22. Top-Four Prohibition. The Commission proposes to continue to
prohibit mergers between two top-four-rated stations in a local market,
consistent with the tentative conclusion in the NPRM. The Commission
tentatively finds that the top-four prohibition remains necessary to
promote competition in the local television marketplace. The Commission
seeks comment on whether there have been any developments since the
NPRM that it should consider with regard to this issue.
23. Consistent with previous Commission decisions, the Commission
proposes to continue to prohibit mergers involving two of the top-four
stations in a market because it believe such combinations would be the
most deleterious to competition. The Commission has previously
identified potential harms associated with top-four combinations, and
the Commission found no evidence in the 2010 Quadrennial Review record
to disturb the Commission's previous findings. Accordingly, the
Commission continues to believe that top-four combinations would often
result in a single firm obtaining a significantly larger market share
than other firms in the market and that such combinations could create
welfare harms. Top-four combinations have been found to reduce
incentives for local stations to improve their programming, as once
strong rivals suddenly have incentives to coordinate their programming
in order to minimize competition between the commonly owned stations.
In addition, in general, there remains a significant ``cushion'' of
audience share points that separates the top-four stations in a market
from the fifth-ranked station. Accordingly, the Commission tentatively
finds that the public interest is best served by retaining the top-four
prohibition. The Commission seeks comment on this tentative conclusion.
24. The NPRM also sought comment on certain circumstances in which
a licensee is able to obtain control over two of the top-four stations
in a market through a transaction or series of transactions, sometimes
referred to as ``affiliation swaps,'' that do not require prior
Commission approval. Based on its review of the 2010 Quadrennial Review
record, the Commission tentatively finds that such transactions should
be subject to the top-four prohibition because it believes they
circumvent the intent of the rule and are not in the public interest.
The Commission seeks comment on whether it should adopt this approach.
25. In general, national network affiliation is a significant
driver of a station's audience share. The Commission has previously
found that, nationally, the Big Four networks (i.e., ABC, CBS, Fox, and
NBC) are the highest rated networks and that, in general, the national
audience statistics are reflected in the rankings in the local markets.
Recent Nielsen data confirm this finding. Accordingly, an affiliation
swap involving a top-four station and a non-top-four station will
nearly always result in the non-top-four station becoming a top-four
station after the swap. Because such affiliation swaps do not involve
the assignment or transfer of a station license, the transaction is not
subject to prior Commission approval under Section 310(d) of the
Communications Act of 1934. Thus, by engaging in an affiliation swap,
parties can achieve a top-four station combination that would otherwise
have been prohibited by the Commission's rules.
26. This fact is evidenced in the Honolulu, Hawaii, DMA, where an
affiliation swap between a top-four station and a non-top-four
station--which was commonly owned with a different top-four station in
the market--was executed. In addition to the affiliation swap, the
parties swapped certain of the stations' non-network programming and
the stations' call signs, purportedly to avoid viewer confusion. Thus,
the stations (though not the licenses) effectively changed hands
without prior Commission approval--approval that was not technically
required. Consistent with the Commission's observation above regarding
the correlation between affiliation with a Big Four network and market
rank, following the affiliation swap, the non-top-four station became a
top-four station. By structuring these transactions so as to evade
Commission review, a single entity was able to acquire control over a
second top-four station in the market, a result that is prohibited
under the local television ownership rule.
27. The Commission tentatively finds that transactions involving
the sale or swap of network affiliations between in-market stations
that result in an entity holding an attributable interest in two top-
four stations can be used to evade the top-four prohibition.
Accordingly, in order to close this loophole, the Commission proposes
to clarify that such transactions must comply with the top-four
prohibition at the time the agreement is executed. Specifically, the
Commission believes an entity should not be permitted to directly or
indirectly own, operate, or control two television stations in the same
DMA through the execution of any agreement (or series of agreements)
involving stations in the same DMA, or any individual or entity with a
cognizable interest in such stations, in which a station (the new
affiliate) acquires the network affiliation of another station (the
previous affiliate), if the change in network affiliations would result
in the licensee of the new affiliate, or any individual or entity with
a cognizable interest in the new affiliate, directly or indirectly
owning, operating, or controlling two of the top-four rated television
stations in the DMA at the time of the agreement. In addition, the
Commission proposes that, for purposes of making this determination,
the new affiliate's post-consummation ranking would be the ranking of
the previous affiliate at the time the agreement is executed,
determined in accordance with Sec. 73.3555(b)(1)(i) of the
Commission's rules. The Commission proposes to find any party that has
control over two top-four stations in the same DMA as a result of such
transactions to be in violation of the top-four prohibition and subject
to enforcement action. Application of this rule would be prospective,
and parties that acquired control over a second in-market top-four
station by engaging in such transactions prior to the release date of a
decision to adopt such a rule would not be subject to divestiture or
enforcement action.
[[Page 29015]]
Consistent with KHNL/KGMB License Subsidiary, such transactions that
would not be subject to such a rule could still be considered in the
context of individual licensing proceedings. All future transactions
would be required to comply with the Commission's rules then in effect.
The Commission seeks comment on these proposals. In addition, it seeks
comment on whether and how station owners are attempting to circumvent
the top-four prohibition, or any other of the media ownership rules,
through the invention of similar devices. While the Commission has
tentatively determined that the present circumstances support
prospective application of this rule, parties are on notice that
similar efforts to evade the media ownership rules could be subject to
enforcement action.
28. The Commission seeks comment on whether this application of the
top-four prohibition is consistent with the Commission's policy to
avoid constraints on commercial activities that are designed to effect
station improvements. The Commission continues to encourage licensees
to improve the quality of the programming and operation of their
stations in ways that are consistent with the Commission's rules and
policies. Moreover, the Commission does not believe that closing this
loophole in the top-four prohibition violates the First Amendment.
Indeed, recent constitutional challenges to the media ownership rules
have been rejected, and the Commission tentatively finds that this
application of the top-four prohibition withstands First Amendment
scrutiny for the same reasons.
29. While certain commenters argued to the contrary, for the
reasons discussed herein, acquiring control over a second in-market
top-four station through the transactions described above is easily
distinguishable from other, legitimate actions a station may undertake
to increase ratings at the expense of a competitor. In addition,
Sinclair cautioned the Commission against interfering in the free
market negotiation of affiliation agreements--which it asserted occur
often and for valid business reasons--based upon a single instance
where the Commission believes an affiliation swap constituted an ``end
run'' around the top-four prohibition. Contrary to Sinclair's
assertion, the Commission does not believe that it is necessary, or
wise, to permit additional parties to evade the top-four prohibition
before it acts, nor does it believe that this proposal is likely to
have a significant impact on the negotiation of affiliation agreements.
Consistent with Sinclair's comments, the Commission believes that the
negotiation of affiliation agreements typically does not involve
affiliation swaps and, therefore, would be unaffected by this proposal.
And while such swaps may not occur often, given the potential of such
transactions to undermine the local television ownership rule, the
Commission believes that the application of the top-four prohibition to
such transactions would be necessary. The Commission does not believe
there is a reliable marketplace solution that would restrain the use of
affiliation swaps to evade the top-four prohibition. The Commission
seeks comment on these views.
30. Eight-Voices Test. Consistent with the proposal in the NPRM,
the Commission tentatively concludes that a merger between two in-
market stations with overlapping contours should not be permitted
unless there would be at least eight independently owned commercial and
noncommercial television stations remaining in the market post-merger,
and at least one station is not a top-four station. The Commission
tentatively finds that the eight-voices test continues to be necessary
to promote competition in local television markets. The Commission
seeks comment on these tentative conclusions.
31. The Commission's view is that the 2010 Quadrennial Review
record does not reveal sufficient changes in the local television
marketplace to warrant modification of the eight-voices test at this
time. Consistent with the Commission's prior position, the Commission
tentatively finds that, in order to permit common ownership of two in-
market stations with digital NLSC overlap, there should be a minimum of
eight independently owned and operated television stations in the
market post-merger. The Commission believes this minimum threshold
would help ensure robust competition among local television stations in
the markets where common ownership is permitted under its proposed
rule, as it would increase the likelihood that each such market would
be served by stations affiliated with each of the Big Four networks as
well as at least four independently owned and operated stations
unaffiliated with these major networks. Indeed, nearly every market
with eight or more full-power television stations--absent a waiver of
the local television ownership rule or unique circumstances--is served
by each of the Big Four networks and at least four independent
competitors unaffiliated with a Big Four network. Competition among
these independently owned stations is important, as it serves to
improve the programming offered both by the major network stations and
the independent stations, including increased local news and public
interest programming. The Commission notes that this competition is
perhaps most valuable during the parts of the day in which local
broadcast stations do not transmit the programming of affiliated
broadcast networks. Moreover, because there continues to be a
significant gap in audience share between the top-four stations in a
market and the remaining stations in most markets, the Commission
continues to believe that it is appropriate to retain the eight-voices
test, which helps to promote at least four independent competitors
before common ownership is allowed. The Commission seeks comment on the
tentative conclusion that, in light of this concentration and
consistent with the 2006 Quadrennial Review Order (73 FR 9481, Feb. 21,
2008, FCC 07-216, rel. Feb. 4, 2008), it remains prudent to require the
presence of at least four additional independently owned and operated
competitors in the market in order to promote competition in the local
television market before permitting any common ownership in that
market. The Commission is most interested in learning whether any new
information has become available since the NPRM that it should take
into account in considering this issue.
32. The Commission tentatively finds that it is appropriate to
include only full-power television stations in the voice count. The
primary purpose of the rule is to promote competition among broadcast
television stations in local television viewing markets; therefore, the
Commission tentatively finds that it would be inappropriate to include
other types of media when counting voices. The Commission notes that in
the 2006 Quadrennial Review Order the Commission addressed the Sinclair
court's criticisms of the eight-voices test, specifically the rationale
for defining voices differently in the radio-television cross ownership
rule and the local television ownership rule. The Commission detailed
its rationale for limiting voices in the television rule to only full-
power television stations, a rationale that was subsequently upheld on
appeal in Prometheus II, and to which the Commission proposes to
continue to adhere herein. The Commission seeks comment on its view
that Sinclair does not compel the Commission to include additional
voices in the eight-voices test.
33. Market Size Waivers. The NPRM sought comment on whether the
[[Page 29016]]
Commission should adopt a waiver standard for markets where the rules
would otherwise limit ownership to a single television station, and, if
so, how such a waiver standard should be structured. The NPRM sought
comment also on whether such a market size waiver, which could even
allow combinations between top-four stations, would promote additional
local news offerings in small markets that are less able to support
four local news operations. Based on review of the 2010 Quadrennial
Review record, the Commission tentatively concludes that a market size
waiver standard is not necessary. Instead, the Commission tentatively
concludes that retention of the existing failed/failing station waiver
policy would serve the public interest and it seeks additional comment
on whether to relax the waiver criteria or establish additional grounds
for waiver.
34. The Commission seeks comment on the tentative conclusion that
establishing a new market size waiver standard is not needed. Having
evaluated the various proposed waiver standards proffered by
commenters, the Commission is concerned that many of the proposed
waiver criteria would be difficult to monitor or enforce, are not
rationally related to the ability of each station to compete in the
local market, and could be manipulated in order to obtain a waiver.
Ultimately, the Commission predicts that such standards would
significantly expand the circumstances in which a waiver of the local
television ownership rule would be granted. The Commission is concerned
that such relaxation would be inconsistent with the tentative
conclusion that the public interest is best served by retaining the
existing television ownership limits. Moreover, the Commission believes
that the existing waiver standard is not unduly restrictive and that it
provides appropriate relief in markets of all sizes. Waiver of its
rules is meant to be exceptional relief, and the Commission tentatively
finds that the existing waiver criteria strike an appropriate balance
between enforcing the ownership limits and providing relief from the
rule on a case-by-case basis.
35. In addition, the Commission tentatively finds that it is not
necessary to modify the existing waiver standard in order to promote
additional local news, as the current policy already indirectly takes
this into consideration in cases involving failing stations. Indeed,
parties frequently pledge to continue and/or increase local news
offerings in order to demonstrate that the proposed transaction would
produce public interest benefits. The Commission's commitment to
promoting increased local news remains strong, and the Commission
believes that the existing waiver policy helps further that goal. The
Commission seeks comment on whether there is new information since the
NPRM that would alter its preliminary views on this issue.
36. The Commission seeks comment on the tentative conclusion that
maintaining the failed/failing station waiver policy will serve the
public interest. While it proposes to retain the existing failed/
failing station waiver policy, it acknowledges that some industry
participants have argued that certain elements of the existing policy
are too restrictive. Accordingly, the Commission seeks comment on
potential changes to the policy to address those circumstances. For
example, are there circumstances in which the Commission should refrain
from applying the four-percent all-day audience share requirement or
adopt a higher threshold? If so, what circumstances would justify such
a change? Are any other changes appropriate? The Commission encourages
commenters to provide alternative waiver criteria for its
consideration, including specific justifications for such criteria, as
well as the potential impact on its policy goals.
37. Multicasting. The NPRM sought comment on whether the transition
to digital television, and specifically a station's ability to
multicast multiple program streams has eliminated the need to permit
common ownership of two stations in local television markets, as the
local television ownership rule does. The 2010 Quadrennial Review
record does not persuade the Commission that multicasting justifies
imposition of a single-station ownership restriction or other
tightening of the current ownership limits. The Commission seeks
comment on whether there have been any developments since the NPRM that
should cause it to reevaluate this position.
38. The Commission tentatively concurs with the broadcast
commenters that, while multicasting has produced public interest
benefits, the ability to multicast does not justify tightening the
current numerical limits. Based on evidence in the 2010 Quadrennial
Review record, broadcasting on a multicast stream does not--at
present--produce the cost savings and additional revenue streams that
can be achieved by owning a second in-market station. Therefore,
tightening the numerical limits might prevent those broadcasters in
markets where common ownership is permitted under the existing rule
from achieving the efficiencies and related public interest benefits
associated with common ownership. Accordingly, the Commission's view
based on the most recent record is that it is not appropriate to adjust
the numerical limits as a result of stations' multicasting capability.
The Commission seeks comment, however, on whether it should reconsider
its position within the context of the 2014 Quadrennial Review
proceeding. The Commission notes that it has authorized channel sharing
by broadcast television stations in connection with the incentive
auction of broadcast television spectrum and that the statutory
provision mandating the incentive auction protects the must-carry
rights of stations that voluntarily relinquish spectrum usage rights in
order to channel share. The Commission seeks comment on the potential
impact of this aspect of the incentive auction for purposes of the
media ownership rules.
39. Moreover, as discussed above, the Commission tentatively finds
that the public interest is served by retaining the current numerical
ownership limits; it believe that doing so would promote competition in
local television markets. Therefore, as the court noted in Prometheus
II, even if multicasting did generate cost savings and new revenue
streams similar to owning a second in-market station--though the
Commission believes that at present it does not--the Commission is not
required ``to promulgate a more restrictive rule just because entities
may gain similar economies of scale and generate new revenue by
multicasting.'' Indeed, for the reasons discussed herein, the
Commission proposes not to make such a change, and it seeks comment on
the potential consequences of such an approach for purposes of the 2014
Quadrennial Review.
40. The NPRM sought comment also on the impact of dual network
affiliations on local markets and whether the Commission should limit
the ability of stations to utilize their multicast capacity to form
dual affiliations with certain networks. As discussed below, the
Commission proposes to decline to regulate such dual affiliations in
the context of the media ownership rules at this time, and it seeks
comment on this proposal. The Commission seeks comment on multicasting
issues in general and, in particular, on any potential impact on the
incentive auction.
41. The Commission does not believe the 2010 Quadrennial Review
record supports regulation within the context of its media ownership
rules to restrict the use of multicast capability to form dual
affiliations. The commenters were primarily concerned with such dual
[[Page 29017]]
affiliations involving two Big Four networks. Evidence available during
the 2010 proceeding indicates that dual affiliations involving two Big
Four networks via multicasting are generally--if not exclusively--
limited to smaller markets with an insufficient number of full-power
commercial television stations to accommodate each Big Four network or
where other unique marketplace factors are responsible for creating the
dual affiliation arrangements. BIA data from 2012 indicate that there
are approximately 40 instances of dual affiliation via multicasting
involving multiple Big Four networks. Each market in which the
Commission identified such dual affiliation was outside the top-100
ranked DMAs, with the vast majority of such markets--approximately 73
percent--containing three or fewer full-power commercial television
stations. These findings are consistent with the data and estimates
provided by cable commenters, as a significant majority of the dual
affiliations identified in these comments involved a Big Four network
and a ``Little Two'' network (i.e., The CW or MyNetworkTV). The
Commission tentatively finds that Big Four/Little Two dual affiliations
via multicasting, regardless of market rank, do not raise sufficient
competitive concerns to justify an amendment to the local television
ownership rule. While there may be potential harms that result from
certain dual network affiliations, the Commission tentatively agrees
with broadcast commenters that the potential benefits of dual
affiliation via multicasting in these smaller markets, including dual
affiliation with more than one Big Four network, outweigh any potential
harms to the Commission's policy goals. Indeed, the Commission believes
that a significant benefit of the multicast capability is the ability
to bring more local network affiliates to smaller markets, thereby
increasing access to popular network programming and local news and
public interest programming tailored to the specific needs and
interests of the local community. Based on the 2010 Quadrennial Review
record, it appears that marketplace incentives operate to limit the
occurrence of dual affiliations via multicasting involving multiple Big
Four networks to these smaller markets. For these reasons, the
Commission tentatively declines to regulate dual affiliations at this
time, and the Commission seeks comment on this approach within the
context of any marketplace changes that may have occurred since the
NPRM.
42. Minority and Female Ownership. The Commission sought comment on
the impact of the proposed local television ownership rule on minority
and female ownership opportunities, as well as the impact of diverse
television ownership on viewpoint diversity. The Commission tentatively
finds that the local television ownership rule proposed in this Further
Notice of Proposed Rulemaking is consistent with its goal to promote
minority and female ownership of broadcast television stations. The
Commission seeks comment on this tentative conclusion.
43. As discussed above, the Commission tentatively finds that the
2010 Quadrennial Review record demonstrates that the existing local
television ownership rule remains necessary to promote competition
among broadcast television stations in local markets. Moreover, the
Commission believes the competition-based rule would also indirectly
advance its viewpoint diversity goal by helping to ensure the presence
of independently owned broadcast television stations in the local
market, thereby increasing the likelihood of a variety of viewpoints.
In addition, while the Commission does not propose to retain the rule
with the specific purpose of preserving the current levels of minority
and female ownership, the Commission tentatively finds that retaining
the existing rule would effectively address the concerns of those
commenters who suggested that additional consolidation would have a
negative impact on minority and female ownership of broadcast
television stations. The Commission notes also that it proposes to
retain without modification the current failed/failing station waiver
policy, including the out-of-market-buyer solicitation requirement--the
failed station solicitation rule (FSSR)--which promotes new entry in a
market by ensuring that out-of-market entities interested in purchasing
a station, including minorities and women, will have an opportunity to
bid. The Commission seeks comment on how any developments since the
NPRM may affect these tentative findings. In addition, the Commission
seeks comment on whether the incentive auction has the potential to
impact minority and female broadcast ownership and whether any such
impacts should affect the 2014 Quadrennial Review.
2. Local Radio Ownership Rule
a. Introduction
44. Based on the 2010 Quadrennial Review record, the Commission
tentatively finds that the current local radio ownership rule remains
necessary in the public interest and should be retained without
modification. The Commission believes that the rule is necessary to
promote competition. In addition, the Commission believes that the
radio ownership limits promote viewpoint diversity ``by ensuring a
sufficient number of independent radio voices and by preserving a
market structure that facilitates and encourages new entry into the
local media market.'' Similarly, the Commission tentatively finds that
a competitive local radio market helps to promote localism, as a
competitive marketplace will lead to the selection of programming that
is responsive to the needs and interests of the local community. The
Commission tentatively finds also that the local radio ownership rule
is consistent with its goal of promoting minority and female ownership
of broadcast television stations. Finally, the Commission believes that
these benefits outweigh any burdens that may result from its proposal
to retain the rule without modification. The Commission seeks comment
on these tentative conclusions.
45. In accordance with these tentative conclusions, the Commission
proposes that an entity may continue to own: (1) Up to eight commercial
radio stations in radio markets with 45 or more radio stations, no more
than five of which can be in the same service (AM or FM); (2) up to
seven commercial radio stations in radio markets with 30-44 radio
stations, no more than four of which can be in the same service (AM or
FM); (3) up to six commercial radio stations in radio markets with 15-
29 radio stations, no more than four of which can be in the same
service (AM or FM); and (4) up to five commercial radio stations in
radio markets with 14 or fewer radio stations, no more than three of
which can be in the same service (AM or FM), provided that an entity
may not own more than 50 percent of the stations in such a market,
except that an entity may always own a single AM and single FM station
combination. The Commission seeks comment on the costs and benefits of
its proposal to retain the existing local radio ownership rule. To the
greatest extent possible, commenters should quantify the expected costs
or benefits of retaining the rule and provide detailed support for any
actual or estimated values provided, including the source of such data
and/or the
[[Page 29018]]
method used to calculate reported values.
b. Background
46. In the NPRM, the Commission proposed to retain the local radio
ownership rule without modification, including the AM/FM subcaps, and
sought comment on this tentative conclusion. The Commission also sought
comment on whether and, if so, how, to incorporate new audio platforms
into the rule and on the impact of such platforms on the broadcast
radio industry. In addition, the NPRM sought comment on whether to
adopt a specific waiver standard for the local radio ownership rule and
on how the proposed rule would affect minority and female ownership
opportunities.
c. Discussion
47. Market. In the NPRM, the Commission tentatively concluded that
the relevant market for review of the local radio ownership rule is the
radio listening market and that it is not appropriate, at this time, to
expand that market to include non-broadcast sources of audio
programming. Based on the Commission's review of the 2010 Quadrennial
Review record, it believes this approach is appropriate, and it seeks
comment on whether it should maintain this market definition.
48. The Commission tentatively finds that, for purposes of the
Commission's ownership rules, non-broadcast sources of audio
programming are not yet meaningful substitutes for broadcast radio
stations with respect to either listeners or advertisers. While
alternate platforms such as satellite radio and Internet-delivered
audio are growing in popularity, broadcast radio remains the dominant
radio technology. In 2012, 92 percent of Americans age 12 or older
listened to broadcast radio, a figure that has remained essentially
constant over the last decade. Satellite radio still serves only a
small portion of the population, even though its subscription rates
continue to climb. And though recent data suggest that a significant
portion of adult U.S. broadband households (42 percent) listen to
Internet-delivered audio programming, the Commission notes that
millions of U.S. households continue to lack broadband connections. In
addition, only 14 percent of Internet radio listeners listen in their
cars, where most broadcast radio listening occurs. Thus, the Commission
tentatively concludes that Internet-delivered audio programming is not
yet a meaningful substitute for broadcast radio listening for most
listeners. The Commission seeks comment on this tentative conclusion
and invites commenters to provide any more recent relevant information
and data.
49. The Commission believes, moreover, that satellite radio and
content delivered via the Internet generally are national platforms
that are not likely to respond to competitive conditions in local
markets. Satellite radio content is uniform nationally, and there is no
evidence in the record that content decisions are made based on
competitive conditions in local markets. Similarly, there is no
evidence in the record that Internet radio stations and other Internet-
delivered audio programming providers (excluding streams of local
broadcast radio stations) modify their programming decisions to respond
to competitive conditions in local markets. Ultimately, the Commission
tentatively finds that only local broadcasters provide programming
based on the unique characteristics of their respective local markets.
As the Commission has stated previously, it is the competition between
such rivals that most benefits listeners in a local market and serves
the public interest--competition that is currently lacking from non-
broadcast audio alternatives. Therefore, the Commission proposes to
continue to limit the relevant market for the local radio ownership
rule to broadcast radio stations in local radio listening markets, and
it seeks comment on this proposal.
50. In addition, broadcast radio's consistently strong position in
both local and national advertising markets appears to support the
Commission's tentative finding that non-broadcast sources of audio
programming are not significant competitors at this time. Broadcasters
asserted that the Commission should expand the relevant market for
review, in part, because of competition for advertising revenue from
non-broadcast audio sources; however, recent advertising data do not
support this contention. From 2008 through 2011, broadcast radio's
local advertising revenue market share increased each year, reaching
16.6 percent in 2011. In the national advertising market during that
same time period, broadcast radio's market share remained stable
(between 1.8 and 2.0 percent). By contrast, satellite radio's
advertising revenue market share in both the local and national markets
did not exceed 0.1 percent. And while ``Internet advertising'' has seen
significant gains in advertising revenue market share both locally and
nationally, evidence suggests that the revenue is not attributable in
any significant portion to providers of Internet-delivered audio
programming. For example, in 2011, online-only audio programming
providers were estimated to have earned approximately $295 million in
advertising revenue. By contrast, in 2011, the total broadcast radio
advertising revenue market was projected at approximately $17.8
billion. The Commission notes that NAB conceded that local radio
broadcasting revenues have improved in recent years, but it argued that
there has been a ``structural change in the audio marketplace'' because
overall revenues were below levels earned in 2005 and 2006 and are not
expected to reach those levels until 2015. While total advertising
revenue for local radio stations did decline from 2006-2009, with the
most significant declines in 2008 and 2009, the evidence does not
support the conclusion that this was a result of a unique change in the
audio marketplace; instead, the total advertising market for all media
experienced a significant contraction that was most likely the result
of the global financial crisis that impacted nearly all markets.
Moreover, overall advertising revenues for the broadcast radio industry
have steadily improved since 2010 and are predicted to grow through
2020. However, the Commission seeks comment on whether any structural
changes have occurred in the audio marketplace and, if so, whether to
adjust the 2014 Quadrennial Review analysis to account for such
changes. The Commission seeks comment on whether there have been any
significant changes since these figures became available.
51. Market Size Tiers. The NPRM proposed to retain the current
approach of setting numerical limits based on market size tiers and
determining the market size based on the number of commercial and
noncommercial radio stations in the local market. The Commission
tentatively concludes that it should adopt these proposals and seek
comment on this approach.
52. The Commission tentatively declines to modify the current
rule's method of calculating the number of stations a licensee owns.
The Commission seeks comment on Mid-West Family's assessment that the
Prometheus I decision mandates an adjustment, in light of the court's
Prometheus II decision upholding the existing rule's methodology. The
Commission's preliminary view is that adopting Mid-West Family's
approach would permit potentially significant consolidation in local
radio markets, which would be inconsistent with the rationale for the
Commission's proposal, discussed in greater detail below, to
[[Page 29019]]
retain the existing numerical ownership limits. Finally, the Commission
proposes to reject Mt. Wilson's proposal. As discussed in greater
detail below in the context of the AM/FM subcaps, digital radio is
still a growing technology; there is no mandate requiring its adoption;
and it has not yet achieved widespread deployment or consumer
acceptance. Therefore, the Commission tentatively finds that it is
premature to amend its local radio ownership rule as a result of
digital technology, and it seeks comment on this approach.
53. Numerical Limits. The NPRM proposed to retain the existing
numerical limits. In addition, the NPRM sought comment on Clear
Channel's proposal to allow increased ownership in larger markets by
creating additional tiers. Clear Channel suggested an increase from
eight to ten in the number of stations a single entity may own in
markets with between 55 and 64 stations and from eight to twelve in the
number of stations that a single entity may own in markets with 65 or
more stations. No party provided comments on this proposal and, as
discussed below, the Commission tentatively finds that the record
supports retaining the existing numerical limits (i.e., the existing
number of tiers and the numerical limits associated with each);
therefore, it tentatively declines to adopt the new ownership tiers
proposed by Clear Channel. As discussed above, many commenters in the
2010 Quadrennial Review proceeding supported the Commission's proposal
to retain its existing limits, while other commenters argued in favor
of loosening or tightening the existing limits. However, no commenters
proposed specific numerical limits to replace the existing limits. For
the reasons discussed below, the Commission proposes to adopt the
tentative conclusion in the NPRM to retain the existing numerical
ownership limits for each existing market size tier.
54. In the 2006 Quadrennial Review Order, the Commission rejected
calls to relax the numerical ownership limits, finding instead that
retaining the existing limits was necessary to protect against
excessive market concentration. The Commission noted that, following
the relaxation of the local radio ownership limits by Congress in the
1996 Act, there had been substantial consolidation of radio ownership
both nationally and locally. Evidence in the record demonstrated that,
in local markets, the largest firms often dominated the market in terms
of audience and revenue share. The Commission ultimately concluded not
only that the existing limits were not unduly restrictive, but also
that permitting additional consolidation would not be in the public
interest. The Prometheus II court upheld the Commission's decision.
55. The Commission determined also in the 2006 Quadrennial Review
Order that tightening the radio ownership limits was not justified
based on the record. The Commission held that tightening the ownership
limits would be inconsistent with Congress's decision to relax the
limits in the 1996 Act and would ignore the financial stability that
consolidation brought to the radio industry. In addition, the
Commission determined that tightening the rule would require
significant divestitures that would disrupt the radio marketplace and
could undermine the ability of local stations to provide quality
programming to their local markets. While acknowledging that
grandfathering was an option to avoid the disruptive impact of
divestitures, the Commission determined that grandfathering in this
instance would not be in the public interest.
56. Based on the 2010 Quadrennial Review record, the Commission
tentatively finds that the competitive conditions in the radio
marketplace that supported the Commission's decision to retain the
existing numerical limits in the 2006 Quadrennial Review Order are
essentially unchanged. Evidence from 2012 shows that in local markets,
the largest commercial firms continue to enjoy substantial advantages
in revenue share--on average, the largest firm in each Arbitron Metro
market has a 45 percent share of the market's total radio advertising
revenue, with the largest two firms accounting for 73 percent of the
revenue. In more than a third of all Arbitron Metro markets, the top
two commercial station owners control at least 80 percent of the radio
advertising revenue. With respect to ratings, the top-four firms
continue to dominate audience share. Therefore, the Commission does not
believe the public interest would be served by relaxing the existing
numerical limits. The Commission seeks comment on whether there are any
more recent data that point toward a different conclusion.
57. The Commission notes also that the record in the 2010
Quadrennial Review proceeding does not reflect changes in the
marketplace that warrant reconsideration of the Commission's previous
decision not to make the limits more restrictive, as some commenters
recommended. The Commission believes that tightening the restrictions
would disregard the previously identified benefits of consolidation in
the radio industry and would be inconsistent with the 1996 Act.
Further, tightening the rule would require divestitures that the
Commission believes would be disruptive to the radio industry and would
upset the settled expectations of individual owners. The Commission
seeks comment on whether any benefits derived from tightening the
limits would outweigh these countervailing considerations. In addition,
the Commission seeks comment on its continued belief that, for the
reasons stated in the 2006 Quadrennial Review Order, tightening the
limits while grandfathering existing combinations would not be in the
public interest and should be avoided.
58. Clarification of Application of Local Radio Ownership Rule. In
the 2002 Biennial Review Order, the Commission adopted the current
standard of using Arbitron Metro areas, where available, for the
application of the numerical radio ownership limits. At that time, the
Commission also adopted certain procedures and safeguards designed to
guide the implementation of the revised local radio ownership rule and
to deter parties from attempting to circumvent the rule through the
manipulation of Arbitron market definitions. Years of experience
applying the current approach suggest certain aspects of the current
standard that the Commission believes merit clarification or further
action to fulfill the intent of the 2002 Biennial Review Order.
59. Multiple parties raised other issues in the 2010 Quadrennial
Review proceeding that the Commission tentatively declines to address
specifically herein. Mid-West Family requested changes to the
grandfathering rules regarding transfers of control due to death or
other departure of shareholders/partners of closely held businesses,
asserting that such transfers of control should be treated the same as
transfers that occur pursuant to a will or intestacy. In addition, UCC
et al. argued that the Commission should consider reversing its
decision in the 2002 Biennial Review Order to grandfather certain radio
station combinations, particularly in light of the elimination of the
eligible entity exception, which they asserted could present ownership
opportunities for minorities and women. By contrast, Frandsen argued
that the Commission should permit the sale of grandfathered clusters to
any party. The Commission tentatively declines at this time to address
the issues raised by Mid-West Family, UCC et al., and Frandsen. As the
Commission has proposed to retain the existing
[[Page 29020]]
numerical limits, it sees no reason at this time to reverse or expand
the grandfathering policies that apply to existing combinations. The
Commission has previously found Mid-West Family's requested relief to
be outside the scope of the quadrennial review proceeding. Moreover, as
discussed herein, the Commission has proposed to reinstate the eligible
entity exception.
60. The 2002 Biennial Review Order prohibits a party from receiving
the benefit of a change in Arbitron Metro boundaries or ``home'' market
designation unless that change has been in place for at least two years
(or, in the case of a ``home'' designation change, the station's
community of license is within the Metro). The Commission does not
apply the two-year waiting period to Arbitron Metro changes resulting
from a Commission-approved change in community of license to an area
outside the Metro's boundaries. The Commission proposes to clarify that
the exception to the waiting period for Commission-approved changes
applies only where the community of license change also involves the
physical relocation of the station facilities to a site outside the
relevant Arbitron Metro market boundaries. Otherwise, the licensee of a
station currently located in an Arbitron Metro could use the exception
to reduce the number of its stations listed as ``home'' to that Metro,
without triggering the two-year waiting period and without any change
in physical coverage or market competition, merely by specifying a new
community of license located outside the Metro. Thus, this
clarification safeguards the local radio ownership limits from
manipulation based on Arbitron market definition. The Commission seeks
comment on this proposed clarification.
61. Note 4 to Sec. 73.3555 of the Commission's rules (Note 4)
grandfathers existing station combinations that do not comply with the
numerical ownership limits of Sec. 73.3555(a). Certain circumstances,
however, require applicants to come into compliance with the numerical
ownership limits despite the fact that the relevant station may have
been part of an existing grandfathered cluster. One such circumstance
is a community of license change, which occasionally can lead to
difficulty in the case where an applicant with a grandfathered cluster
of stations seeks to move a station's community of license outside the
relevant Arbitron Metro. Given that the Commission relies on BIA for
market designations, such an applicant may be prevented from
demonstrating compliance with the multiple ownership limits because the
station proposing to change its community will continue to be listed by
BIA as ``home'' to the Metro until the community of license change has
taken place. To resolve this practical issue, the Commission
tentatively proposes to allow a temporary waiver of the radio multiple
ownership limits for three months in this limited instance to allow BIA
sufficient time to change the affected station's ``home'' designation
following a community of license relocation. The Commission also
proposes to exempt from the requirements of Note 4 ``intra-Metro''
community of license changes--from one community to another within the
same Arbitron Metro. The Commission tentatively finds that, in the
majority of cases, such a move will have little or no impact on the
state of competition within the local market. The Commission seeks
comment on these proposed adjustments to the operation of Note 4.
62. In its comments in the 2010 Quadrennial Review proceeding, ARSO
renewed its longstanding request that the Commission redefine local
radio markets for Puerto Rico. ARSO argues that Arbitron's definition
of the entire island of Puerto Rico as a single Arbitron Metro market
does not accurately reflect market and geographic realities, which
prevent stations from competing island-wide. ARSO requests that the
Commission: (1) redefine the local radio markets in Puerto Rico using
the eight Metropolitan Statistical Areas defined by the Office of
Management and Budget (OMB); or (2) redefine the local radio markets
using the three Combined Statistical Areas defined by OMB; or (3) treat
Puerto Rico as a non-Arbitron Metro area and redefine its local markets
using contour-overlap methodology. The Commission has consistently
waived the Arbitron Metro definition for applicants in Puerto Rico and
employed the contour-overlap methodology in the course of implementing
the 2002 Biennial Review Order. The Commission has previously stated
that it would address ARSO's request for relief in a future proceeding.
The Commission seeks comment on ARSO's suggestions and on the
effectiveness of the Commission's prior waivers of the definition in
this context.
63. AM/FM Subcaps. The NPRM proposed to retain the existing AM/FM
subcaps, finding that the rationales for doing so set forth in the 2006
Quadrennial Review Order were still valid, namely to promote new entry
and to account for the technological and marketplace differences
between AM and FM stations and thereby promote competition. In
addition, the NPRM sought comment on the impact of the digital radio
transition on the AM/FM subcaps, as well as issues regarding the
aggregation of multiple AM stations to provide signal coverage in large
geographic areas or in areas with mountainous terrain. Consistent with
the proposal in the NPRM, the Commission tentatively finds that there
have not been significant changes in the broadcast radio marketplace
with respect to the rationale for maintaining the AM/FM subcaps since
the conclusion of the 2006 Quadrennial Review proceeding, and it
proposes to retain the existing AM/FM subcaps for the reasons set forth
in the 2006 Quadrennial Review Order. The Commission seeks comment on
this approach.
64. The Commission tentatively agrees with the commenters in the
2010 Quadrennial Review proceeding that supported retention of the AM
subcaps in order to promote new entry. Consistent with Commission
precedent, the Commission believes that broadcast radio, in general,
continues to be a more likely avenue for new entry in the media
marketplace--including entry by small businesses and entities seeking
to serve niche audiences--as a result of radio's ability to more easily
reach certain demographic groups and the relative affordability of
radio stations compared to other mass media. AM stations are generally
the least expensive option for entry into the radio market, often by a
significant margin, and therefore permit new entry for far less capital
investment than is required to purchase an FM station. While some
commenters suggested that eliminating the subcaps could result in
divestiture of properties that could be acquired by new entrants, the
Commission tentatively finds that this speculative rationale is not
persuasive. Therefore, consistent with Commission precedent, it
believes that the public interest is best served by retaining the
existing AM subcaps, which would continue to further competition, and
possibly also viewpoint diversity, by promoting new entry. The
Commission seeks comment on this issue and invites commenters to
provide any new relevant information that has become available since
the NPRM.
65. In addition, the Commission tentatively finds that there
continue to be technical and marketplace differences between AM and FM
stations that justify retention of both the AM and FM subcaps in order
to promote competition in local radio markets. As the Commission has
noted previously, FM stations enjoy unique
[[Page 29021]]
technical advantages over AM stations, such as increased bandwidth and
superior audio signal fidelity. In addition, AM signal propagation
varies with the time of day (i.e., AM signals travel much farther at
night than during the day), and many AM stations are required to cease
operation at sunset. These technological differences often, but not
always, result in greater listenership and revenues for FM stations.
66. While the Commission has previously stated that digital radio
technology may help AM stations to level the playing field with FM
stations, it tentatively finds that this is not yet the case.
Deployment of digital radio technology for both AM and FM stations is
limited and has not changed significantly in recent years. In addition,
the Commission believes it is important to consider consumer adoption
when evaluating the impact of digital radio on the technological and
marketplace differences between AM and FM stations. AM stations will
not be able to realize the potential competitive benefits of
transitioning to digital if listeners are largely unable to receive the
digital broadcasts. Recent digital radio deployment data suggest that
FM stations may actually be increasing the technological divide through
greater adoption rates of digital radio technology. Furthermore,
consumers have been slow to adopt radios capable of receiving digital
signals, though consumer awareness of the technology is relatively high
and there are efforts to increase the availability of such radios,
particularly as standard or optional equipment in many new car models.
The Commission proposes to continue to monitor the impact of the
digital radio transition in future media ownership proceedings. It
seeks comment on this approach.
67. Furthermore, the Commission tentatively finds that the recent
changes to the FM translator rules, ``to allow AM stations to use
currently authorized FM translator stations to retransmit their AM
service within their AM stations' current coverage areas'' have not yet
significantly impacted the technological and marketplace differences
between AM and FM stations. While this change has been beneficial for
many AM stations, many more AM stations have not availed themselves of
the opportunity and/or lack the ability to do so. Consequently, the
Commission believes that FM stations generally continue to enjoy
significant advantages over AM stations. The Commission proposes to
continue to monitor the impact of this change in future media ownership
proceedings, and it seeks comment on this approach. The Commission has
recently initiated a proceeding to explore ways to revitalize the AM
band. Similarly, the Commission proposes to monitor that proceeding for
any future impact on the AM marketplace that may warrant consideration
in its media ownership proceedings. The Commission seeks comment on any
present implications of these revitalization efforts for the 2014
Quadrennial Review.
68. Finally, while the technological and marketplace differences
between AM and FM stations generally benefit FM stations, and thus
support retention of the FM subcaps, there continue to be many markets
in which AM stations are ``significant radio voices.'' For example, a
study provided by Clear Channel found that throughout the 300 Arbitron
Metro markets, there are 187 a.m. stations ranked in the top five in
terms of all-day audience share. And according to NAB, AM stations are
among the top revenue earners in some of the largest radio markets
(e.g., New York, Chicago, and Los Angeles). Therefore, the Commission
tentatively finds that retention of the existing AM subcaps is
necessary to prevent a single station owner from acquiring excessive
market power through concentration of ownership of AM stations in
markets in which AM stations are significant radio voices.
69. In addition, as discussed above, the Commission tentatively
concludes that it is not in the public interest to tighten the
numerical ownership limits; therefore, the Commission sees no need to
reassess the subcaps associated with each numerical tier, as proposed
by Mt. Wilson. Indeed, tightening the subcaps absent a concurrent
tightening of the numerical ownership limits would result in an
internal inconsistency in the rule, as an entity would be unable to own
all the stations otherwise permitted under certain numerical tiers. For
example, in markets with 30-44 stations, an entity currently may own up
to seven stations, provided that no more than four of the stations are
in the same service. If the subcap was tightened to three stations in
the same service, an entity could then only own up to six stations,
even though the rule's premise is that the public interest is best
served by permitting ownership of up to seven stations in this
particular market. The Commission seeks comment on whether there is any
reason the Commission should adopt different subcaps despite this
potential inconsistency.
70. Market Size Waivers. Though the NPRM sought comment on whether
to adopt a specific waiver standard, no commenter proposed such a
standard in the 2010 Quadrennial Review proceeding. The Commission
tentatively declines to adopt a specific waiver standard for the local
radio ownership rule. The Commission seeks comment on whether it is
sufficient that, consistent with Commission precedent, parties that
wish to seek a waiver of the local radio ownership rule may do so
pursuant to the general waiver standard under Section 1.3 of the
Commission's rules.
71. Minority and Female Ownership. The Commission sought comment on
how the radio rule affects minority and female ownership opportunities,
including specific comment on the results of Media Ownership Study 7,
which analyzes the relationship between ownership structure and the
provision of radio programming targeted to African-American and
Hispanic audiences. The Commission tentatively finds that the radio
ownership rule proposed in this Further Notice of Proposed Rulemaking
is consistent with the goal to promote minority and female ownership of
broadcast radio stations. The Commission seeks comment on this
tentative conclusion.
72. As noted above, the Commission tentatively finds that retaining
the existing competition-based numerical limits would indirectly
promote its viewpoint diversity goal, in part by preserving ownership
opportunities for new entrants, including minority- and female-owned
businesses. Moreover, part of the rationale for the proposal to retain
the AM/FM subcaps is to promote new entry, particularly in the AM band,
which has historically provided low-cost ownership opportunities for
new entrants, including minorities and women.
73. The Commission tentatively declines to tighten the local radio
rule's ownership limits in order to promote increased minority and
female ownership, as some recommend. While the Commission remains
committed to promoting minority and female ownership, it is one of
many--sometimes competing--goals that the Commission must balance when
setting the numerical ownership limits. As discussed above, the
Commission believes that tightening the local radio rule's ownership
limits would ignore the benefits of consolidation in the radio industry
and therefore be inconsistent with the 1996 Act. Furthermore, it
believes that tightening the local radio rule would require
divestitures that would be disruptive to the radio industry. In
addition, while the Commission does not propose to retain the rule
specifically to preserve the current levels of minority and female
[[Page 29022]]
ownership, it tentatively finds that retaining the existing rule
effectively would address the concerns of those commenters who suggest
that additional consolidation would have a negative impact on minority
and female ownership of broadcast radio stations. Ultimately, the
Commission tentatively finds that, based on the record in the 2010
Quadrennial Review proceeding, the current competition-based limits
reflect an appropriate balance of its policy goals and that retaining
these limits would serve the public interest and simultaneously promote
viewpoint diversity. The Commission seeks comment on these tentative
conclusions and invites commenters to provide any evidence bearing on
this issue that has become available since the NPRM.
3. Newspaper/Broadcast Cross-Ownership Rule
a. Introduction
74. Since 1975, the newspaper/broadcast cross-ownership rule (NBCO
rule) has prohibited common ownership of a daily newspaper and a full-
power broadcast station (AM, FM, or TV) if the station's service
contour encompasses the newspaper's city of publication. This absolute
ban on newspaper/broadcast cross-ownership remains in effect today
despite the Commission's attempts over the last decade to modify the
restriction. Most recently, in the 2006 Quadrennial Review Order, the
Commission adopted a revised standard whereby waiver requests for
certain mergers in the top 20 Nielsen DMAs were granted a favorable
presumption. The Third Circuit, however, vacated and remanded the
revisions on procedural grounds, finding that the Commission had failed
to provide adequate public notice of its proposed rule pursuant to the
APA. Although the Court in Prometheus I affirmed the Commission's
conclusion that an absolute ban is not necessary, the Court in
Prometheus II did not reach the Commission's substantive modifications
to the NBCO rule.
75. The Commission continues to believe that some restriction on
newspaper/broadcast cross-ownership is necessary to protect and promote
viewpoint diversity in local markets. The Commission seeks comment on
that tentative conclusion. This view is consistent with the
Commission's longstanding rationale for the NBCO rule. As the
Commission recognized in the 2002 Biennial Review Order, ``[a] diverse
and robust marketplace of ideas is the foundation of our democracy.''
The Supreme Court has recognized the importance of the Commission's
role in promoting viewpoint diversity, calling it a ``basic tenet of
national communications policy.''
76. As discussed below, daily newspapers and local television
stations (and their affiliated Web sites) continue to be the dominant
providers of local news and information to which consumers turn.
Evidence in the 2010 Quadrennial Review proceeding does not suggest
that the Internet, for all its ability to make infinite sources of
information immediately and globally accessible, has yet tilted that
balance. Thus, the ``diverse and antagonistic sources'' that the NBCO
rule historically has protected--daily newspapers and local television
stations--are still the primary outlets of local news and information
that consumers use. Comments in the current record touting the localism
benefits of newspaper/broadcast cross-ownership or claiming a
competitive need for traditional media to achieve economies of scale in
today's marketplace, while providing a fuller understanding of the
newsgathering efficiencies of cross-owned properties and the current
financial challenges facing traditional media, were not substantially
different from those made in previous reviews, and the Commission does
not believe they diminish the viewpoint diversity rationale for the
rule. Moreover, the efficiencies that may be gained from newspaper/
broadcast combinations do not necessarily lead to gains in localism. As
explained below, the Commission seeks comment on the extent to which
this dominance of daily newspapers and local televisions stations in
the provision of local news and information persists today.
77. However, the Commission found in previous reviews that the
nearly 40-year-old blanket prohibition on newspaper/broadcast cross-
ownership is overly broad, and the Third Circuit upheld those findings.
It is possible that some newspaper/broadcast combinations could be
allowed without unduly harming viewpoint diversity. To that end, the
Commission seeks comment on whether the prohibition on newspaper/radio
combinations should be lifted. The Commission asks what impact such a
modification would have on viewpoint diversity in local markets.
Research shows that most radio stations do not produce significant
amounts of local news and that most consumers do not rely on radio
stations as their primary source of local news. Given that the
newspaper/television restriction has always been the crux of the NBCO
rule, the Commission seeks comment regarding the added value of the
rule's newspaper/radio component. The Commission seeks comment,
therefore, on whether there is sufficient justification under the legal
standards of Section 202(h) for continuing to restrict newspaper/radio
combinations. The Commission seeks comment also on the costs and
benefits associated with retaining or eliminating the restriction on
newspaper/radio combinations. To the greatest extent possible,
commenters should quantify the expected costs or benefits of the rule
and any alternatives and provide detailed support for any actual or
estimated values provided, including the source of such data and/or the
method used to calculate reported values.
78. The Commission invites comment also on whether and in what way
it should modify the newspaper/television cross-ownership restriction.
Although further comment is welcome, the Commission is disinclined to
impose a bright-line rule permitting combinations in certain
circumstances. Instead the Commission seeks comment on approaches that
would maintain the ban on newspaper/television combinations in all
markets but that would allow applicants the opportunity to seek
approval of particular transactions. The Commission could consider any
waiver requests on a purely case-by-case basis, assessing each request
independently and considering the totality of the circumstances each
proposed transaction presents, including all asserted and potential
likely public interest implications of the specific proposed
combination. The Commission seeks comment on this approach, including
the costs and benefits associated with a pure case-by-case review of
waiver applications. To the greatest extent possible, commenters should
quantify the expected costs or benefits of this proposal and any
alternatives and provide detailed support for any actual or estimated
values provided, including the source of such data and/or the method
used to calculate reported values.
79. The Commission also invites further comment on a case-by-case
waiver approach that would include presumptions that favor or disfavor
the grant of waiver requests in accordance with certain prescribed
guidelines. This approach would build on proposals in the NPRM to
modify the vacated 2006 rule. Under this approach, a request for waiver
of the newspaper/television cross-ownership prohibition would be
entitled to a presumption that it is consistent with the public
interest, convenience, and necessity to allow an entity to own,
operate, or control one daily newspaper and one full-power television
station in a top-20 Nielsen
[[Page 29023]]
DMA provided that: (1) The television station is not ranked among the
top-four television stations in the DMA, based on the most recent all-
day (9 a.m.-midnight) audience share, as measured by Nielsen or by any
comparable professional, accepted audience ratings service, and (2) at
least eight independently owned and operating major media voices will
remain in the DMA. Major media voices would include full-power
television broadcast stations and newspapers that are published at
least four days a week within the DMA in the dominant language of the
market and have a circulation exceeding 5 percent of the households in
the DMA. In all other cases and in any DMA below the top-20 there would
be a presumption that granting a waiver to permit a newspaper/
television combination is inconsistent with the public interest,
convenience, and necessity. A party seeking to overcome a presumption
would carry the burden of proof that the proposed combination will or
will not unduly harm viewpoint diversity within the DMA. As provided
below, the Commission seeks comment on all aspects of this framework,
including the costs and benefits of each of the elements discussed
herein. To the greatest extent possible, commenters should quantify the
expected costs or benefits of this approach and any alternatives and
provide detailed support for any actual or estimated values provided,
including the source of such data and/or the method used to calculate
reported values.
80. As described in more detail below, the Commission seeks comment
on various other issues regarding a newspaper/television cross-
ownership restriction. First, any restriction would be modified to
replace the obsolete analog Grade A contour with an approach that
approximates the outdated contour as closely as possible. The
Commission proposes to prohibit common ownership of a full-power
television station and a daily newspaper when: (1) The television
station's community of license and the newspaper's community of
publication are in the same Nielsen DMA, and (2) the principal
community contour (PCC) of the television station, as defined in Sec.
73.625 of the Commission's rules, encompasses the entire community in
which the newspaper is published. Second, the restriction would not
include the four-factor test that all waiver applicants, even those
entitled to a favorable presumption, were required to satisfy under the
2006 rule. As discussed below, the Commission believes that the factors
are for the most part vague, subjective, difficult to prove and
enforce, and/or not directly linked to viewpoint diversity. Third, the
restriction would not include a local news exception, such as the one
permitted by the 2006 rule under which the Commission reversed the
negative presumption against a waiver when the proposed combination
involved a broadcast station that had not been offering local newscasts
and the applicants committed to airing at least seven hours of local
news per week after the transaction. As described below, the Commission
believes that the potential difficulties in monitoring and enforcing
the exception would render it meaningless. Fourth, the Commission
proposes to include in any restriction an exception for merger
applicants that demonstrate that either the television station or the
newspaper has failed or is failing.
81. Finally, the Commission tentatively agrees with DCS that the
NBCO rule does not have a significant impact on minority ownership, and
the Commission believes that these modest revisions the Commission put
forth for comment would be unlikely to have a disproportionate effect
on either minority or female owners. The Commission seeks comment on
whether the benefits of the revisions it describes here in the interest
of protecting viewpoint diversity would outweigh any burdens that could
result from such revisions, which the Commission would minimize by
grandfathering any combinations that would become newly non-compliant
because of the revisions.
b. Background
82. As discussed below, the NPRM inquired about detailed scenarios
in connection with proposed rule modifications.
c. Discussion
(i) Policy Goals
83. Background. In the NPRM, the Commission tentatively affirmed
the Commission's past determinations that the NBCO rule promotes
viewpoint diversity but is not necessary to advance its localism and
competition goals. Consistent with previous Commission findings, the
Commission tentatively concluded that, although an absolute ban is
overly broad, some newspaper/broadcast cross-ownership restrictions
continue to be necessary to protect and promote viewpoint diversity.
The Commission's reasoning centered on evidence that newspapers and
local television stations, and their affiliated Web sites, are the
primary sources that consumers rely on for local news and information.
The Commission recognized that newspaper/broadcast cross-ownership may
provide certain benefits that promote its localism goal. Thus, it
tentatively affirmed the Commission's earlier findings that the
opportunity to share newsgathering resources and to realize other
efficiencies derived from economies of scale and scope may improve the
ability of commonly owned media outlets to provide local news and
information. It tentatively concluded, as the Commission found in
previous ownership reviews, that newspapers and broadcast stations do
not compete in the same product market and, therefore, that the rule is
not necessary to promote its competition goal.
84. Discussion. The Commission seeks comment on the current
validity of the Commission's tentative conclusion in the NPRM that
newspapers and local television stations, and their affiliated Web
sites, are the dominant sources consumers rely on for local news and
therefore that cross-ownership restrictions continue to be necessary
under Section 202(h) to promote viewpoint diversity in local markets.
The Commission proposes to adopt the NPRM's tentative findings that the
NBCO rule is not necessary to foster its localism and competition
goals. While the Commission recognizes that the rule may hinder the
realization of certain efficiencies that could result in the production
of more local news, it anticipates that modifications of the rule, such
as those outlined below, could enable such efficiencies, and thereby
potentially promote localism, in situations where viewpoint diversity
would not be unduly sacrificed.
(i) Viewpoint Diversity
85. In the 2010 Quadrennial Review proceeding, newspaper and media
owners proffered two principal arguments to support their position that
the Commission's diversity goal no longer justifies a prohibition on
newspaper/broadcast cross-ownership. They argued, first, that ownership
does not necessarily influence viewpoint and, second, that an array of
diverse viewpoints is widely available from an abundance of outlets,
particularly via the Internet. Both of these arguments were addressed
by the Commission in the 2002 and 2006 media ownership reviews and by
the Third Circuit in Prometheus I. The Third Circuit agreed with the
Commission that, although these arguments provide an appropriate basis
for relaxing the absolute ban on newspaper/broadcast cross-ownership,
they do not mandate the removal of all
[[Page 29024]]
restrictions on such combinations. The Commission seeks comment on the
tentative conclusion that neither of these arguments presents a reason
for eliminating the NBCO rule in the 2014 Quadrennial Review
proceeding.
86. The Commission does not believe that the 2010 Quadrennial
Review record compels it to alter the earlier conclusion that cross-
ownership can diminish viewpoint diversity. For example, the authors of
Media Ownership Study 9 find that ownership concentration may adversely
affect viewpoint diversity and the quality of local news. The
Commission finds that the results of Media Ownership Studies 8A and 8B,
suggesting that ownership structure does not have a marked impact on
viewpoint diversity, cannot serve as a basis for assessing the impact
of the NBCO rule. The analysis in Media Ownership Study 8B did not
include any variables pertaining to newspaper/broadcast cross-
ownership, and Media Ownership Study 8A examined only newspaper/
television cross-ownership, for which its data was particularly
limited. The 2008 Pritchard Study cited by Cox supports the proposition
that cross-ownership does not diminish viewpoint diversity; however,
its analysis includes only three cross-ownership situations. The
editorial restraint exhibited by media owners in the three markets
Pritchard studied does not negate what Pritchard calls the
``theoretical power'' of media owners to control viewpoint. Even if
cross-media owners do not exercise that power frequently, the
Commission believes it is important to restrict cross-ownership of the
dominant local news providers in markets where viewpoint diversity is
insufficiently robust to withstand the potential loss of an
independently owned voice. The Commission seeks comment on this view.
87. With respect to the second argument, opponents asserted that
the rule cannot be justified on diversity grounds because consumers
today have nearly ubiquitous access to a multitude of voices. The
Commission believes that the media environment has changed dramatically
since 1975 when the average American read one local print newspaper and
watched one of three evening newscasts in real time. Without question,
the Internet, MVPD services, and other technological developments have
profoundly changed the ways in which people access, consume, and share
news and information. In its 2002 and 2006 ownership decisions, the
Commission described the rapid advancements in the media industry at
great length. Since then, those changes have been compounded as both
providers and consumers of news use the Internet even more intensely.
As the Commission concluded in its 2002 and 2006 proceedings, the
Commission believes the proliferation of media outlets since 1975 may
well render the absolute ban on newspaper/broadcast cross-ownership
obsolete.
88. While the extent to which Americans turn to news Web sites
unaffiliated with traditional media may be increasing, it appears that
such sources have not supplanted print newspapers and local television
stations, and their affiliated Web sites, as the dominant providers of
local news. As a threshold matter, online services and information are
not available or not enjoyed at full capacity by many Americans due to
disparities in broadband availability and adoption rates. Furthermore,
according to a recent Pew Report on the State of the News Media,
``local TV remains America's most popular source of local news and
information.'' Commission staff reported in the Information Needs of
Communities Report that, on a typical day, 78 percent of Americans
obtain news from their local television station. A recent trade
association analysis reportedly concluded that viewership of local
evening news broadcasts in the 10 largest markets exceeded the five
highest rated cable news programs combined by more than 430 percent.
Although more consumers now turn to the Internet than to print
newspapers for news and information, newspapers (both the print and
online versions) are relied upon for the widest range of local news
topics, and newspaper Web sites are the primary traditional source of
local news for online consumers in the vast majority of large markets.
In addition, many local television stations have become ``major online
sources of news,'' even surpassing the popularity of newspaper Web
sites in a number of local markets. The author of Media Ownership Study
6 concludes that ``[n]ewspapers and television stations dominate what
local news can be found online.'' The author found that only 17 of the
1,074 local news Web sites he examined were unaffiliated with
traditional print or broadcast media. As the Commission described in
the NPRM, the results of Media Ownership Study 6 are supported by data
from other studies demonstrating a consumer preference for Web sites
affiliated with legacy media. The Commission seeks comment on its
assessment of the current record and it invite commenters to provide
any updated information or evidence regarding consumer reliance on
unaffiliated online sources for local news and information.
89. Even Web sites unaffiliated with newspapers and television
stations often contain local news content that originates from those
traditional sources. The results of the Pew Baltimore Study revealed
new media's ``limited role'' in providing original reporting. The
Information Needs of Communities Report points to a number of studies
demonstrating that ``the growing number of web outlets relies on a
relatively fixed, or declining, pool of original reporting provided by
traditional media.'' In addition, Media Ownership Study 6 finds a
dearth of independent Web sites with original local news content.
Commenters in the 2010 Quadrennial Review proceeding tended to agree
that most independent online sources, particularly news aggregator Web
sites, currently do not provide a substitute for the original reporting
by professional journalists associated with traditional local media.
Media Ownership Study 6 cautions that even the independent local Web
sites that produce high-quality content are not necessarily substitutes
for traditional media outlets. The Commission invites commenters to
submit updated information or evidence regarding the prevalence of
original local news content on Web sites unaffiliated with traditional
media outlets.
90. At the current time and based on the record before the
Commission, it tentatively finds that the record does not support the
conclusion that the impact of the Internet has obviated the need for
cross-ownership restrictions. The NBCO rule is intended to preserve
access to a variety of viewpoints on substantive matters of local
concern. The Commission tentatively finds that the diversity of local
news coverage is not enhanced by the fact that newspapers from around
the world are only a click away. Remote access to hometown sports
scores and local weather reports expands the availability, but not the
diversity, of information. While the Commission tentatively agrees with
Tribune that the presence of local and specialized Web sites ``enriches
the conversation,'' the record in the 2010 Quadrennial Review
proceeding does not appear to demonstrate that most local, hyperlocal,
and niche Web sites fill the role of local television stations or daily
newspapers. In addition, the studies that Tribune cited in support of
its assertion that Americans increasingly use the Internet to obtain
election information concluded that television remains the primary
source for such information among all Americans.
[[Page 29025]]
Although the 2010 Quadrennial Review record does not appear to provide
convincing evidence that the Internet eliminates entirely the need for
cross-ownership restrictions, the Commission seeks comment on its
tentative assessment of the record. The Commission also seeks comment
on whether there have been any changes in the Internet's role in the
current marketplace for local news and information that the Commission
should consider in its 2014 Quadrennial Review.
(ii) Localism
91. The evidence in the 2010 Quadrennial Review record does not
appear to negate the basic proposition that newspaper/broadcast cross-
ownership may enable commonly owned properties to produce and
disseminate more and sometimes better local news. As acknowledged in
the NPRM, the Commission has found that cross-ownership may produce
such benefits to localism. The Commission recognizes that localism
benefits are not guaranteed, however. The Commission sought comment in
the NPRM not only on the benefits of cross-ownership generally, but
also specifically on how to weigh the finding in Media Ownership Study
4 that an increased amount of local news on a cross-owned television
station does not necessarily translate into more local news at the
market level. The author of the study theorized that cross-owned
stations may tend to ``crowd out'' the news production of other
stations.
92. The author of Media Ownership Study 4 cautions that the result
showing less local news in markets with newspaper/broadcast cross-
ownership is ``imprecisely measured and not statistically different
from zero.'' Given that disclaimer, and the disputed evidence in the
2010 Quadrennial Review record, the Commission proposes not to accord
much weight to the study's finding that the amount of local news at the
market level may be negatively correlated with newspaper/broadcast
cross-ownership. Despite the criticisms of the methodology used in
Media Ownership Study 4, the Commission thinks it reasonable to accept
the premise that such cross-ownership may result in a greater amount of
local news production by the cross-owned properties based on other
record evidence. The Commission is aware, however, that such an outcome
is not assured and depends in part on the owner's commitment to
disseminate local news.
93. The Commission believes the nation's interest in maintaining a
robust democracy through a ``multiplicity of voices'' justifies
maintaining certain NBCO restrictions even if doing so prevents some
combinations that might create cost-savings and efficiencies in news
production. Moreover, the Commission does not believe that the
elimination of the NBCO rule would necessarily result in benefits to
localism. The Commission seeks comment on whether a continued
restriction, with the modifications described below, would minimize any
potential effects on localism while preserving and promoting viewpoint
diversity.
(iii) Competition
94. Traditionally, the Commission does not evaluate the NBCO rule
in terms of its competition goal because it has found that newspapers
and broadcast stations do not compete in the same product market.
However, some commenters in the 2010 Quadrennial Review proceeding
expressed concerns about the impact of the NBCO rule on competition
more generally. Other commenters disputed these concerns.
95. Although the Commission shares the concerns of many Americans
about the future of the newspaper industry, the Commission agrees with
certain commenters that it would be inappropriate to relax the NBCO
rule on the ground that newspapers are struggling to reinvent a
successful business model. The Commission maintains that the pertinent
issue for this part of its analysis is whether the NBCO rule is
necessary to promote competition between newspapers and broadcast
stations. The Commission already has determined that it is not. The
Commission does not believe it could justify jeopardizing viewpoint
diversity in local markets based on assertions that the rule limits
opportunities for traditional media owners to increase revenue.
Nonetheless, given that the revisions to the NBCO rule considered below
would narrow its application, the Commission seeks comment on the
extent to which such revisions would mitigate any unintended harms.
96. Despite the bleak outlook for newspapers' print revenues, there
have been some encouraging signs that traditional media are finding new
ways to monetize their content. The Commission recognizes that the
adjustments needed to survive this transition period may pose
insurmountable challenges for some owners. Accordingly, as discussed
below, the Commission proposes to include an exception to the cross-
ownership restriction when either the newspaper or the television
station involved in a proposed merger is failed or failing. The
Commission believes the risk that a common owner will influence the
viewpoint of a newly acquired outlet is preferable to the greater
diversity harm of losing the outlet altogether.
97. The Commission seeks comment, for purposes of the 2014
Quadrennial Review proceeding, on its tentative view, as described
above and consistent with Commission precedent, that the NBCO rule is
not necessary to promote localism and competition goals but that some
form of cross-ownership restriction remains necessary to preserve and
promote viewpoint diversity in local markets.
(ii) Newspaper/Radio Cross-Ownership
98. Background. In the NPRM, the Commission sought comment on
whether it should eliminate the part of the NBCO rule that applies to
newspaper/radio combinations. The Commission tentatively concluded that
radio stations are not the primary outlets that contribute to viewpoint
diversity in local markets and that a substantial amount of news and
talk show programming on radio stations is nationally syndicated,
rather than locally produced. The Commission's preliminary view was
that radio stations are not a primary source that consumers turn to for
local news and information and that, rather, consumers in markets of
all sizes rely most heavily on other types of news outlets for local
news and information. The Commission asked whether newspaper/radio
cross-ownership would promote localism and provide financially
struggling newspapers and radio stations the opportunity to become
vital participants in the news and information marketplace. In
addition, the Commission asked whether it should substitute Arbitron
market definitions for radio contours to determine when the NBCO rule
is triggered for newspaper/radio combinations and whether existing
combinations implicated by a rule change should be grandfathered. The
Commission invites further comment also on these issues.
99. Discussion. The Commission seeks further comment on whether the
restriction on newspaper/radio cross-ownership should be eliminated
from the NBCO rule. The Commission seeks comment on the Commission's
tentative conclusions that radio stations are not the primary outlets
that contribute to viewpoint diversity in local markets and that
consumers rely predominantly on other outlets for local news and
information. Several commenters in the
[[Page 29026]]
2010 Quadrennial Review proceeding referenced the fact that promoting
viewpoint diversity has been the Commission's lone justification for
retaining the restriction. As discussed above, the Commission has found
repeatedly that the restriction does not promote its localism or
competition goals, and the Commission tentatively reaffirms those
findings. Therefore, the Commission tentatively agrees with several
commenters that if the rule were no longer necessary to support the
Commission's viewpoint diversity policy, then the newspaper/radio
cross-ownership restriction would be left without a public interest
rationale. Under Section 202(h) of the 1996 Act, the Commission must
repeal or modify any media ownership regulations that no longer serve
the public interest. Accordingly, it seeks comment on whether the
newspaper/radio cross-ownership restriction advances its interest in
promoting viewpoint diversity or whether the Commission should
eliminate the restriction and permit common ownership of newspapers and
radio stations in all markets, within the prescribed limits of the
local radio ownership rule.
100. Evidence from the Information Needs of Communities Report
shows that consumers' reliance on radio news has declined steadily over
the past two decades. From 1991 to 2010, the number of people reporting
that they listened to some news on the radio dropped from 54 percent to
34 percent. Of the approximately 11,000 commercial radio stations in
the country, only 30 are all-news radio stations, a reduction from the
mid-1980s when there were 50 such stations. Although a small number of
commercial all-news radio stations in the nation's largest markets are
very successful, radio stations in most cities do not provide much
local journalism. One finding showed that in 2007 more than 40 percent
of radio stations carried news programming produced remotely by a
commonly owned station outside the local market. Typically, only one
employee is involved in news output at a median-sized radio station.
Although the news-talk radio format has exploded in popularity, it has
done little for traditional local radio news. Eighty-six percent of
programming on news-talk stations is nationally syndicated, rather than
locally produced. The Commission invites commenters to provide any new
data on these subjects that would be useful for the 2014 Quadrennial
Review.
101. In seeking comment on the elimination of the newspaper/radio
cross-ownership restriction, the Commission notes that it has
recognized since at least 1970 that radio does not play a dominant role
in promoting viewpoint diversity. That year, while seeking comment on
proposals that led to the adoption of the NBCO rule, the Commission
identified as its foremost concern the common control of television
stations and newspapers and noted the significant decline in the number
of people relying primarily on radio for local news. Even as it adopted
the NBCO rule in 1975, the Commission recognized that ``a radio station
cannot be considered the equal of either the paper or the television
station in any sense, least of all in terms of being a source for news
or for being the medium turned to for discussion of matters of local
concern.'' The Commission, nevertheless, included newspaper/radio
combinations within the NBCO prohibition ``to encourage still greater
diversity'' because ``even a smaller gain is worth pursuing.'' Since
1975, the Commission repeatedly has acknowledged radio's lesser
contributions to viewpoint diversity. For example, the Commission
stated in its 2002 media ownership review that ``broadcast radio
generally has less of an impact on local diversity than broadcast
television.'' In its 2006 review, it observed that ``radio is a
significantly less important source of news and information than
newspapers or television.'' The Commission seeks comment on whether in
today's marketplace the link between the newspaper/radio cross-
ownership restriction and the Commission's goal of promoting viewpoint
diversity has become too tenuous to support the rule under Section
202(h).
102. The Commission invites commenters to augment the record with
any information or evidence regarding any impact on diversity in the
local radio markets. The Commission notes that Media Ownership Study 5
suggests that eliminating the restriction would be unlikely to affect
either radio news variety or listening, given its finding that
newspaper/radio cross-ownership is not correlated with either of those
metrics. The Commission seeks comment on this finding. Moreover,
several commenters claimed that lifting the newspaper/radio cross-
ownership restriction would revitalize local news on radio stations and
would provide struggling newspapers with a broader base of financial
support and an increased ability to reach audiences. Although the
Commission would not decide to eliminate the restriction based on those
projected outcomes, it would welcome the accrual of any such incidental
benefits and it seeks comment on such commenters' assertions. Further,
the Commission seeks comment on to what extent, if any, its decisions
regarding the newspaper/radio cross-ownership rule and radio/television
cross-ownership rule, discussed below, should align given that the
basis of its analysis for both rules may rest primarily on the
contributions of radio to viewpoint diversity.
103. Finally, the Commission notes that earlier this year MMTC
submitted a study examining the issue of cross-owned media properties
in a market. According to MMTC, the study indicated that cross-
ownership does not have a disparate impact on minority and female
broadcast owners. As discussed further below, the Commission asks
commenters to provide any demonstrable evidence of such a link that may
have become available since the MMTC Cross-Ownership Study.
(iii) Newspaper/Television Cross-Ownership Rule
(i) Case-by-Case Waiver Approach
104. Background. In the NPRM, the Commission tentatively concluded
that it should reinstate a simplified version of the 2006 rule's
framework generally prohibiting newspaper/broadcast cross-ownership but
granting waiver requests on a case-by-case basis, using presumptive
guidelines, when the proposed merger would not unduly harm viewpoint
diversity in the local market. The Commission sought comment on
whether, alternatively, it should adopt a bright-line rule allowing
mergers for newspaper/broadcast combinations in the top 20 DMAs in
those situations where a waiver request would have been given a
favorable presumption under a case-by-case approach. The Commission
noted that a bright-line rule for such newspaper/broadcast combinations
would conserve resources and promote certainty but that a case-by-case
approach would afford greater flexibility to account for the specific
circumstances of a proposed merger.
105. Discussion. Although further comment on the issue is welcome,
the Commission does not propose to adopt a bright-line rule allowing
newspaper/television combinations, even under narrowly prescribed
circumstances. The Commission noted in the NPRM that a bright-line rule
permitting certain newspaper/broadcast combinations in the top 20 DMAs
might promote consistency and certainty in the marketplace and reduce
the need for a potentially costly waiver process. The Commission
recognizes that, under certain conditions, the largest markets
[[Page 29027]]
may be able to accommodate a limited amount of consolidation without
impairing viewpoint diversity. The Commission also is aware that
bright-line rules are more likely to produce predictable and consistent
outcomes in an expeditious and less costly manner than rules that
incorporate a waiver process, which is inherently more uncertain. The
Commission is concerned, however, that a bright-line rule is too blunt
an instrument to be used for allowing newspaper/television cross-
ownership, no matter how limited. For example, allowing certain
combinations only in the top-20 DMAs could foreclose merger
opportunities in smaller markets where viewpoint diversity is
sufficiently robust. Conversely, such a bright-line rule might permit a
combination in a top-20 DMA that would harm the public interest.
106. The Commission tentatively concludes, therefore, that a
general prohibition on newspaper/television combinations in all markets
is the appropriate starting point when considering the impact of
newspaper/television cross-ownership on viewpoint diversity. It
believes the 2010 Quadrennial Review record supports this view. The
Commission recognizes, however, that particular combinations might be
shown to be consistent with its diversity goal, and so it proposes to
entertain waiver requests. A waiver process would enable the Commission
to examine proposed mergers on a case-by-case basis to determine the
likely effects on the affected market. Because the Commission would
have the flexibility to evaluate the particular circumstances of a
newspaper/television combination, it could tailor its decision
accordingly.
107. The Commission believes that a case-by-case waiver approach
would produce sensible outcomes and also improve transparency and
public participation in the process. Such an approach would afford
interested parties the opportunity to comment on a proposed newspaper/
television combination because the parties to the transaction would be
required to seek a waiver of the Commission's rules regardless of
whether the transaction involved the transfer of a broadcast license. A
newspaper owner seeking to obtain a television station license would
need to seek a waiver of a newspaper/television cross-ownership rule as
part of its application for assignment of license or transfer of
control. In considering a bright-line rule approach, the NPRM indicated
that an opponent of a transaction permitted under a bright-line rule
would continue to have the option to file a petition to deny a
broadcast license transfer and assignment application involving an NBCO
combination. However, with respect to any newspaper purchases by
broadcast owners that would be permitted under a bright-line rule,
would-be petitioners would not have an opportunity to oppose the
newspaper purchase because there would be no transfer application
involved. A case-by-case waiver approach would resolve that issue as
every proposed newspaper/television combination would require
Commission approval. To that end, the Commission seeks comment on
whether, to enable a timely public response to a merger involving a
newspaper purchase by a television licensee, it should require the
station to file its waiver request prior to a newspaper acquisition,
rather than at the time of the station's license renewal, and should
require Commission staff to place such waiver requests on public
notice. Under the Commission's current practice, if a television
licensee purchases a newspaper that triggers the NBCO rule, then,
absent a waiver, it must dispose of its station within one year or by
the time of its next renewal date, whichever is longer. Alternatively,
it can seek a waiver of the rule in conjunction with its license
renewal, at which point interested parties are free to comment on the
waiver request. As a result, the opportunity to comment on a television
station's acquisition of a newspaper may not occur until many years
after consummation of the purchase. The Commission therefore seeks
comment on requiring television licensees to file waiver requests prior
to a newspaper acquisition in order to facilitate the public's timely
participation. What are the benefits of this approach and what burdens,
if any, would it impose on the applicants? Would the potential benefits
outweigh any burdens?
108. Pure Case-by-Case Approach. The Commission also request
comment on what type of waiver process would enable it to identify any
acceptable newspaper/television combinations most accurately and
effectively. The Commission could implement a pure case-by-case
approach that evaluates the totality of the circumstances for each
individual transaction, considering each waiver request anew without
measuring it against a set of defined criteria or awarding the
applicant an automatic presumption based on a prima facie showing of
particular elements. The Commission would not require any particular
type of evidence to support a waiver applicant's showing that the
proposed merger would not diminish viewpoint diversity, and thus would
be in the public interest. Similarly, opponents of a transaction could
offer a range of arguments and evidence concerning the unique
characteristics of a transaction that weigh against the grant of that
particular application. This approach could offer the Commission
maximum flexibility and discretion in each case to decide whether a
waiver would serve the public interest. Such a potentially broad
inquiry would avoid a formulaic approach, which may not always
adequately measure an imprecise quality like viewpoint diversity. On
the other hand, a pure case-by-case approach might not promote
consistency and certainty in the marketplace and could impose
additional burdens or costs on the applicants, petitioners, or
Commission. The Commission seeks comment on the pros and cons, costs
and benefits of evaluating waiver requests on the individualized merits
of each particular case without relying on presumptive guidelines or
established criteria.
109. If the Commission were to adopt a case-by-case approach to
waiver applications, it seeks comment on whether, and if so how, the
approach should differ from the Commission's traditional waiver
standard under Commission rules. Further, it seeks comment on whether a
case-by-case approach should incorporate, or disavow, the criteria for
waiver set forth when the NBCO rule was adopted in 1975, and which are
currently in effect. At the time of adoption, the Commission
``contemplated waivers in four situations: (1) Where there is an
inability to dispose of an interest to conform to the rules; (2) where
the only possible sale is at an artificially depressed price; (3) where
separate ownership of the newspaper and station cannot be supported in
the locality; and (4) where the purposes of the rule would not be
served by divestiture.'' Has the application of these criteria
historically been useful to the industry, the public, or the Commission
in evaluating transactions? Have they tended to create an
insurmountable bar to the grant of applications or inhibited industry
participants from considering transactions? Or do the conditions
provide a loophole to the existing ban? Do the specific criteria add
value to the standard included in the Commission's rules? Should
different criteria be enunciated, for instance including any or all of
the elements that are described as possible presumptions as described
below? The Commission seeks comment on these issues.
[[Page 29028]]
110. Case-by-Case Approach with Presumptions. In addition, the
Commission seeks comment on an approach whereby the Commission would
ascribe a favorable presumption to certain waiver applicants in the
top-20 DMAs and a negative presumption to all other waiver applicants.
As described below, the Commission seeks comment on requiring as
conditions for a favorable presumption that: (1) The proposed merger
does not involve a television station ranked among the top-four
television stations in the DMA and (2) at least eight major media
voices remain in the DMA following the transaction. In the 2010
Quadrennial Review proceeding, NAA warned that opportunities for
acquisition and investment are stifled by the regulatory uncertainty
and delay associated with even a straightforward waiver request
entitled to a favorable presumption. CRT called the NBCO waiver
provision ``convoluted,'' and Tribune claimed that the use of
presumptions creates ``uncertainty, additional cost and prejudice.''
Nevertheless, presumptive guidelines would provide waiver applicants a
greater degree of predictability than under a pure case-by-case
approach while still affording the Commission some flexibility to take
into account the particular circumstances of a proposed merger.
Newspaper and television station owners could make more informed
decisions about whether to expend the time and resources to pursue a
merger. Presumptive guidelines would not prevent a waiver applicant
from submitting whatever evidence it deemed useful and would not
constrain the Commission's decision-making discretion. However, by
providing direction regarding what showings to make, presumptive
guidelines could save a waiver applicant time and money and improve its
chances for a successful outcome in warranted circumstances. On the
other hand, the presumptions could lead to unintended consequences in
specific situations, such as recommending denial of an application that
could benefit the public interest as a result of the specific
characteristics of the transaction and local market or the grant of an
application that would not. The Commission seeks comment on the pros
and cons, costs and benefits of adopting a case-by-case approach that
includes presumptions and the trade-offs involved as compared to the
pure case-by-case approach.
(ii) The Scope of the Rule
111. Background. The current rule prohibits common ownership of a
daily newspaper and a television station when the Grade A contour of
the station encompasses the entire community in which the newspaper is
published. The Commission tentatively concludes that the rule should be
updated to reflect the fact that, since the transition to digital
television service, full-power television stations no longer have
analog Grade A contours. In the NPRM, the Commission sought comment on
whether it should modify the rule so that the cross-ownership
prohibition is triggered when a daily newspaper and a television
station are located in the same Nielsen DMA. It asked what the impact
of the change would be, and in particular whether many more newspaper/
television combinations would be implicated under a DMA-based approach
than under a contour-based approach. The Commission's preliminary view
was that DMA market definitions would reflect newspaper circulation and
television viewing areas more accurately than the current approach.
112. The Commission proposed to grandfather ownership of existing
newspaper/television combinations that would be in violation of the
NBCO rule as a result of shifting to a DMA-based approach. It
tentatively concluded that requiring divestiture would be disruptive to
the industry and a hardship for the individual owners. In addition, it
sought comment on whether grandfathered combinations should be freely
transferable in perpetuity.
113. Discussion. Based on the 2010 Quadrennial Review record,
including the responses of many newspaper and broadcast owners, the
Commission proposes to adopt an approach that uses both DMAs and
contours. Newspaper and broadcast owners argued that, because DMAs can
be much larger in size than the former Grade A contour areas, the
NPRM's proposed DMA-based approach would expand the reach of the rule
too broadly. Several commenters asserted that the approach proposed in
the NPRM could prohibit cross-ownership when there is no overlap
between the community in which a newspaper is published and the primary
service area of a broadcast station. To avoid that possibility, the
Commission proposes to prohibit cross-ownership of a full-power
television station and a daily newspaper when: (1) The community of
license of the television station and the community of publication of
the newspaper are in the same Nielsen DMA, and (2) the PCC of the
television station, as defined in Section 73.625 of the Commission's
rules, encompasses the entire community in which the newspaper is
published. Both conditions would need to be met in order for the cross-
ownership prohibition to be triggered. The DMA requirement would ensure
that the newspaper and television station both serve the same economic
market, while the contour requirement would ensure that they actually
reach the same communities and consumers within that larger geographic
market. Further, if a newspaper's community of publication is located
in a different DMA than the television station, then the station likely
does not primarily serve the community of publication, despite the fact
that the over-the-air signal reaches that community. The Commission
notes further, that a television station is not entitled to carriage on
cable or satellite television systems outside its DMA, and thus would
not be entitled to carriage in the newspaper's out-of-market community
of publication. The Commission acknowledges that such an approach could
permit combinations that would be prohibited under a contour-only
approach; however, it believes that the number of instances where a
station's PCC encompasses a newspaper's community of publication not
located in the same DMA would be limited. The Commission seeks comment
on this approach and notes that, if adopted, it would apply
irrespective of how the Commission decides to evaluate requests for
waiver of the prohibition.
114. The PCC is a digital contour that ensures reliable service for
the community of license. Commission rules already define the PCC, and
it can be verified in a straightforward manner if a dispute arose
concerning the reach of the NBCO rule.
115. In the Notice of Inquiry (75 FR 33227, June 11, 2010, FCC 10-
92, rel. May 25, 2010) (NOI), the Commission explained that it has
defined one other digital television service contour, the digital NLSC.
However, the NLSC is roughly equivalent to the former analog Grade B
service contour and approximates the same probability of service as
that contour, which reaches a broader geographic area than the Grade A
service contour. For that reason, the Commission does not believe the
NLSC would be an appropriate contour to use in conjunction with the
NBCO rule. When the Commission initially adopted the NBCO rule, it
deliberately chose the smaller Grade A contour to define the rule's
boundaries. The Commission seeks comment on its preference not to adopt
the NLSC.
116. The Commission recognized in the NOI that because the PCC is
larger than the Grade A contour, its use could result in a more
restrictive NBCO rule. The Commission's proposed approach,
[[Page 29029]]
however, would be less restrictive than its initial proposal to rely
solely on the DMA market definition to trigger the cross-ownership
prohibition. In addition, the Commission has examined size
differentials between the PCC and the former Grade A contour for
various categories of television stations, specifically, high-VHF, low-
VHF, and UHF stations. While the PCC is slightly larger than the Grade
A contour, the Commission seeks comment on its belief that the size
differentials are not so great as to have a meaningful impact in terms
of the proposed rule's applicability.
117. Furthermore, the Commission believes the PCC would be
preferable to the other suggestions commenters offered. NAA proposed
that the Commission simulate a digital Grade A contour by applying to a
station's NLSC the propagation and implementation margin factor it
established for cable carriage of digital broadcast stations (i.e.,
20dB). NAA asserted that the resulting simulated contour would be
appropriate because the Commission developed the 20dB measurement using
``Grade A-type signal quality factors.'' The Commission believes that
using a measurement based on the signal quality required for cable
carriage would impose too strict a standard for purposes of the NBCO
rule because it would exclude parts of the coverage area that reliably
receive the television signal. A.H. Belo and CRT suggested that the
Commission add a mileage qualifier to the DMA measurement. A.H. Belo
and CRT, however, did not specify what mileage the qualifier should be
or explain how the Commission could develop a mileage qualifier that
would be meaningful. The Commission seeks comment on its view that
using the PCC would be the superior approach.
118. The Commission is not inclined to adopt the suggestion of A.H.
Belo and CRT to limit the application of the NBCO rule to ``major''
daily newspapers having a circulation exceeding 5 percent of the DMA's
households. Cox similarly argued that the NBCO rule should not be
triggered unless the newspaper's circulation exceeds 5 percent of the
households in the television station's community of license. The
Commission seeks comment on whether there are any reasons to change the
current definition, which states that ``a daily newspaper is one which
is published four or more days per week, which is in the dominant
language in the market, and which is circulated generally in the
community of publication.'' The Commission notes that the newspaper
definition suggested by A.H. Belo and CRT could fail to trigger the
rule when a newspaper is not widely circulated in the larger DMA
despite its influence in its own community of publication. In addition,
the Commission is not inclined to adopt Cox's suggestion to impose a
minimum circulation requirement within the television station's
community of license. Under the vacated 2006 rule, a newspaper was not
deemed a ``major media voice'' for purposes of the rule's eight voices
test unless it had a circulation exceeding five percent of the
households within the DMA. Different definitions may serve different
purposes, however, and the Commission seeks comment on whether the
current requirement that a daily newspaper be published at least four
days a week, in the dominant language in the market, and circulated
generally in its community of publication is sufficient to ensure the
significance of the newspaper for purposes of triggering the rule,
thereby obviating specification of a minimum circulation amount or
modification of the area of consideration. The Commission previously
has determined that newspapers with these characteristics are
significant enough to come within the scope of the NBCO rule, and
commenters in the 2010 Quadrennial Review record proceeding have not
provided evidence that a less restrictive definition would be
sufficient to protect viewpoint diversity.
119. The Commission seeks comment on the tentative conclusion that,
to the extent that an existing newspaper/television combination would
become newly non-compliant as a result of its proposed modification of
the NBCO rule, the Commission should grandfather such combinations in
order to avoid market disruption and to avoid penalizing licensees for
the switch from an analog contour to a digital contour. The Commission
believes that incorporating the PCC into the rule would limit the
number of existing newspaper/television combinations that would fall in
this category. Consistent with existing precedent, the Commission does
not believe grandfathered combinations should be transferrable. The
Commission seeks comment on its view that any future transfer of a
grandfathered combination should comply with the applicable ownership
rules, including the NBCO rule, in place at the time the transfer of
control or assignment application is filed. The Commission does not
intend to upset any filing deadlines it has previously imposed on
specific parties related to cross-ownership proceedings. In addition,
consistent with the Commission's decision in the 2006 Quadrennial
Review Order, the Commission would allow all grandfathered combinations
or permanent waivers from the prior rule that previously have been
granted to continue in effect under the rule ultimately adopted, to the
extent that such grandfathering/permanent waivers would still be
necessary to permit common ownership.
(iii) Market Tiers
120. Background. In the NPRM, the Commission proposed to
differentiate between markets ranked among the top 20 DMAs and markets
below the top 20 DMAs for purposes of determining whether a waiver
request is entitled to a favorable presumption under the approach
discussed in the NPRM. The Commission proposed a top-20 demarcation
point for newspaper combinations involving either television or radio
stations. The Commission's proposal to lift the restriction on
newspaper/radio cross-ownership would render moot the delineation of
market tiers for such combinations. The Commission seeks comment,
however, on whether a top-20 demarcation point should apply to
newspaper/radio combinations in the event it retains a restriction on
such combinations. Consistent with its findings in the 2006 Quadrennial
Review Order, the Commission's preliminary view was that the top 20
DMAs are notably different from other markets, both in terms of voices
and in terms of television and radio households. The Commission
tentatively concluded that, based on the range of media outlets
available in the top 20 DMAs, viewpoint diversity in those largest
markets is healthy and vibrant in comparison to other DMAs. It sought
comment on its tentative conclusion that the viewpoint diversity level
in the 20 largest DMAs is sufficient to consider adopting a regulatory
framework that would accommodate a limited amount of newspaper/
broadcast cross-ownership in those markets. It also sought comment on
its continued belief that markets below the top 20 DMAs generally
cannot accommodate such cross-ownership absent particular circumstances
warranting a waiver. In addition, it asked whether a different
demarcation point would more effectively protect and promote its goals.
121. Discussion. In the event it were to adopt a waiver standard
with presumptive guidelines, the Commission seeks further comment on
whether to grant a favorable presumption to waiver requests seeking
approval for a merger in a top-20 DMA where certain conditions are met
and to
[[Page 29030]]
ascribe a negative presumption to waiver requests involving mergers in
the remaining DMAs. As described below, the Commission also seeks
comment on whether waiver requests for proposed newspaper/television
combinations within the top-20 DMAs should be entitled to a favorable
presumption only if the television station were not ranked among the
top-four television stations within the DMA and there would be at least
eight independently owned and operated major media voices remaining in
the DMA post-transaction. It seeks comment on the impact of such an
approach on viewpoint diversity, particularly in the 20 largest DMAs,
and on how any such presumptive waiver standard would work. The
Commission tentatively concludes that any such rule should create a
favorable presumption for waiver requests only in cases where the
proposed combination consists of a single television station and single
daily newspaper, as described above, and not in cases where the common
ownership is proposed to include a television duopoly, regardless of
whether a duopoly is permitted under the local television ownership
rule. The Commission seeks comment on this tentative conclusion. For
each element it proposes to include in a presumptive waiver standard,
it seeks comment on its usefulness and the costs and benefits of its
inclusion.
122. Some commenters in the 2010 Quadrennial Review proceeding
asserted that differentiating the 20 largest DMAs from smaller markets
would be arbitrary and capricious. On the other hand, there is evidence
supporting such a distinction. The greater demographic diversity found
more frequently within larger populations is more likely to generate
demand for a wider range of viewpoints. The larger populations of the
top-20 DMAs may also be better able to provide the economic base to
support a greater number of media outlets. Indeed, evidence
demonstrates a greater level of media diversity in the 20 largest DMAs
that distinguishes those markets from the remaining DMAs. Data show
that, while there are at least 10 independently owned, commercial
television stations in 14 of the top 20 DMAs, none of the DMAs ranked
21 through 25 has more than seven independently owned, commercial
television stations. Additionally, while 10 of the top 20 DMAs have at
least two newspapers with a circulation of at least 5 percent of the
households in that DMA, four of the five DMAs ranked 21 through 25 have
only one such newspaper. Moreover, the top 20 markets, on average, have
15 independently owned television stations and major newspapers and
approximately 2.6 million television households. By comparison, DMAs 21
through 30 have on average nine major media voices and fewer than 1.2
million television households, representing drops of 37 percent and 56
percent from the top 20 markets, respectively. DMAs 31 through 50 have
average numbers of voices for each category similar to markets 21
through 30, but a lower number of television households averaging
795,000. DMAs 51 through 210 show even more dramatic drops, with, on
average, fewer than seven major media voices and approximately 240,000
television households, representing drops of 54 percent and 91 percent
from the top 20 DMAs, respectively.
123. Several commenters in the 2010 Quadrennial Review proceeding
contended that many lower-ranked DMAs are abundantly diverse. The
Commission emphasizes that any presumptions would provide merely a
starting point for the analysis of the likely impact of a proposed
merger on a particular market. A presumption could be overcome if the
weight of the evidence favors the party with the burden of proof.
Waiver applicants in smaller markets would not be precluded from
demonstrating that a proposed merger would create efficiencies that
would serve the public interest without harming viewpoint diversity in
the local market.
124. None of the commenters specified an alternative demarcation
point, but a few commenters argued that the same standard should apply
to all, or the majority of, markets. For example, Cox proposed a two-
part test that it argued should apply to NBCO waiver requests in all
markets. The first part of the test, Cox claimed, would protect
viewpoint diversity by requiring that 20 independent media voices
remain in the market following a proposed combination, which could
include a newspaper and any broadcast properties that would be
permitted under the local ownership rules. Cox proposed that
independent media voices include independently owned daily newspapers,
full-power television stations, full-power radio stations, cable and
satellite television services (counted as one voice), and the Internet
(counted as one voice). As Cox stated, the diversity prong of its
proposed test was patterned in part after the radio/television cross-
ownership rule. The second part of Cox's test, intended to preserve
localism, would require that at least three independent media voices
that produce and distribute local news and information programming,
other than the combining properties, remain in the market post-
transaction. The Commission seeks comment on Cox's suggestion. For the
reasons explained below in connection with the eight-voices
restriction, the Commission believes that the first part of Cox's
proposed test would define independent media voices too broadly. As to
the second part of Cox's proposed test, the Commission believes it
would be difficult to apply and enforce an objective, content-neutral
standard of what constitutes an independent media voice that produces
and distributes local news and information programming. Moreover,
nothing in the Cox proposal provided specific evidentiary support that
relates the standard specifically to newspaper/television combinations.
(iv) Top-Four Restriction
125. Background. Consistent with the 2006 NBCO rule, the Commission
proposed in the NPRM that newspaper/television combinations involving a
television station ranked among the top-four television stations in the
DMA would not be entitled to a favorable presumption. The Commission
proposed that television rankings be based on the most recent all-day
(i.e., 9:00 a.m. to midnight) audience share, as measured by Nielsen or
another comparable professional, accepted audience ratings service.
126. The Commission's preliminary view was that ``allowing a top-
four station to merge with a daily newspaper would create the greatest
risk of losing an independent voice in that market.'' Based on the
Commission's data analysis, the amount of local news drops
significantly between the fourth- and fifth-ranked stations. The most
dramatic difference occurs in larger markets, where the fifth-ranked
station generally provides no more than half the amount of local news
aired on the fourth-ranked station. The Commission sought comment on
whether a different limit would be more appropriate, such as a top-five
or top-six restriction. It also asked if the restriction should depend
on whether the station is affiliated with one of the four major
broadcast networks, given evidence that such stations tend to air more
local news.
127. Discussion. If the Commission were to adopt a waiver standard
with presumptive guidelines, it would not provide a favorable
presumption for newspaper/television combinations involving a
television station ranked among the top-four television stations in the
DMA. The Commission would continue to determine a television
[[Page 29031]]
station's ranking in accordance with Section 73.3555(d)(3)(i) of the
Commission's rules. As stated in the NPRM, evidence shows that the top-
four television stations in a DMA generally air more local news and
information than the other television stations in the market,
particularly in the larger DMAs. The Commission seeks comment on its
tentative conclusion that viewpoint diversity in even the largest
markets could be harmed if a top-ranked television station merged with
a daily newspaper within the same DMA. Therefore, regardless of the
DMA's size, the Commission believes that a proposed combination
involving a top-four television station would be inconsistent with the
public interest. The Commission invites commenters to provide any new
information or evidence that the Commission should take into
consideration regarding this issue.
128. The Commission disagrees with those commenters who contend
that the rationale for allowing cross-ownership in the top 20 markets
would also support not having a top-four restriction. The Commission's
analysis of this rule hinges not on whether it should be relaxed to
enhance efficiencies that could promote localism, but on whether some
form of the rule remains necessary to promote viewpoint diversity.
Although the Commission would hope that any permitted combinations
under a revised rule would generate localism benefits, the NBCO rule is
designed to protect viewpoint diversity. Under the presumptive waiver
standard the Commission seeks comment on today, waiver applicants in
the top-20 DMAs would be entitled to a favorable presumption on the
theory that permitting certain newspaper/television combinations in
those markets would not likely harm viewpoint diversity. Allowing the
combination of a newspaper and a top-four station, however, could
potentially harm viewpoint diversity precisely because the top-four
television stations typically provide the most local news among
television stations. A combination with one of those stations thus
could result in a diminution of viewpoint diversity, and therefore the
Commission believes that a waiver request involving such a station
should not be entitled to a favorable presumption. The Commission seeks
comment on this proposition.
129. Other arguments also sidestep the diversity rationale. Tribune
contended that combining with one of the market's weaker television
stations may not provide the lifeline that many struggling newspapers
need. It further asserted that the rationale for the top-four
restriction within the context of the local television rule--to
preserve competition among the strongest television stations--is
inapplicable to the NBCO rule. The Commission's primary intent,
however, in considering whether to retain the top-four component of the
NBCO rule, if amended, is to protect viewpoint diversity, not to save
struggling newspapers or to promote competition. The Commission seeks
comment on its position with respect to these assertions.
130. Finally, Fox claimed that a top-four restriction would violate
the First Amendment because it would preclude a speaker from acquiring
additional outlets based on the popularity of the speaker's content.
The Commission disagrees. As the U.S. Supreme Court stated, assuring
``access to a multiplicity of information sources . . . promotes values
central to the First Amendment.'' The Commission also disagrees with
Fox's assertion that such a restriction would be content-based. Rather,
the Commission believes the top-four restriction would operate on the
content-neutral basis of market ranking. It notes that, within the
context of the local television rule, the Third Circuit upheld the top-
four restriction as a reasonable limit on market power.
(v) Eight Major Media Voices Restriction
131. Background. The Commission proposed that transactions that
would leave fewer than eight independently owned and operating ``major
media voices'' in the DMA would not be entitled to a favorable
presumption under a presumptive waiver standard. Major media voices
were defined in the 2006 Quadrennial Review Order as full-power
commercial and noncommercial television stations and major newspapers.
The Commission sought comment on the potential impact of eliminating
this voices test given its analysis that eight major media voices would
remain in each of the top-20 DMAs even if all daily newspapers in those
markets combined with television stations. The Commission also asked
whether requiring a different number of voices would protect its
diversity goal more effectively.
132. Discussion. Were the Commission to adopt the presumptive
waiver standard on which it seeks comment, the Commission proposes to
ascribe a negative presumption to waiver requests for newspaper/
television combinations in the top-20 DMAs if fewer than eight major
media voices would remain in the DMA following the proposed merger. The
Commission believes it should continue to define major media voices as
full-power television broadcast stations and newspapers that are
published at least four days a week within the DMA in the dominant
language of the market and have a circulation exceeding 5 percent of
the households in the DMA. None of the commenters in the 2010
Quadrennial Review proceeding addressed the impact of removing the
eight-voices test from a presumptive waiver standard or recommended an
alternative voices test for the top-20 DMAs. Notwithstanding the
supposition in the NPRM that the eight-voices test may not have an
impact in the top-20 DMAs currently, if the Commission decides to adopt
a presumptive waiver standard, then it proposes to retain the test as
the more cautious approach and to protect viewpoint diversity in the
event that media diversity in a top-20 DMA drops to the point where the
test would become a critical factor in promoting that goal. The
Commission included the eight-voices test in the 2006 waiver standard
to prevent ``a significant decrease in the number of independently
owned major media voices'' in the top-20 DMAs, and it seeks comment on
whether it should incorporate the test for the same reason if it adopts
a presumptive waiver standard.
133. Some commenters recommended that the Commission expand the
definition of major media voices beyond full-power commercial and
noncommercial television stations and major newspapers. For example,
Cox urged the Commission to include in the definition full-power radio
stations, cable and satellite television services (counted as one
voice), and the Internet (counted as one voice). Cox argued that its
approach would resemble the definition used for the radio/television
cross-ownership rule. Referencing the local television rule, Tribune
asserted that a voices test should include radio stations, cable and
satellite news channels, weekly newspapers, and independent Web sites
with news and local information. The Commission's view is that neither
of these comparisons should persuade it to expand its definition: This
Further Notice of Proposed Rulemaking seeks comment on repealing the
radio/television cross-ownership rule, and only television stations
count toward the minimum number of remaining media outlets required
under the local television rule. In addition, the Commission is
disinclined to agree with NAA that the definition should include any
media outlet that ``contribute[s]
[[Page 29032]]
meaningfully to local news diversity,'' the determination of which
would depend on the type of media outlet under consideration. For
practical and legal reasons, the Commission believes it unwise to
engage in the kind of subjective, content-based assessment that such a
standard likely would entail. The Commission seeks comment on these
views.
134. The Commission tentatively concludes that, for purposes of any
newspaper/television cross-ownership rule that the Commission may
adopt, full-power television stations and major newspapers are the
relevant voices that should be included in the definition of major
media voices. As noted in the 2006 Quadrennial Review Order and
discussed above, television stations and major newspapers are the
predominant sources consumers rely on for news and information. In
addition, evidence demonstrates that radio stations and independent Web
sites generally do not originate significant amounts of local news.
Evidence also suggests that viewership of local broadcast television
news far outstrips that of cable news programming. Therefore, the
Commission believes that counting the full-power television stations
and the major newspapers within a local market provides a reasonable
proxy for the level of viewpoint diversity that is meaningful for
purposes of its proposed rule, and the Commission seeks comment on this
belief.
(vi) Four-Factor Test
135. Background. Under the NBCO rule as revised in the 2006
Quadrennial Review Order, the Commission considered four factors in
evaluating a request for a rule waiver. All waiver applicants,
regardless of whether they were entitled to a favorable presumption,
were required to show: (1) That the combined entity would significantly
increase the amount of local news in the market; (2) that the newspaper
and the broadcast outlets each would continue to employ its own staff
and exercise its own independent news judgment; (3) the level of
concentration in the Nielsen DMA; and (4) the financial condition of
the newspaper or broadcast station, and if the newspaper or broadcast
station was in financial distress, the proposed owner's commitment to
invest significantly in newsroom operations.
136. In the NPRM, the Commission sought comment on whether to
retain these four factors. The Commission asked if the factors
benefitted the waiver applicants or the Commission staff responsible
for reviewing waiver requests. It sought comment on whether the factors
were overly subjective or likely to create unnecessary delay. The
Commission also asked whether, if the four-factor test were excluded
from the rule, the presumptions in favor of or against a transaction
should create a prima facie case, which would shift the burden of proof
to the party seeking to overcome the presumption.
137. Discussion. The Commission proposes not to include the four-
factor test in any newspaper/television cross-ownership rule that it
ultimately may adopt. None of the commenters in the 2010 Quadrennial
Review proceeding supported retaining the test. The Commission
tentatively concludes that the factors are not well-suited as standards
required of every waiver applicant because they are vague, subjective,
difficult to verify, and costly to enforce. The Commission would not
discourage waiver applicants, particularly those in smaller markets,
from attempting to strengthen their requests by presenting evidence in
support of considerations like those reflected in the four factors.
Rather, the ill-defined nature of these factors leads the Commission to
believe that they should not be imposed automatically on every waiver
applicant. The Commission seeks comment on this approach.
138. In the event the Commission adopts a presumptive waiver
standard, it seeks further comment on whether, instead of a four-factor
test, it should treat a presumption either in favor of or against a
waiver request as establishing a prima facie case. The party seeking to
overcome the presumption would have the burden to show that the
proposed newspaper/television combination would or would not unduly
harm viewpoint diversity within the DMA. To meet this burden, parties
could present evidence, for instance, regarding the quantity and
strength of existing local news providers within the DMA including, for
example, their availability, accessibility, and focus on local news and
information; the level and pervasiveness of their presence or influence
within the DMA, particularly in those portions of the DMA that
potentially would be most affected by the proposed merger; and the
strength of the applicant's proposed local news and other local program
offerings. The impact on viewpoint diversity in the local market would
be the focal point of the Commission's review. Evidence related to
other variables could shade the Commission's analysis but would not be
necessary or sufficient. The Commission believes this type of narrowed
approach would be consistent with its objective to rationalize the NBCO
rule by linking its requirements to its purpose.
(vii) Overcoming the Negative Presumption
139. Background. In the NPRM, the Commission sought comment on
whether to retain the criteria required by the 2006 Quadrennial Review
Order to overcome a negative presumption. Under the 2006 rule, a waiver
applicant could overcome a negative presumption by demonstrating, with
clear and convincing evidence, that the merged entity would increase
the diversity of independent news outlets and the level of competition
among independent news sources in the relevant market. The rule adopted
in the 2006 Quadrennial Review Order further stated that the Commission
would reverse a negative presumption in two limited circumstances: (1)
When the proposed combination involved a failed/failing station or
newspaper, or (2) when the proposed combination was with a broadcast
station that was not offering local newscasts prior to the combination,
and the station would initiate at least seven hours per week of local
news after the combination. The NPRM asked whether these standards were
sufficiently objective and quantifiable. It asked also whether special
consideration should be given to a transaction involving a station or
newspaper that is failed or failing, and if so, what type of showing
should be required. Finally, the NPRM sought comment on whether the
Commission should adopt any other criteria, particularly given that
licensees could seek waivers under Section 1.3 of the Commission's
rules.
140. Discussion. The Commission believes it should not adopt the
criteria required by the 2006 Quadrennial Review Order to overcome a
negative presumption in any presumptive waiver standard that the
Commission may adopt, other than the failed/failing station or
newspaper criterion. In the preceding discussion of the four-factor
test, the Commission sought comment on whether it should enable merger
applicants to overcome any negative presumption by demonstrating that
the proposed transaction would not unduly harm viewpoint diversity
within the DMA. The Commission seeks comment on whether that standard
also should replace the 2006 criteria requiring clear and convincing
evidence that diversity and competition would increase. The Commission
believes that the clear and convincing measure imposed an overly
burdensome evidentiary standard, unnecessarily included a competition
showing, and failed to identify relevant
[[Page 29033]]
evidence that would support the diversity showing. The Commission is
inclined to agree with Free Press that the exception for waiver
applicants that commit to initiating weekly local news programming on a
television station that has not been offering any local news would be
too difficult to enforce. Not only does the Commission think it would
be impractical for the Commission to monitor the station's subsequent
local news output, but it does not wish to engage in making content-
based judgments regarding what constitutes local news. For this reason
and for the reasons stated above for proposing to reject the four-
factor test, the Commission is not inclined to adopt NAA's
recommendation that any NBCO rule the Commission adopts include an
exception when: (1) The merger applicants commit to retaining,
protecting, and exercising their respective editorial independence or
(2) the merger applicants commit to adding news or public affairs
programming to a broadcast station that previously had not been airing
news. The Commission seeks comment on this approach.
141. The Commission proposes to adopt a failed/failing entity
exception, which would allow merger applicants to overcome a negative
presumption under a presumptive waiver standard when a proposed
combination involved a failed/failing television station or newspaper.
In addition, it similarly proposes to consider an exception for failed/
failing entities if it adopts a waiver standard that does not include
presumptive guidelines. As explained above in the discussion of its
policy goals, the Commission believes the continued operation of a
local news outlet under common ownership would cause less harm to
viewpoint diversity than would its complete disappearance from the
market. Noting that no alternative definitions were suggested in the
2010 Quadrennial Review proceeding, the Commission seeks comment on
whether to incorporate the criteria adopted in the 2006 Quadrennial
Review Order to determine if a television station or newspaper is
failed or failing. Specifically, in order to qualify as failed, the
newspaper or television station would have to show that it had stopped
circulating or had been dark due to financial distress for at least
four months immediately prior to the filing of the assignment or
transfer of control application, or that it was involved in court-
supervised involuntary bankruptcy or involuntary insolvency
proceedings. To qualify as failing, the applicant would have to show
that: (1) If the television station was the failing entity, that it had
a low all-day audience share (i.e., 4 percent or lower); (2) the
financial condition of the newspaper or television station was poor
(i.e., a negative cash flow for the previous three years); and (3) the
combination would produce public interest benefits. An applicant
seeking a waiver of a newspaper/television cross-ownership prohibition
on the basis that either the television station or the newspaper was
failed or failing would be required to show that the tangible and
verifiable public interest benefits of the combination outweighed any
harms. Further, as is already the case with failed and failing station
waivers of the local television rule, in seeking subsequent renewals of
the television station's license, the owner of the combined entities
would be required to certify to the Commission that the public interest
benefits of the combination were being fulfilled, including a specific,
factual showing of the program-related benefits that had accrued to the
public. Cost savings or other efficiencies, standing alone, would not
constitute a sufficient showing. The Commission seeks comment on the
implications of requiring such a showing. In addition, the applicant
would have to show that the in-market buyer was the only reasonably
available candidate willing and able to acquire and operate the failed
or failing newspaper or station and that selling the newspaper or
station to any out-of-market buyer would result in an artificially
depressed price. One way to satisfy this criterion would be to provide
an affidavit from an independent broker affirming that active and
serious efforts had been made to sell the newspaper or television
station, and that no reasonable offer from an entity outside the market
had been received. The Commission seeks comment on whether to adopt
such a criterion. It seeks comment on whether to adopt such an
exception for failed/failing entities regardless of the waiver standard
it adopts.
(iv) Minority and Female Ownership
142. Background. The Commission has provided several opportunities
for public input on issues pertaining to minority and female ownership.
It sought comment in the NPRM on how the proposed revisions to the NBCO
rule could affect minority and female ownership opportunities. Further,
it asked how promotion of diverse ownership promotes viewpoint
diversity. The Commission also sought comment on the minority and
female ownership data contained in the 2012 323 Report. In addition,
the Commission invited comment on the MMTC Cross-Ownership Study which
seeks to examine ``whether, and to what extent, cross-ownership might
have a material adverse impact on minority and women ownership.'' To
inform the 2014 Quadrennial Review, the Commission seeks further
comment below on the relationship of the NBCO rule to minority and
female ownership.
143. Discussion. Some commenters criticized the Commission for
proposing to relax the NBCO rule without first determining that there
would be no negative impact on levels of minority and female ownership.
The Commission recognizes that the Third Circuit directed the
Commission to address certain portions of the Diversity Order in the
context of its quadrennial review. The Commission has considered
carefully whether there is evidence in the current record that
modifications to the NBCO rule, such as those the Commission seeks
comment on above, would likely adversely affect minority and female
ownership, and it tentatively concludes, as discussed below, that the
current record does not establish that such harm is likely. The
Commission tentatively finds that the information in the current record
asserting a potential impact would not change its underlying analysis
regarding the possible rule modifications set forth above. Moreover,
the Commission rejects the argument that the Prometheus II decision
requires the Commission to take no action unless it can show
definitively that a rule change would have no negative impact on
minority ownership levels. In any case, considering the low levels of
minority and female ownership reflected in the 2012 323 Report, the
Commission does not believe the record evidence shows that the cross-
ownership ban has protected or promoted minority or female ownership of
broadcast stations in the past 35 years, or that it could be expected
to do so in the future. The Commission seeks comment on these views.
144. The Commission notes that commenters in the 2010 Quadrennial
Review record did not focus on the impact of newspaper/radio cross-
ownership in particular. None of these commenters seriously contended
or provided any data showing that newspaper mergers with minority/
female-owned radio stations would harm viewpoint diversity in local
markets. As discussed above, the Commission does not believe that the
vast majority of radio stations contribute significantly to viewpoint
diversity. Moreover, the Commission has no evidence in the current
record suggesting that minority/female-owned
[[Page 29034]]
radio stations contribute more significantly to viewpoint diversity or
broadcast greater amounts of local news on which consumers rely as a
primary source of information than other radio stations. Even if they
did, the Commission could not conclude that it would therefore be
reasonable to restrain the ability of owners of all commercial radio
stations to make business decisions to exit the market or to combine
with a newspaper should the record otherwise support allowing such
combinations. The Commission invites commenters to provide any new
relevant information, data, or evidence that should inform the 2014
Quadrennial Review.
145. With respect to newspaper/television combinations, the current
record reflects varying opinions concerning the impact of a rule
modification on minority and female ownership. While the Commission
agrees with the commenters that current levels of minority and female
ownership are discouragingly low, the Commission is not persuaded by
evidence in the current record that the NBCO modifications it seeks
comment on above would adversely affect minority and female ownership
levels. Even assuming that some minority-owned stations would become
acquisition targets if the rule were loosened, the Commission does not
believe that such a possibility necessarily would preclude rule
modifications that are otherwise consistent with its statutory mandate.
To the extent that governmental action to boost ownership diversity is
appropriate and in accordance with the law, the Commission does not
believe that any such action should be in the form of indirect measures
that have no demonstrable effect on minority ownership and yet
constrain all broadcast licensees. The Commission seeks comment on this
tentative conclusion and its impact on any decision to modify its
cross-ownership rules. Several commenters argued that promoting access
to capital would advance minority ownership more effectively than
either limiting the number of potential buyers for minority broadcast
owners interested in selling or preventing minority broadcast owners
from experimenting with print publication. The Commission addresses
related proposals below.
146. At this time, the Commission is not convinced that a top-four
restriction, if adopted as part of a presumptive waiver standard, would
decrease minority ownership. Commenters predicted that minority-owned
television stations, the majority of which are stand-alone stations
unaffiliated with a network, would be likely targets for acquisition if
top-four television stations were excluded from cross-ownership.
However, a newspaper publisher that is foreclosed from buying a top-
ranked television station may not necessarily seek to purchase a lower-
ranked station. In any event, station owners would not be compelled to
sell their stations as a result of a modification to the NBCO rule.
Moreover, a station owner that wishes to exit the market is not
prevented from selling its station under the current NBCO ban, which
merely eliminates newspaper owners as potential buyers. The Commission
notes that the commenters' concern is in tension with the more frequent
complaint that the Commission has not been aggressive enough in
encouraging investment in minority broadcasters. The changes the
Commission seeks comment on today could permit stand-alone stations
without a network affiliation to compete better in the market and to
improve their local news offerings by combining resources with an in-
market daily newspaper, if they so desired and such an opportunity were
available. The Commission seeks comment on the likelihood of such an
effect.
147. In addition, commenters arguing that minority-owned
broadcasters are competitively disadvantaged in the presence of large
media conglomerates pointed to alleged effects of multiple station
ownership, not cross-ownership of newspapers and broadcast stations. As
the Commission has found, newspapers and broadcast stations generally
do not compete in the same product markets, and it does not believe
that an owner of a newspaper/television combination would possess any
greater ability to impede local competition among local television
stations than the well-capitalized owner of a single media property.
Free Press pointed to various financial pressures that it claims have
forced a number of minority owners to exit the market. To the extent
that Free Press alleged that these financial difficulties stemmed from
or were exacerbated by media consolidation, the consolidation to which
Free Press refers is not related to the NBCO rule. Given that an NBCO
restriction did not prevent the minority owners Free Press identified
from leaving the market and in light of the Commission's finding that
newspapers and broadcast stations generally do not compete in the same
product market, the Commission seeks further comment specifically on
the relationship between the NBCO rule and minority and female
ownership.
148. The MMTC Cross-Ownership Study stated that ``the impact of
cross-media ownership on minority and women broadcast ownership is
probably negligible.'' MMTC indicated that the study surveyed both
minority- and/or female-owned broadcast stations in markets with cross-
owned media, along with non-minority/non-female-owned broadcast
stations in the same markets, to explore whether there was a difference
in the responses of the two groups regarding the importance of local
cross-owned media. According to MMTC, the study's findings showed a
lack of concern by almost all of the respondents about the presence of
cross-owned media in the market. MMTC acknowledged, however, that the
study was ``not intended as a comprehensive random sample survey'' and
cautioned that the limited number of responses warrants ``great care''
in reaching any conclusions.
149. A number of commenters argued that the MMTC Cross-Ownership
Study was critically flawed in its methodology and analysis and that
the Commission cannot rely on the study as a basis for policy making.
In response, MMTC recognized that the MMTC Cross-Ownership Study is not
dispositive but argued that it provides useful evidence about the
impact of cross-ownership, noting the record was previously devoid of
any such data.
150. Given the limitations of the study that even MMTC
acknowledges, the Commission does not believe it can draw definitive
conclusions about the impact of cross-ownership on minority and female
ownership from the MMTC Cross-Ownership Study alone. The Commission
invites commenters to provide additional evidence that bears on this
issue, especially any evidence arising since MMTC's filing of the
study.
151. Furthermore, the Commission notes that any attempt to conduct
an empirical study of the relationship between cross-ownership
restrictions and minority and female ownership would face obstacles
that likely would make such study impractical and unreliable. A
rigorous econometric analysis would require that the Commission observe
a sufficient number of markets in which cross-ownership and/or minority
and female ownership levels recently have shown variation. Due to the
Commission's cross-ownership restrictions having been in place for such
a long period of time and to low levels of minority and female
ownership, however, both cross-ownership and minority and female
ownership levels show very little variation, making empirical study of
the relationship between these multiple variables extremely difficult.
In
[[Page 29035]]
addition, any study necessarily would be based on a very small dataset
for the same reasons. As a result of these limitations, any estimation
of the relationship between cross-ownership restrictions and minority
and female ownership is likely to be imprecise. Given such imprecision,
the Commission does not believe that a study could extrapolate with any
degree of confidence the effect that changing the Commission's cross-
ownership rules would have on minority and female ownership levels, and
any attempt to do so would be misleading. Variation in ownership
structure over time, resulting from additional cross-owned entities,
could provide additional data points to study in the future. The
Commission seeks comment on these views concerning the inherent
challenges to conducting comprehensive research on these issues.
152. Finally, the Commission emphasizes that, as proposed above, no
newspaper/television combination would be permitted without a
Commission waiver of a general rule prohibiting such combinations. Even
a waiver request that would be granted a favorable presumption under a
presumptive waiver standard would be subject to denial if the
Commission found that the proposed transaction was likely to harm
viewpoint diversity in the local market. A case-by-case waiver approach
under either option the Commission offers for comment would allow for
close Commission examination of the particular circumstances of a
proposed combination. Where the newspaper purchase of a television
station, minority/female-owned or otherwise, would disserve the public
interest, the Commission would deny the request for a rule waiver. The
Commission seeks comment on whether a waiver requirement would provide
adequate protection when the particular circumstances of a proposed
merger run counter to its diversity goals.
4. Radio/Television Cross-Ownership Rule
a. Introduction
153. The Commission seeks comment on whether the radio/television
cross-ownership rule, which limits the combined number of commercial
radio and television stations a single entity may own in the same
market, is still necessary in the public interest or whether it should
be repealed. It seeks comment on whether the current media marketplace
and the evidence adduced in the 2010 Quadrennial Review proceeding
support a conclusion that the local television ownership rule and the
local radio ownership rule, which the Commission proposes to retain
with limited modification elsewhere in this Further Notice of Proposed
Rulemaking, adequately serve the goals the radio/television cross-
ownership rule was intended to promote, namely, competition and
diversity in local markets. The Commission seeks comment on whether the
benefits of eliminating this regulation would outweigh any potential
costs and whether simplifying its rules in this way would have only a
minimal effect in most markets. Moreover, the Commission seeks comment
on whether repeal of this rule would be consistent with its goal of
promoting minority and female ownership of broadcast stations. The
Commission invites commenters to discuss any relevant evidence in the
2010 Quadrennial Review record and submit any new evidence that bears
on its review of this rule. In addition, the Commission seeks comment
on the costs and benefits of retaining or eliminating the radio/
television cross-ownership rule. To the greatest extent possible,
commenters should quantify the expected costs or benefits of the rule
and any alternatives and provide detailed support for any actual or
estimated values provided, including the source of such data and/or the
method used to calculate reported values.
b. Background
154. In the NPRM, the Commission tentatively concluded that the
radio/television cross-ownership rule is not currently necessary to
promote the public interest. The Commission sought comment on a range
of issues, including whether radio and television stations constitute
different markets, whether repeal of the rule would encourage more and
better competition in local media markets, whether repeal of the rule
would result in additional broadcast consolidation, and what impact, if
any, repeal would have on small, independent broadcasters, including
those stations owned by minorities and women. The Commission indicated
that changes in the marketplace and evidence from the media ownership
studies specifically supported the tentative conclusion that the rule
is not necessary to promote viewpoint diversity in local media markets.
155. The Commission invites commenters to augment the 2010
Quadrennial Review record with any new or different evidence, data, or
information relevant to its consideration of the radio/television
cross-ownership rule in this consolidated docket.
c. Discussion
156. Considering the record in the 2010 Quadrennial Review
proceeding and consistent with the tentative conclusion in the NPRM,
the Commission seeks comment on whether the radio/television cross-
ownership rule is still necessary to promote the public interest or
whether the rule should be repealed. The Commission notes that the
record suggests that, unlike local television stations and daily
newspapers, radio stations are not a dominant source of local news and
information, and thus, the Commission seeks comment on whether
retention of this rule is necessary to promote and preserve viewpoint
diversity in local markets. Moreover, the Commission seeks comment on
whether the existing rule offers substantial benefits in addition to
its other rules. The Commission tentatively finds, as the Commission
consistently has in past proceedings, that this rule is not necessary
to support its goals of competition or localism.
157. Viewpoint Diversity. Limiting the combined number of
commercial radio and television stations that a single entity may own
in a market was previously found necessary to promote a diversity of
viewpoints. The Commission seeks comment on the continued necessity of
such a restriction. It notes that, despite its specific request in the
NPRM, no studies were submitted in the 2010 Quadrennial Review record
to demonstrate that this rule supports viewpoint diversity or that
repeal of the rule would cause a decrease in viewpoint diversity. The
Commission seeks comment on whether the local radio and local
television ownership rules, which it proposes to retain, as well as its
proposed newspaper/television cross-ownership rule, would be sufficient
to protect viewpoint diversity such that retaining the radio/television
cross-ownership rule is unnecessary.
158. The Commission seeks comment on evidence in the 2010
Quadrennial Review record suggesting that radio stations are not
currently a dominant source of local news and information. Consistent
with the tentative conclusions in the NPRM, the record in the 2010
Quadrennial Review proceeding demonstrates that consumers rely
primarily on local television stations and daily newspapers (and their
affiliated Web sites) for their local news, and not on radio stations.
If the record demonstrates that radio stations are not the primary
outlets that contribute to local viewpoint diversity, what harm to
viewpoint diversity would
[[Page 29036]]
result from repealing the radio/television cross-ownership restriction?
To the extent that noncommercial radio stations contribute to local
news and information, the Commission notes that, because its ownership
rules do not apply to noncommercial radio stations, the repeal of this
rule would not impact their contribution to viewpoint diversity. The
Commission seeks comment on how this fact should affect its analysis.
159. The Commission has previously acknowledged that radio is a
distant third behind newspapers and television stations in terms of
being an important provider of news and information. Indeed, the
Commission has long recognized that ``a radio station cannot be
considered the equal of either the newspaper or the television station
in any sense, least of all in terms of being a source for news or for
being the medium turned to for discussion of matters of local
concern.'' In the 2006 Quadrennial Review Order the Commission decided
to retain the radio/television cross-ownership rule on the basis that
the public relied on both radio and television for news and
information. Information in the record in the 2010 Quadrennial Review
proceeding, as well as the Information Needs of Communities Report and
the most recent media ownership studies, suggest that local radio
stations do not contribute to local viewpoint diversity to the same
degree as local television stations and daily newspapers.
160. As discussed in the context of the NBCO rule above, recent
evidence demonstrates that consumers regard local television stations
and daily newspapers as the principal sources of local news and
information. According to a recent Pew study, this popularity has, in
turn, encouraged many television stations to produce more local morning
and mid-day news programming, further establishing television stations
as the main providers of local news and information in local markets.
Independent television stations, particularly in those markets where
they air local news, showed bigger audience or ratings gains in 2011
when compared to any of the stations affiliated with Big Four broadcast
networks, which may provide more national programming content during
those day parts.
161. As described in detail above, the Information Needs of
Communities Report records a steady decline over the past two decades
in consumer reliance on commercial radio news. The number of people who
listen to some news on the radio dropped from 54 percent to 34 percent
during that period. Only 30 commercial radio stations out of over
11,000 are all-news radio stations, a reduction from 50 in the mid-
1980s. Although the Commission acknowledges that a small number of
commercial all-news radio stations in the nation's largest markets are
very successful, radio stations in most cities do not provide local
journalism. Eighty-six percent of programming on news-talk stations is
nationally syndicated, rather than locally produced. The Commission
seeks comment on whether there is any more recent countervailing
evidence refuting these trends.
162. Additionally, the Commission seeks comment on whether the
existing radio/television cross-ownership rule provides meaningful
additional restriction on consolidation, given that the local
television and radio rules separately impose limitations on the amount
of broadcast ownership permitted in local markets. Would the repeal of
the rule have more than a minimal impact on broadcast consolidation in
most local markets, as parties would continue to be constrained by the
applicable local radio and local television ownership rules? As
discussed in the NPRM, absent the radio/television cross-ownership
rule, an entity approaching the limits of the existing cap, if
constrained only by the local radio rule, would be permitted to acquire
one or two additional radio stations in large markets, at most. Under
the local radio rule, an entity owning six or seven radio stations can
own as many as eight radio stations in the largest radio markets in the
absence of the cross-ownership rule. The Commission seeks comment on
whether the local radio rule is sufficient to protect competition in
local radio markets. It believes the elimination of the radio/
television cross-ownership rule would have no effect on the number of
television stations an entity may own as the existing cross-ownership
rule references the local television rule to determine how many
television stations an entity may own. The Commission seeks comment on
this conclusion and on whether the radio/television cross-ownership
rule has independent effects, aside from those provided by the other
local ownership rules, on consolidation in most local markets.
163. The Commission also seeks comment on the implications of the
cross-ownership rule's two-tiered voice count restriction on broadcast
consolidation in local markets. The restrictions appear to be readily
met in many markets. In many large markets, the requirement that at
least 20 independently owned and operating media voices remain in order
to own television stations and as many as six or seven radio stations
is met or exceeded and therefore appears to have little effect.
Similarly, in many small markets the requirement that at least 10
independently owned media voices remain in order to own a television
station and as many as four radio stations is met, so that element of
the rule presumably has a limited impact on the potential for
consolidation in those markets. The Commission seeks comment on these
findings and on markets where this element of the rule may have an
impact on television/radio consolidation. What is the significance of
any such impact? The Commission seeks comment on whether the record
from the 2010 Quadrennial Review proceeding or any more recent evidence
establishes any particular or measurable potential harm that would
likely result from repeal of this cross-ownership rule.
164. Competition. Consistent with prior holdings, the Commission
tentatively finds that the radio/television cross-ownership rule is not
necessary to promote competition. The Commission has found previously
that most advertisers do not consider radio and television to be good
substitutes for one another, and that ``television and radio stations
neither compete in the same product market nor do they bear any
vertical relation to one another.'' This position is consistent with
the long-standing conclusion of the Department of Justice, which
considers radio advertising as a separate antitrust market for purposes
of its competition analysis. Similarly, the Commission tentatively
finds that most consumers do not consider radio and television stations
to be substitutes for one another and do not switch between television
viewing and radio listening based on program content. Nothing in the
current record undermines the Commission's previous conclusion that a
television-radio combination, therefore, cannot adversely affect
competition in any relevant product market. Given that radio and
television stations do not appear to compete in the same market and
that the local television and radio rules would prevent significant
additional consolidation even in the absence of this rule, the 2010
Quadrennial Review record does not suggest that repeal of the radio/
television cross-ownership rule would harm competition. The Commission
seeks comment on whether any data or evidence made available since the
NPRM warrants a renewed analysis of the competitive effect of the
radio/television cross-ownership.
165. Localism. Consistent with the tentative conclusion in the NPRM
and
[[Page 29037]]
previous Commission holdings, the Commission tentatively finds that the
radio/television cross-ownership rule is not necessary to promote
localism. The Commission seeks comment on this tentative conclusion.
Furthermore, it seeks comment on whether elimination of this rule is
likely to result in benefits to localism in the form of improved or
expanded programming.
166. The Commission sought comment in the NPRM on the relevance of
the media ownership studies to its analysis of whether the radio/
television cross-ownership rule promotes its localism goals. The
Commission specifically highlighted the findings in Media Ownership
Study 1 and Media Ownership Study 4 about the correlation between the
level of radio/television cross-ownership in a market and the amount of
local television programming provided. The Commission stated in the
NPRM that Media Ownership Study 1 examines how cross-ownership is
associated with localism, as measured by the amount of local news
provided in the market, and that the study finds that cross-ownership
decreases local television news hours but raises ratings, which leads
to ambiguous results. Additionally, the Commission observed the finding
in Media Ownership Study 4 that, at the station level, radio/television
cross-owned stations appear to air more local news on average, though
the impact is marginal. The study showed that for every additional in-
market radio station a parent owned, the television station aired 3.7
more minutes of local news. Some commenters in the 2010 Quadrennial
Review proceeding maintained that these media ownership studies support
the conclusion that the cross-ownership rule cannot be justified based
on localism concerns. NAB stated that the record is clear that repeal
of the radio/television cross-ownership rule would benefit both
localism and diversity.
167. The Commission agrees with industry commenters who maintained
that some limited cross-ownership could create efficiencies that could
benefit the public should broadcasters choose to invest additional
resources in the production of local news and information programming.
When broadcasters engage in joint operations, whether those operations
are focused on programming and news gathering or back office matters,
the Commission believes it likely that financial efficiencies result.
Such efficiencies could lead ultimately to consumer benefits in the
form of additional station investments in equipment for radio or
television newsrooms, an increase in staffing for news and
informational programs, or additional local news coverage on radio
stations. The Commission recognizes the potential for such benefits and
seeks comment on the likely extent of such gains if the rule were
repealed.
168. Minority and Female Ownership. The Commission also sought
comment in the NPRM on the effect that eliminating the radio/television
cross-ownership rule would have on efforts to foster ownership
diversity among minorities and females. Further, the Commission sought
comment on the minority and female ownership data contained in the 2012
323 Report. In addition, interested parties had the opportunity to
comment on the MMTC Cross-Ownership Study, as discussed in the context
of the NBCO rule above. In response, several commenters criticized the
Commission for proposing to relax any of its rules, including the
radio/television cross-ownership rule, without first determining that
there will be no negative impact on minority and female ownership. The
Commission has considered carefully whether there is evidence in the
current record that elimination of the radio/television cross-ownership
rule would likely adversely affect minority and female ownership, and
it believes, as discussed below, that the current record does not
establish that such harm is likely. Furthermore, the Commission does
not believe that record evidence shows that the cross-ownership ban has
protected or promoted minority or female ownership of broadcast
stations, or that it could be expected to do so in the future.
Nevertheless, the Commission invites commenters to submit further data
on the connection, if any, between the radio/television cross-ownership
rule and minority and female ownership.
169. Notably, radio/television cross-ownership combinations were
not the focus of commenters' concerns raised in response to the NPRM.
In fact, no commenter to the NPRM presented empirical data or other
analyses that established that repeal of this rule would harm
competition, localism, or viewpoint diversity in local markets. As
discussed above, the Commission tentatively concludes that the rule is
not necessary to promote competition or localism, and the record
reflects that most radio commercial stations do not broadcast
significant amounts of local news and information. The current record
does not suggest that minority/female-owned radio stations contribute
more significantly to viewpoint diversity than other radio stations or
broadcast more meaningful amounts of local news on which consumers rely
as a primary source of information. The Commission seeks comment on
these views. As discussed further in the Diversity section below,
several of the media ownership studies in this proceeding concluded
that there is a positive relationship between minority station
ownership and the provision of certain types of minority-oriented
content or the consumption of broadcast content by minority audiences.
Several commenters also raised this issue. This observation, however,
does not alter the Commission's view that radio stations--be they
minority-owned or not--do not contribute significantly to local news.
The Commission seeks comment on whether recent evidence shows
otherwise. Recognizing that repeal of the rule would potentially allow
for the acquisition of a limited number of additional radio stations in
some markets by incumbent television broadcasters, the Commission seeks
comment on the impact that elimination of the rule would have on media
consolidation and thus on small broadcast owners, including minority
and women owners. As noted above, the current radio/television rule
already allows for a significant degree of cross-ownership of radio and
television stations in a market. Second, the cross-ownership rule has
always been accompanied by the ownership limitations contained in the
local television and local radio rules, which the Commission proposes
to retain substantively unchanged in order to protect competition in
local markets. The Commission seeks comment on whether the local
ownership rules are sufficient to protect minority and female broadcast
owners from the competitive effects of media consolidation.
170. Moreover, while the Commission acknowledges the concerns
raised by NABOB and others advocating for additional minority ownership
opportunities, it agrees with commenters, including NAB, that the low
level of minority and female broadcast ownership cannot be attributed
solely or primarily to consolidation. Nor has any commenter shown that
these low levels of ownership are a result of the existing radio/
television cross-ownership rule. The Commission recognizes the presence
of many disparate factors, including, most significantly, access to
capital, as longstanding, persistent impediments to ownership diversity
in broadcasting. As discussed below, such factors require further study
and consideration.
171. In this Further Notice of Proposed Rulemaking, the Commission
[[Page 29038]]
reaffirms its commitment to broadcast ownership diversity as an
important goal. The 2010 Quadrennial Review record, however, does not
appear to establish that elimination of the radio/television cross-
ownership rule would adversely affect ownership diversity. The
Commission asks commenters to provide any demonstrable evidence of such
a link that may have become available since the 2010 Quadrennial
Review.
5. Dual Network Rule
a. Introduction
172. The Commission tentatively finds that the dual network rule,
which permits common ownership of multiple broadcast networks, but
prohibits a merger between or among the ``top-four'' networks (ABC,
CBS, Fox, and NBC), continues to be necessary to promote competition
and localism and should be retained without modification. In
particular, the Commission tentatively finds that the top-four
broadcast networks have a distinctive ability to attract, on a regular
basis, larger primetime audiences than other broadcast and cable
networks, which enables them to earn higher rates from those
advertisers willing to pay a premium for such audiences. Thus, the
Commission believes that a combination between top-four broadcast
networks would reduce the choices available to advertisers seeking
large, national audiences, which could substantially lessen competition
and lead the networks to pay less attention to viewer demand for
innovative, high quality programming. The Commission also tentatively
find that the rule remains necessary to preserve the balance of
bargaining power between the top-four networks and their affiliates,
thus improving the ability of affiliates to exert influence on network
programming decisions in a manner that best serves the interests of
their local communities. The Commission tentatively concludes that the
benefits of retaining the rule outweigh any potential burdens. The
Commission seeks comment on these tentative findings, particularly with
respect to any relevant developments that may have occurred since the
NPRM. The Commission seeks comment also on the costs and benefits of
its proposal to retain the existing dual network rule. To the greatest
extent possible, commenters should quantify the expected costs or
benefits of the rule and provide detailed support for any actual or
estimated values provided, including the source of such data and/or the
method used to calculate reported values.
b. Background
173. In the NPRM, the Commission sought comment on its tentative
conclusion that the existing dual network rule should be retained
without modification in order to promote competition. The Commission
also sought comment on the potential impact of top-four network mergers
on localism. The Commission invites commenters to augment the 2010
Quadrennial Review record with any new or different evidence, data, or
information relevant to its consideration of the dual network rule in
this consolidated docket.
c. Discussion
174. Competition. Consistent with the Commission's tentative
conclusion in the NPRM, the Commission tentatively finds that the dual
network rule remains necessary in the public interest to foster
competition in the provision of primetime entertainment programming and
the sale of national advertising time. Specifically, as discussed in
more detail below, the Commission tentatively finds that the primetime
entertainment programming supplied by the top-four broadcast networks
is a distinct product, the provision of which could be restricted if
two of the four major networks were to merge. The Commission also
tentatively finds that, consistent with past Commission findings, the
top-four broadcast networks comprise a ``strategic group'' in the
national advertising market and compete largely among themselves for
advertisers that seek to reach large, national mass audiences.
Accordingly, the Commission continues to believe that a top-four
network merger would substantially lessen competition for advertising
dollars in the national advertising market, which would, in turn,
reduce incentives for the networks to compete with each other for
viewers by providing innovative, high quality programming. Based on
their distinctive characteristics relative to other broadcast and cable
networks, the Commission tentatively finds that the top-four broadcast
networks serve a unique role in the provision of primetime
entertainment programming and the sale of national advertising time
that justifies retaining a rule specific to them. The Commission seeks
comment on these tentative findings.
175. As noted in the NPRM, in comparison to other broadcast and
cable networks, the top-four broadcast networks achieve substantially
larger primetime audiences, as measured both by the audience size for
individual programs and by the audience size for each network as a
whole. Primetime broadcast network programming is generally designed to
attract a mass audience, and financing such programming, in turn,
requires the substantial revenue that only a mass audience can provide.
The top-four broadcast networks supply their affiliated local stations
with primetime entertainment programming intended to attract both mass
audiences and the advertisers that want to reach such large, national
audiences. By contrast, other broadcast networks, and many cable
networks, tend to target more specialized, niche audiences. As CBS
noted, in recent years, some cable networks have moved away from
serving niche audiences and have modified their primetime programming
lineups to more closely resemble those of broadcast networks.
Nonetheless, with the exception of certain individual sports events or
mini-series, even the highest rated primetime entertainment programs on
cable networks achieve substantially smaller audiences than their
broadcast network counterparts. For instance, during 2011, the highest
rated primetime entertainment programs on cable networks attracted, at
most, between 8 and 9 million viewers. By contrast, in any given week
during the 2010-2011 television season, there were typically a dozen or
more primetime entertainment programs on the top-four broadcast
networks that attracted more than 10 million viewers, with the highest
rated broadcast programs frequently attracting more than 20 million
viewers, based on Nielsen data. Thus, the audience size for individual
primetime entertainment programs provided by each of the top-four
broadcast networks remains unmatched by that of any other broadcast or
cable network.
176. Furthermore, as measured at the network level, the average
primetime audience size for each of the top-four broadcast networks
remains significantly larger than the audience size for even the most
popular cable networks. The Commission recognizes that consumers
generally substitute between broadcast and cable networks and that the
gap in size between broadcast and cable audiences has narrowed over
time, such that the aggregate audience for cable networks is now
larger. Nevertheless, as stated in the NPRM, in 2009-2010 the average
primetime audience for a top-four broadcast network remained
substantially larger than the average primetime audience for other
broadcast and cable networks. The Commission finds that this gap in
audience size
[[Page 29039]]
continued in 2011. In 2011, the average primetime audience for a top-
four broadcast network was nearly three times larger than the average
primetime audience for the highest rated cable networks, based on SNL
Kagan data. In addition, the average primetime audience for the top-
four broadcast networks was more than twice as large as that of the
fifth highest-rated broadcast network, and more than five times larger
than that of the next highest-rated English-language broadcast network.
As a result, based on the 2010 Quadrennial Review record, the
Commission tentatively finds that, despite the ability of certain
primetime cable network programs to achieve large audiences on
occasion, in general, primetime entertainment programming provided by
the top-four broadcast networks remains a distinct product capable of
attracting large audiences, the size of which individual cable networks
cannot consistently replicate. The Commission seeks comment on whether
this audience gap has narrowed significantly since the NPRM.
177. Another indicator that the top-four broadcast networks are
distinct from cable networks is the wide disparity in advertising
prices between them. Using data for 2009, the Commission found in the
NPRM that the top-four broadcast networks generally earn higher
advertising rates than cable networks. In 2011, based on SNL Kagan
data, the average advertising rate among the top-four broadcast
networks, as measured in cost per thousand views (referred to as cost
per mille or CPM), was $19.19. By contrast, the four highest CPMs among
non-sports cable networks were for MTV, Bravo, Discovery Channel, and
TBS, which had an average CPM of $10.95, or approximately 43 percent
less than that of the top-four broadcast networks. The appeal of the
top-four broadcast networks to advertisers seeking large, national
audiences is also reflected in data on net advertising revenues. In
2011, the top-four broadcast networks averaged $3.17 billion in net
advertising revenues, based on SNL Kagan data. By contrast, the four
non-sports cable networks with the highest net advertising revenue
totals (Nickelodeon, USA Network, TNT, and MTV) averaged just under 1
billion dollars in net advertising revenues, or less than one-third of
the average amount that the top-four broadcast networks received. The
Commission invites commenters to provide any relevant data that has
become available more recently.
178. The Commission tentatively concludes that it should adopt the
proposal in the NPRM to retain the existing dual network rule without
modification in order to promote competition. The Commission finds
force in WGAW's view that the rule remains necessary to promote
competition in the market for primetime programming. Specifically, the
Commission believes that the top-four broadcast networks have a
distinctive ability to attract, on a regular basis, larger primetime
audiences than other broadcast and cable networks, which enables them
to earn higher rates from those advertisers that are willing to pay a
premium for such audiences. Thus, the Commission believes that a
combination between top-four broadcast networks would reduce the
choices available to advertisers seeking large, national audiences,
which could substantially lessen competition and lead the networks to
pay less attention to viewer demand for innovative, high quality
programming. The Commission therefore tentatively concludes that the
primetime entertainment programming provided by the top-four broadcast
networks and national television advertising time are each distinct
products, the availability, price, and quality of which could be
restricted, to the detriment of consumers, if two of the top-four
networks were to merge. Accordingly, the Commission tentatively
concludes that the dual network rule remains necessary to foster
competition in the provision of primetime entertainment programming and
the sale of national television advertising time. The Commission seeks
comment on these tentative conclusions.
179. Localism. In addition to promoting its competition goal, the
Commission tentatively finds that, consistent with past Commission
findings, the dual network rule remains necessary to promote its
localism goal. Specifically, the Commission tentatively finds that the
rule remains necessary to preserve the balance of bargaining power
between the top-four networks and their affiliates, thus improving the
ability of affiliates to exert influence on network programming
decisions in a manner that best serves the interests of their local
communities. Typically, a critical role of a broadcast network is to
provide its local affiliates with high quality programming. Because
this programming is distributed across the country, broadcast networks
have an economic incentive to ensure that the programming both appeals
to a mass, nationwide audience and is widely shown by affiliates. A
network's local affiliates serve a complementary role by providing
local input in network programming decisions and airing programming
that serves the specific needs and interests of that specific local
community. As a result, the economic incentives of the networks are not
always aligned with the interests of the local affiliates or the
communities they serve.
180. In the context of this complementary network-affiliate
relationship, the Commission believes that the dual network rule is, as
the Affiliates Associations asserted, ``an important structural
principle'' that helps to maintain equilibrium. Specifically, the
Commission tentatively finds that a top-four network merger would
reduce the ability of a network affiliate to use the availability of
other top, independently owned networks as a bargaining tool to
influence programming decisions of its network, including the
affiliate's ability to engage in a dialogue with its network over the
suitability for local audiences of either the content or scheduling of
network programming. The Commission seeks comment on its tentative
conclusion that the dual network rule remains necessary to foster
localism.
181. The NPRM also sought comment on whether antitrust laws and the
Commission's public interest standard are sufficient to address any
harms to competition or localism that would result from a top-four
network merger. As discussed above, the Commission is concerned here
that a top-four network merger would restrict the availability, price,
and quality of primetime entertainment programming to the detriment of
consumers. The Commission is also concerned that the bargaining power
and influence of affiliates would be reduced. As the Commission has
previously noted, it does not think antitrust enforcement would
adequately protect against these harms. The Commission seeks comment on
these concerns.
182. Dual Affiliation. Some commenters urged the Commission to
prohibit a TV station from affiliating with two or more top-four
broadcast networks in a single market, because they contended that the
practice allows stations to circumvent the intent of the dual network
rule. Specifically, commenters claimed that dual affiliation allows a
broadcaster to ``do locally what the networks are forbidden from doing
nationally,'' which is to consolidate the bargaining power of multiple
top-four network signals under the control of a single entity. The
Commission notes, however, that the dual network rule addresses harms
to competition and localism that would result from the consolidation of
top-four
[[Page 29040]]
network ownership at the national level. In particular, as discussed
above, the Commission tentatively finds that a combination between top-
four broadcast networks would reduce the number of networks competing
for national advertisers and would reduce the ability of a local
affiliate to use the availability of other top, independently owned
networks as a bargaining tool to influence network programming
decisions. By contrast, the Commission believes that dual affiliation
does not give rise to either of these harms because it does not reduce
the number of network owners. Although commenters are invited to offer
opposing views, the Commission does not perceive arguments related to
dual affiliation as relevant to consideration of the dual network rule.
Instead, it believe that issues related to dual affiliation, including
the potential consolidation of market power by a single station owner
in a local market, are more relevant to the local television ownership
rule, and the Commission discusses them above in that context.
D. Diversity Order Remand
1. Introduction
183. In addition to assessing each of the broadcast ownership
rules, the Commission is considering in this proceeding the Third
Circuit's remand of certain aspects of the Commission's 2008 Diversity
Order. In Prometheus II, the Third Circuit concluded that the decision
in the Diversity Order to adopt a revenue-based eligible entity
definition as a race-neutral means of facilitating ownership diversity
was arbitrary and capricious, because the Commission did not show how
such a definition specifically would assist minorities and women, who
were among the intended beneficiaries of this action. In light of this
conclusion, the Third Circuit remanded each of the measures adopted in
the Diversity Order that relied on the revenue-based definition.
184. Based on its analysis of the preexisting eligible entity
standard as well as the measures to which it applied, the Third
Circuit's remand instructions, and the record thus far in this
proceeding, the Commission tentatively concludes that the revenue-based
eligible entity standard should be reinstated and applied to the
regulatory policies set forth in the Diversity Order. The Commission
believes that small businesses benefit from flexible licensing policies
and that making it easier for small business applicants to participate
in the broadcast industry will encourage innovation and enhance
viewpoint diversity.
185. For the reasons explained below, the Commission tentatively
concludes that the Commission is not in a position at this time to
adopt a socially disadvantaged business (SDB) eligibility standard,
which expressly would recognize the race and ethnicity of applicants,
or any other race- or gender-targeted measures. The Commission invites
further input on ways to expand the participation of minorities and
women in the broadcast industry. It also seeks comment on specific
measures, in addition to those that that the Commission tentatively
concludes should be reinstated, that may provide further opportunities
for minorities and women to own and operate broadcast outlets.
186. The Commission discusses below the actions that it currently
believes are appropriate in response to the Third Circuit remand of the
Diversity Order.
2. Background
a. Commission Diversity Initiatives
187. In addition to promoting viewpoint diversity generally through
the broadcast ownership rules, the Commission has a long history of
promulgating rules and regulations intended to foster diversity in
terms of minority and female ownership. Although the Commission and
Congress previously made available race- and gender-conscious measures
intended specifically to assist minorities and women in their efforts
to acquire broadcast properties, such as tax certificates and distress
sale policies, those policies and programs were discontinued following
the Supreme Court's 1995 decision in Adarand Constructors, Inc. v.
Pe[ntilde]a. The Supreme Court held in Adarand that any federal program
in which the ``government treats any person unequally because of his or
her race'' must satisfy the ``strict scrutiny'' constitutional standard
of judicial review. Under strict scrutiny, racial classifications are
constitutional only if they are narrowly tailored measures that further
a compelling governmental interest. As a result, the Commission
currently does not use race or ethnic origin as a factor in its
ownership diversification policies. In addition, Congress repealed the
tax certificate policy in 1995 as part of its budget approval process.
188. The Commission announced in October 2013 that it is conducting
a study of Hispanic television viewing. The study is the Commission's
first systematic examination of the Hispanic television market, a
market that implicates an important and growing segment of the nation's
population. It incorporates comprehensive data from the improved Form
323 biennial ownership reports, described below. Specifically, the
study will consider: (1) The impact of Hispanic-owned television
stations on Hispanic-oriented programming and Hispanic viewership in
selected local television markets; (2) the extent of Hispanic-oriented
programming on U.S. broadcast television; and (3) the role of digital
multicasting in increasing the amount of Hispanic-oriented programming.
b. Data Collection Concerning Minority and Female Ownership
189. Collection of Biennial Ownership Data. As explained in detail
in the NPRM, the Commission actively has sought in recent years to
improve its collection and analysis of broadcast ownership information.
Among other initiatives, the Commission has implemented major changes
to its Form 323 biennial ownership reports to improve the reliability
and utility of the data reported in the form, including data regarding
minority and female broadcast ownership.
3. Discussion
a. Remand Review of the Revenue-Based Eligible Entity Standard
190. Background. The Commission solicited comment in the NPRM on
whether the Commission should reinstate the pre-existing revenue-based
eligible entity definition to support the measures the Third Circuit
vacated and remanded as well as other measures the Commission may
implement in the future. In light of the Third Circuit's conclusion
that the Commission previously had failed to demonstrate a nexus
between this definition and its stated goal of promoting female and
minority ownership, the Commission asked commenters to supply any
available evidence demonstrating that a revenue-based definition would
support this specific policy objective. In addition, the Commission
sought comment on whether re-adoption of the revenue-based standard
would support its traditional diversity, localism, and competition
goals in other ways, particularly by enhancing ownership opportunities
for small businesses and other new entrants.
191. The Commission adopted its revenue-based eligible entity
definition in the 2002 Biennial Review Order as an exception to the
prohibition on the transfer of grandfathered station combinations that
violated then newly adopted local radio ownership limits.
[[Page 29041]]
The Commission ruled that licensees would be allowed to transfer
control of or assign a grandfathered combination to an eligible entity,
which was defined as any entity that would qualify as a small business
consistent with SBA standards for its industry grouping, based on
revenue. In addition, the Commission ruled that eligible entities would
be permitted, with limited restrictions, to sell existing grandfathered
combinations intact to new owners. The Commission adopted this transfer
policy as a means to promote diversity of ownership and observed more
generally that policies supporting the entry of new participants into
the broadcasting industry also may promote innovation in the field.
192. Thereafter, in the Diversity Order, the Commission concluded
that additional uses of the eligible entity definition would advance
its objectives of promoting diversity of ownership in the broadcast
industry by making it easier for small businesses and new entrants to
acquire licenses and attract the capital necessary to compete in the
marketplace with larger and better financed companies. In this regard,
the Commission stated that the adoption of new measures relying on this
definition would ``be effective in creating new opportunities for
broadcast ownership by a variety of small businesses and new entrants,
including those owned by women and minorities.'' The Commission further
observed that facilitating market entry by new entrants into the
broadcast industry would promote new programming services, particularly
those that are responsive to local needs, interests, and audiences
currently underserved. Thus, between 2002 and the Third Circuit's
remand of the measures relying on the eligible entity definition in
2011, the Commission used the revenue-based standard to support a range
of measures intended to encourage ownership diversity.
193. Several commenters, including AWM and NAB, supported
reinstatement of a revenue-based eligible entity definition and the
measures to which it previously applied as a means to diversify
broadcast ownership. UCC et al. recommended that, instead of abandoning
or repurposing the current eligibility definition, the Commission
should assess whether it has had any measurable effect on the ownership
of broadcast stations by minorities and women. As discussed in more
detail below, DCS believed that the Commission should adopt a revised
eligible entity definition that incorporates the Overcoming
Disadvantage Preference (ODP) standard proposed by the Commission's
Diversity Advisory Committee in 2010. According to DCS, no meaningful
impact on minority ownership will be achieved by relying on a
definition based solely upon the SBA's revenue limits for small
businesses.
194. Discussion. The Commission tentatively concludes that a
revenue-based eligible entity standard is an appropriate and worthwhile
approach for expanding ownership diversity whether or not the standard
is effective in promoting ownership of broadcast stations by women and
minorities. The Commission concedes that it does not have an
evidentiary record demonstrating that this standard specifically
increases minority and female broadcast ownership. The Commission
invites commenters to supplement the record with any new data or
analysis that may bear on this issue. Nonetheless, even in the absence
of such evidence, the Commission believes that reinstatement of the
revenue-based standard would serve the public interest by promoting
small-business participation in the broadcast industry. The Commission
believes that small-business applicants and licensees benefit from
flexible licensing, auction, transactions, and construction policies.
Often, small-business applicants have financing and operational needs
distinct from those of larger broadcasters. By easing certain
regulations for small broadcasters, the Commission believes that it
will promote its public interest goal of making access to broadcast
spectrum available to a broad range of applicants. The Commission also
believes that enabling more small businesses to participate in the
broadcast industry will encourage innovation and expand ownership and
viewpoint diversity.
195. The Commission seeks comment on these tentative conclusions.
The Commission also seeks input on other potential public interest
benefits or detriments that could result from reinstating the eligible
entity standard. It is interested in hearing from eligible entity
broadcasters that have used one or more of the measures adopted in the
Diversity Order. What measures were used? Did the eligible entity
definition facilitate entry into broadcast ownership? Was increased
financing and investment available to eligible entity broadcasters as a
result of the existence of the eligible entity standard or any of the
measures? The experiences of such broadcasters could aid the
Commission's assessment of this standard and the measures that utilize
the definition.
196. The Commission's records indicate that a large number of
Commission permittees and licensees previously have availed themselves
of policies based on the revenue-based eligible entity standard. In
particular, the Diversity Order afforded eligible entities that acquire
broadcast construction permits through an assignment from another
permittee additional time to construct their facilities under certain
circumstances, and many small businesses made use of this measure. FCC
Form 314 requires that assignees in broadcast transactions indicate
whether the assignee is an eligible entity as that term is defined in
the Diversity Order. Between the implementation of the eligible entity
definition and the suspension of the definition following the
Prometheus II decision, Commission staff processed approximately 247
Form 314 construction permit assignment applications in which the
assignee self-identified as an eligible entity. Of those 247
applications, approximately 132 (53.4 percent) of the eligible entities
have constructed their broadcast facilities and are now on the air. The
data also reveal that the largest group of broadcasters that availed
themselves of the eligible entity definition are noncommercial
educational broadcasters. Of the 247 total eligible entities, 160 (64.7
percent) are NCE permittees or licensees.
197. On the whole, the Commission believes that these data indicate
that the revenue-based eligible entity standard has been used
successfully by small firms and has aided their entry into, as well as
sustained their presence in, broadcasting in furtherance of the
Commission's public interest goals. While these data may not include
the total number of applicants and permittees that have availed
themselves of one or more of the measures to which the eligible entity
standard applied, this information nonetheless suggests that providing
additional time to construct broadcast facilities and other measures
have assisted market entry by small broadcasters.
198. The Commission also tentatively concludes that, if the
Commission reinstates the eligible entity definition, it would be
appropriate to readopt each measure relying on this definition that was
remanded in Prometheus II. These measures include: (1) Revision of
Rules Regarding Construction Permit Deadlines (The Commission proposes
that this exception to its strict broadcast station construction
policy, if reinstated by the Commission, would be limited to one 18-
month extension based on one assignment to an eligible entity.
[[Page 29042]]
Moreover, to ensure realization of its policy goals, in reviewing the
permit sale to the eligible entity, the Commission proposes to assess
the bona fides of both the arms-length structure of the transaction and
the assignee's status as an eligible entity.); (2) Modification of
Attribution Rule (In addition, pursuant to the new entrant bidding
credits available under the Commission's broadcast auction rules, the
modified EDP attribution standard was available to interest holders in
eligible entities that are the winning bidders in broadcast auctions.
The Commission proposes to reinstate this application of the modified
EDP standard.); (3) Distress Sale Policy; (4) Duopoly Priority for
Companies that Finance or Incubate an Eligible Entity; (5) Extension of
Divestiture Deadline in Certain Mergers; and (6) Assignment or Transfer
of Grandfathered Radio Station Combinations.
199. The Commission proposes to define an eligible entity as any
entity, commercial or noncommercial, that would qualify as a small
business consistent with SBA standards for its industry grouping, based
on revenue. The Commission proposes to include both commercial and
noncommercial entities within the scope of the term ``eligible entity''
to the extent that they otherwise meet the criteria of this standard.
The Commission previously applied the SBA standards to define eligible
entities, and the Commission seeks comment on whether those standards
should apply if it re-adopts the eligible entity standard. The
Commission requests comment on whether there is any reason to use
different eligible entity definitions for commercial and noncommercial
entities. For all SBA programs, a radio or television station with no
more than $35.5 million dollars in annual revenue currently is
considered a small business. To determine qualification as a small
business, the SBA considers the revenues of the parent corporation and
affiliates of the parent corporation, not just the revenues of
individual broadcast stations. The Commission proposes to do the same.
In addition, in order to ensure that ultimate control rests in an
eligible entity that satisfies the revenue criteria, the Commission
proposes that the entity must satisfy one of several control tests.
Specifically, the eligible entity would have to hold: (1) 30 percent or
more of the stock/partnership shares and more than 50 percent voting
power of the corporation or partnership that will hold the broadcast
license; (2) 15 percent or more of the stock/partnership shares and
more than 50 percent voting power of the corporation or partnership
that will hold the broadcast licenses, provided that no other person or
entity owns or controls more than 25 percent of the outstanding stock
or partnership interest; or (3) more than 50 percent of the voting
power of the corporation if the corporation that holds the broadcast
licenses is a publicly traded company.
200. The Commission seeks comment on the costs and benefits of the
proposal to adopt a revenue-based eligible entity definition and the
measures relying on this definition as proposed herein. To the greatest
extent possible, commenters should quantify the expected costs or
benefits of the proposals and provide detailed support for any actual
or estimated values provided, including the source of such data and/or
the method used to calculate reported values.
b. Remand Review of a Race- or Gender-Conscious Eligible Entity
Standard
(i) Background
201. The Third Circuit in Prometheus II instructed the Commission
to address on remand the other eligible entity definitions it had
considered when the revenue-based definition was adopted. Specifically,
in the Diversity Third FNPRM, the Commission sought comment on the
possibility of replacing the revenue-based standard with a standard
based on the SBA's definition of SDBs used for purposes of its Business
Development Program. Pursuant to the SBA's program, persons of certain
racial or ethnic backgrounds are presumed to be disadvantaged; all
other individuals may qualify for the program if they can show by a
preponderance of the evidence that they are disadvantaged. In response
to the court's directive, the Commission sought comment in the NPRM on
the benefits and risks of adopting an SDB standard to support the
various ownership diversity measures remanded by the court. The
Commission also solicited input on other proposals that were included
in the Diversity Third FNPRM as well as any other race- or gender-
conscious standards the Commission should consider.
202. Under the SBA's 8(a) Business Development Program, certain
individuals are presumed to be socially disadvantaged: African-
Americans, Hispanic Americans, Asian Pacific Americans, Native
Americans (American Indians, Eskimos, Aleuts, or Native Hawaiians), and
Subcontinent Asian Americans. Additionally, the SBA permits the
applicant to show through a ``preponderance of the evidence'' social
disadvantage due to gender, physical handicap, long-term residence in
an environment isolated from the mainstream of American society, or
other similar causes.
203. To the extent an SDB standard includes race-specific criteria,
it would be subject to strict constitutional scrutiny. As explained in
the NPRM, rules and policies that operate based on race, ethnic origin,
or gender are subject to an exacting constitutional analysis. All race-
based classifications imposed by the government ```must be analyzed by
a reviewing court under strict scrutiny' . . . [and] are constitutional
only if they are narrowly tailored to further compelling governmental
interests.'' The U.S. Supreme Court to date has accepted only two
justifications for race-based action as compelling for purposes of
strict scrutiny: student body diversity in higher education and
remedying past discrimination. Gender-based classifications are
evaluated under an intermediate standard of review and will be upheld
as constitutional if the government's actions are deemed substantially
related to the achievement of an important objective. In the NPRM,
commenters were asked to explain in detail, based on relevant case law,
whether and how the Commission could overcome the application of strict
or intermediate constitutional scrutiny to any race- or gender-based
standard. The Commission sought data and explanation for whether and
how proposals could be supported and applied in a consistent and
rational manner. In particular, the Commission solicited input on
whether the Commission could demonstrate a compelling governmental
interest in fostering viewpoint diversity, redressing past
discrimination, or some other interest and, if so, whether policies
based on a race-conscious standard would be a narrowly tailored means
of addressing any such interest.
204. The Commission acknowledged in the NPRM that its ownership
data and other empirical evidence in the record at that time likely
were insufficient to support the adoption of a race- or gender-based
standard. In recognition of the fact that such data are not by
themselves sufficient to satisfy the constitutional hurdle that has
been established for race- and gender-based measures, the Commission
asked in the NPRM that commenters supply any relevant evidence,
including peer-reviewed studies, which could assist in supporting a
race-conscious approach. With respect to any proposals for a gender-
conscious standard, commenters similarly were asked to address the
[[Page 29043]]
relevant constitutional standards and to provide any available
empirical support.
205. A number of commenters supported the adoption of a race- or
gender-conscious standard as a means to increase minority and female
ownership. Based on the Third Circuit's instructions in Prometheus II,
commenters asserted that the Commission must fully consider the
feasibility of adopting an SDB standard in this proceeding and that the
Commission is not permitted to defer consideration of race- or gender-
based action until a future proceeding. Some commenters also asserted
that, prior to the conclusion of this proceeding, the Commission must
provide any further data and complete any additional empirical studies
that may be necessary to evaluate or justify the adoption of an SDB
standard. Similarly, several commenters asked the Commission not to
make any changes to any of the media ownership rules until it collects
and analyzes data on broadcast ownership by women and minorities in a
manner that they view as consistent with the court's remand of the
eligible entity standard.
206. Several commenters further asserted that Prometheus II not
only obligates the Commission to consider fully the feasibility of
implementing a race-conscious eligible entity standard in this
proceeding, but also requires the Commission to adopt such a standard.
NABOB maintained that in this proceeding the Commission ``must
establish policies, similar to those it had prior to the Adarand
decision, which were designed to specifically increase minority
ownership of broadcast stations.'' NABOB also stated that ``[f]ailure
to adopt a policy to promote minority ownership in this proceeding is
contrary to the mandate of the Third Circuit in the Prometheus II
case.'' NABOB argued that ``the Commission is obligated by the
Prometheus II decision to continue this proceeding until it has
completed the studies required and adopted a policy to promote minority
ownership.'' In addition, NABOB asserted that if the Commission does
not take these actions in the instant proceeding, then it must, at a
minimum, provide a specific timetable for developing a policy to
promote minority ownership.
207. Advocates of a race- or gender-conscious standard cited the
Supreme Court's rulings in Grutter v. Bollinger and Metro Broadcasting
v. FCC as precedent for establishing a compelling interest in
facilitating broadcast ownership diversity
208. Some commenters suggested that the Commission currently lacks
evidence sufficient to implement a race- or gender-targeted standard.
In light of this perceived deficiency, DCS suggested that the
Commission promptly implement an ODP standard, which it described as
race- and gender-neutral, while the Commission develops the record
necessary to adopt a constitutionally sustainable race-conscious
definition. Similarly, UCC et al. argued that ``there are problems with
the Commission's data collection and analysis that need to be fixed''
prior to the adoption of race- or gender-conscious measures. UCC et al.
further argued that, because ``the Commission will have to show that it
tried race-neutral solutions and found them insufficient'' in order to
``defend against a constitutional challenge to any future policy that
uses race as a factor,'' the Commission should move forward in this
proceeding to ``evaluat[e] whether its current race- and gender-neutral
policies designed to promote opportunities for minorities and women are
in fact working as intended.'' NHMC et al. opined that ``any
consideration of [SDBs] is premature'' until the Commission resolves
the existing problems with its data and analysis and that any SDB
proposal ``would lack requisite supporting data and analysis necessary
to withstand scrutiny from the court based on the current record.''
(ii) Discussion
209. The Commission tentatively concludes that it does not have
sufficient evidence at this time to satisfy the constitutional
standards necessary to adopt race- or gender-conscious measures. In
evaluating the possibility of adopting an SDB standard, or any other
race-conscious standard, the first question the Commission must
consider is whether the standard could be justified by a ``compelling
governmental interest.'' Assuming that such an interest could be
established, the Commission then would have to be able to demonstrate
that the application of the race-conscious standard to specific
measures or programs would be ``narrowly tailored'' to further that
interest. The Commission discusses below its preliminary approach to
this analysis. While the Commission tentatively finds that a reviewing
court could deem the Commission's interest in promoting a diversity of
viewpoints compelling, the Commission believes that it does not have
sufficient evidence at this time to demonstrate that adoption of race-
conscious measures would be narrowly tailored to further that interest.
The Commission also discusses the constitutional analysis that would
apply if it sought to adopt gender-conscious measures based on that
interest. Further, the Commission tentatively finds that it does not
have sufficient evidence to establish a compelling interest in
remedying past discrimination. The Commission seeks comment on both its
preliminary analysis and its tentative findings.
210. As a threshold matter, the Commission rejects commenters'
arguments that the Commission is required to adopt an SDB standard or
another race-conscious eligible entity standard in this proceeding in
light of the court's instructions in Prometheus II. The Commission also
disagrees with arguments that the Commission is not permitted to
conclude this proceeding until it has completed any and all studies or
analyses that may enable it to take such action in the future
consistent with current standards of constitutional law. The Commission
intends to follow the Third Circuit's direction that the Commission
consider adopting an SDB definition before completion of this
proceeding and evaluate the feasibility of adopting a race-conscious
eligibility standard based on an extensive analysis of the available
evidence. The Commission does not believe that the Third Circuit
intended to prejudge the outcome of the Commission's analysis of the
evidence or the feasibility of implementing a race-conscious standard
that would be consistent both with applicable legal standards and the
Commission's practices and procedures.
(i) Constitutional Analysis of Commission Interest in Enhancing
Viewpoint Diversity
211. Compelling Governmental Interest Analysis. In the NPRM, the
Commission reaffirmed its longstanding commitment to advancing a
diversity of viewpoints. The Commission noted that it ``has relied on
its media ownership rules to ensure that diverse viewpoints and
perspectives are available to the American people in the content they
receive over the broadcast airwaves,'' and stated that ``media
ownership limits are necessary to preserve and promote viewpoint
diversity.'' In this regard, the Commission further explained that it
has ``regulated media ownership as a means of enhancing viewpoint
diversity on the premise that diffuse ownership among media outlets
promotes the presentation of a larger number of viewpoints in broadcast
content'' than otherwise would be available. The NPRM also noted that,
in addition to viewpoint diversity, the Commission has considered the
impact of its rules on program, outlet, source, and minority and female
ownership diversity.
[[Page 29044]]
212. As the Third Circuit observed in Prometheus II, the Supreme
Court long has recognized the Commission's interest in broadcast
diversity. In Metro Broadcasting, the Supreme Court held, based on the
application of intermediate constitutional scrutiny, that ``the
interest in enhancing broadcast diversity is, at the very least, an
important governmental objective.'' In reaching this determination, the
Court stated that ``[s]afeguarding the public's right to receive a
diversity of views and information over the airwaves is . . . an
integral component of the FCC's mission'' and that the Commission's
```public interest' standard necessarily invites reference to First
Amendment principles.'' That opinion was issued prior to Adarand,
however, which overruled the application of intermediate scrutiny in
Metro Broadcasting. Notably, Adarand did not disturb other aspects of
Metro Broadcasting, including the recognition of an important
governmental interest in broadcast diversity. Nonetheless, in the
aftermath of Adarand, it is clear that the Commission would have to
establish that its interest in promoting diversity is not only
important, but compelling, in order to adopt a race-conscious standard.
In addition, the Supreme Court held in 2003 in Grutter v. Bollinger
that diversity is a compelling governmental interest in the realm of
higher education. That finding was based on the Court's determination
that ``universities occupy a special niche in our constitutional
tradition'' and on substantial evidence, including numerous expert
studies and reports, regarding the educational benefits that flow from
student body diversity.
213. The Commission believes that its interest in promoting a
diversity of viewpoints could be deemed sufficiently compelling to
survive strict scrutiny analysis. In a different context, the Supreme
Court has recognized viewpoint diversity as an interest ``of the
highest order.'' In addition, the Supreme Court in Metro Broadcasting
recognized similarities between broadcast diversity and the interest in
promoting student body diversity the Court later recognized as
compelling in Grutter: ``Just as a `diverse student body' contributing
to a ```robust exchange of ideas''' is a `constitutionally permissible
goal' on which a race-conscious university admissions program may be
predicated, the diversity of views and information on the airwaves
serves important First Amendment values.'' Other similarities between
Metro Broadcasting and Grutter further strengthen the conclusion that
viewpoint diversity may qualify as a compelling interest. In both
cases, the Supreme Court recognized that there were important First
Amendment interests at stake and acknowledged that diversity was
central to the relevant institution's mission. In addition, just as the
Grutter Court acknowledged the longstanding recognition of education's
``fundamental role'' in American society, the Court long has recognized
that broadcasting is ``an essential part of the national discourse on
subjects across the whole broad spectrum of speech, thought, and
expression.''
214. The Commission notes, however, that some decisions applying
strict scrutiny have cast doubt on the likelihood that courts would
accept the Commission's interest in viewpoint diversity as the basis
for race-conscious action. In 2007, the Supreme Court declined to
recognize a compelling interest in diversity outside of ``the context
of higher education.'' Moreover, the DC Circuit held in Lutheran
Church-Missouri Synod v. FCC that broadcast diversity does not rise to
the level of a compelling governmental interest. The DC Circuit
reasoned that ``even the majority'' of the Supreme Court ``who thought
the government's interest `important' [in Metro Broadcasting] must have
concluded implicitly that it was not `compelling'; otherwise, it is
unlikely that the majority would have adopted a wholly new equal
protection standard to decide the case as it did.'' That reading is not
compelled, however. The Metro Broadcasting Court actually stated that
``enhancing broadcast diversity is, at the very least, an important
governmental objective,'' thereby leaving open the possibility that
broadcast diversity might be a compelling interest.
215. The Commission seeks comment on this preliminary analysis,
including any other factors or relevant precedent that it should
consider. The Commission also seeks comment on other relevant interests
that a reviewing court might recognize as compelling and the analysis
of such interests under applicable judicial precedent.
216. Narrow Tailoring Analysis. Even assuming that the Commission
were able to establish a compelling interest in diversity, it still
would be required to demonstrate that the adoption of a race-conscious
SDB standard, as well as the programs to which it would apply, would be
``narrowly tailored'' to further that interest. As the Supreme Court
has stated, ``[e]ven in the limited circumstance when drawing racial
distinctions is permissible to further a compelling state interest,
government is still `constrained in how it may pursue that end: [T]he
means chosen to accomplish the [government's] asserted purpose must be
specifically and narrowly framed to accomplish that purpose.'' The
Commission tentatively concludes that the evidence in the record at
this time does not satisfy this requirement for two reasons. First, the
Commission tentatively finds that it does not demonstrate that the
connection between minority ownership and viewpoint diversity is direct
and substantial enough to satisfy strict scrutiny. Second, it believes
that the record does not reveal a feasible means of carrying out the
type of individualized consideration the Supreme Court has held is
required for a diversity-based program to pass constitutional muster.
217. The Commission disagrees with commenters who argued that a
nexus between minority ownership and viewpoint diversity sufficient to
satisfy strict scrutiny already has been established and accepted by
the Supreme Court in Metro Broadcasting. The Commission believes that
empirical evidence of a stronger nexus between minority ownership and
broadcast diversity than was demonstrated in Metro Broadcasting would
be required for a race-conscious SDB standard to withstand strict
scrutiny. In finding that the Commission's minority ownership policies
were substantially related to achieving broadcast diversity, the
Supreme Court in Metro Broadcasting deferred to the judgment of
Congress and the Commission, as corroborated by various social science
studies. As stated above, however, the Supreme Court since has
repudiated Metro Broadcasting's application of intermediate scrutiny,
and under strict scrutiny, the Commission's judgment regarding the
relationship between minority ownership and broadcast diversity is
unlikely to receive the same deference. In her dissent in Metro
Broadcasting, Justice O'Connor argued that the Court should have
applied strict scrutiny and that, under such scrutiny, the available
evidence fell far short of the requisite direct and substantial
connection, establishing at best ``the existence of some rational
nexus.'' Subsequent developments in constitutional jurisprudence
further suggest that empirical evidence of a stronger nexus between
broadcast diversity and minority ownership than was shown in Metro
Broadcasting would be required to withstand strict scrutiny.
218. As explained below, there is a significant amount of evidence
in this proceeding regarding the role and status of minorities in the
broadcast industry.
[[Page 29045]]
Although this evidence contributes valuable information to the record
in this proceeding and informs the Commission's broader review of the
broadcast ownership rules, it tentatively concludes that the evidence
in the record would not satisfy strict scrutiny. Commenters are invited
to address the Commission's tentative conclusions and evaluations of
this evidence. In addition, the Commission invites commenters to
provide any additional evidence that may be relevant to this analysis.
With regard to any such evidence, commenters should explain whether
and, if so, how the evidence would bolster the Commission's ability to
satisfy the requisite narrow tailoring standard.
219. The two recent studies in the record that directly address the
impact of minority ownership on viewpoint diversity are Media Ownership
Studies 8A and 8B. Media Ownership Study 8A focuses on the relationship
between local media ownership and viewpoint diversity in local
television news. The authors calculate a measure of viewpoint diversity
based on program audience data and then analyze the relationship of
this measure to certain aspects of the Commission's broadcast ownership
rules, finding either that the relationship is not statistically
distinguishable from zero or very small in absolute magnitude. In
particular, this study finds that the relationship between minority
ownership and viewpoint diversity is not statistically distinguishable
from zero. As a result, this study does not appear to provide evidence
that the Commission could rely upon to justify race-conscious action.
220. Media Ownership Study 8B examines viewpoint diversity in local
television news through an analysis of television news transcripts. In
general, the authors find very little evidence of a robust relationship
between available measures of market structure and viewpoint diversity,
perhaps due to the fact that the measures of market structure are, in
the words of the authors, ``rather blunt.'' With respect to minority
ownership in particular, the authors find almost no statistically
significant relationship between such ownership and their measure of
viewpoint diversity. Notably, the study does find a positive
relationship between minority ownership and coverage of minority
politicians, which suggests that minority-owned stations may focus on
certain types of minority-oriented content more than other stations and
which could be viewed as a measure of one form of viewpoint diversity.
Despite this finding, the Commission tentatively concludes that Media
Ownership Study 8B does not provide sufficient evidence to satisfy the
requirements of strict scrutiny. First, the effects of minority
ownership revealed in the study are quite limited overall, and minority
ownership does not have an effect on most variables and disparity
measures analyzed. Second, in the vast majority of cases the authors
study, the relationship between minority ownership and viewpoint
diversity is not statistically different from zero.
221. Other studies in the record examine the relationship between
minority ownership of broadcast outlets and other aspects of the
Commission's diversity goal, such as programming or format diversity.
The Commission does not believe that evidence regarding program or
other forms of diversity is as relevant as evidence regarding viewpoint
diversity for the purpose of establishing narrow tailoring to a
compelling interest. The Commission tentatively concludes that, of any
diversity-related interest that the Commission has authority to
advance, viewpoint diversity currently is most likely to be accepted as
a compelling governmental interest under strict scrutiny. Although the
Metro Broadcasting Court did not define broadcast diversity with this
level of precision, a court applying strict scrutiny is likely to
require such precision, and the Supreme Court's prior recognition of
broadcast diversity as an interest ``of the highest order'' seems to
pertain to viewpoint diversity. Media Ownership Study 7 assesses the
relationship between ownership structure and the provision of radio
programming, as measured by program formats, to minority (African-
American and Hispanic) audiences between 2005 and 2009. The study finds
that minority audiences have different format tastes than white
audiences and that minority-owned stations disproportionately cater to
these tastes. In addition, the regression analyses included in Media
Ownership Study 7 show that, on a market-wide basis, the presence of
minority-owned stations increases the amount of minority-targeted
programming and that the availability of minority-targeted formats
attracts more minorities to listening. The study also concludes that
most stations with minority-targeted formats are not minority-owned and
that group ownership, including particularly ownership by non-minority
owners, within a local market allows for greater format
diversification. Because this study is focused on format diversity and
shows that non-minority stations provide a significant amount of
minority-targeted programming, the Commission tentatively finds that it
would have limited value as a justification for adopting race-conscious
measures.
222. In addition to the Media Ownership Studies commissioned for
this proceeding, commenters have submitted a number of studies into the
record that analyze issues related to minority broadcast ownership. The
Commission discusses those studies that appear to relate most closely
to the impact of minority ownership on its diversity goals. Commenters
are invited to supplement this discussion with additional views of the
relevance of these studies and to submit additional evidence that may
be pertinent to the Commission's analysis. For example, ``Media
Ownership Matters: Localism, the Ethnic Minority News Audience and
Community Participation,'' a 2006 study commissioned by the Benton
Foundation, finds that there is a ``nexus'' between minority ownership
and service to underserved communities. This study used ethnographic
and survey research to discern patterns in news consumption among
minorities in the Washington, DC, metropolitan area. It finds that of
the 18 percent of minority listeners who reported that they prefer to
obtain news programming from radio, a majority of those listeners
preferred minority-owned stations. While this finding is informative,
the Commission tentatively finds that the evidentiary value of this
study in the context of a strict scrutiny analysis would be limited
because it covered only three neighborhoods in one metropolitan area.
In addition, the study does not provide any statistical analysis of or
adjust for factors aside from minority ownership that may explain this
result. Additionally, this finding represents only a small percentage
of the individuals the authors surveyed (i.e., a majority of 18 percent
of the listeners surveyed). Furthermore, the study does not analyze the
news content on minority-owned radio stations or provide analysis
comparing such content to the news content on other stations.
223. In sum, the Commission believes that the body of evidence
contained in the recent Media Ownership Studies and the studies
submitted in the record by commenters do not demonstrate the ``nearly
complete'' or ``tightly bound'' nexus between diversity of viewpoint
and minority ownership that would be required to justify a race-based
eligibility entity definition. Nevertheless, the Commission believes
that the studies strengthen the evidence
[[Page 29046]]
of a link between broadcast diversity and minority ownership. They also
begin to answer questions raised by Justice O'Connor's Metro
Broadcasting dissent, such as how to define minority programming and
whether such programming is underrepresented, that the Supreme Court
found it unnecessary to address under intermediate scrutiny. In
particular, existing studies show that minority groups have distinct
preferences, and that expanding minority ownership increases the amount
of programming targeted to such preferences. As stated above, however,
the evidence largely concerns program or format diversity rather than
the viewpoint diversity that the Supreme Court has recognized as an
interest ``of the highest order'' and that the Commission believes is
most central to First Amendment values. Many of the studies also
support only limited conclusions and reflect a need for further
analysis. Given the Commission's tentative assessments of these studies
and other data, it cannot conclude at this time that the evidence
demonstrates a sufficient nexus between minority ownership of broadcast
stations and viewpoint diversity to withstand strict scrutiny.
224. In response to NABOB's request that the Commission provide a
specific timetable for completing future studies necessary to adopt a
policy to promote minority ownership, the Commission has identified in
detail in this Further Notice of Proposed Rulemaking the studies in the
current record that it have found establish useful information
regarding the relationship between viewpoint diversity and minority and
female ownership of broadcast stations. In addition, the Commission has
outlined ongoing and additional efforts to achieve important further
analysis of the status and impact of minority ownership, including, but
not limited to, the studies being conducted by OCBO and the Hispanic
television viewing study discussed above. In addition, as indicated in
the NPRM, Form 323 ownership data will continue to be collected and
analyzed and considered in connection with future media ownership
reviews. The process for doing so will continue to be refined and
improved. The Commission cannot firmly establish herein a timetable for
release of future biennial ownership data or the completion of studies,
examinations, or assessments. Commenters may submit additional studies
that the Commission should consider in its analysis.
225. In addition, the Commission tentatively finds that the record
in this proceeding does not reveal a feasible means of carrying out the
type of individualized consideration the Supreme Court has held is
required to pass constitutional muster under strict scrutiny. Where
race-conscious governmental action is concerned, the Supreme Court
previously has found that narrow tailoring requires individualized
review, serious, good-faith consideration of race-neutral alternatives,
minimal adverse impact on third parties, and temporal limits. In
particular, the Court found in Grutter that narrow tailoring demands
that race be considered ``in a flexible, non-mechanical way'' alongside
other factors that may contribute to diversity and that consideration
of race was permissible only as one among many disparate factors in
order to evaluate individual applicants for admission to an educational
institution. The manner in which the Commission allocates broadcast
licenses is different in many important respects from university
admissions, and the Commission believes that implementing a program for
awarding or affording preferences related to broadcast licenses based
on the ``individualized review'' required in other contexts would pose
a number of administrative and practical challenges for the Commission.
The Supreme Court has held, however, that ``[t]he fact that the
implementation of a program capable of providing individualized
consideration might present administrative challenges does not render
constitutional an otherwise problematic system.'' The Commission seeks
comment on its tentative conclusion and potential ways in which an
individualized review process feasibly, effectively, and efficiently
could be incorporated into any race-conscious measures adopted by the
Commission.
226. Commenters generally did not suggest criteria, other than race
and ethnic origin, that could be considered in an individualized,
holistic evaluation system like that approved in Grutter. DCS
recommended that the Commission replace its revenue-based eligible
entity definition with an ODP standard as a race-neutral means of
advancing ownership diversity. The Commission notes that it is not
entirely clear whether the proposed ODP standard would be subject to
heightened constitutional scrutiny. Moreover, the Commission believes
that it does not have a sufficient record at present on a number of
issues that would need to be resolved prior to the implementation of an
ODP standard. Among other issues, no commenter provided input on (1)
what social or economic disadvantages should be cognizable under an ODP
standard, (2) how the Commission could validate claims of eligibility
for ODP status, (3) whether applicants should bear the burden of
proving specifically that they would contribute to diversity as a
result of having overcome certain disadvantages, (4) how the Commission
could measure the overcoming of a disadvantage if an applicant is a
widely held corporation rather than an entity with a single majority
shareholder or a small number of control persons, and (5) how the
Commission could evaluate the effectiveness of the use of an ODP
standard. Even if the Commission could develop an adequate record on
these issues, it is concerned that it may lack the resources to conduct
such individualized reviews. Moreover, the Commission would have to
walk a very fine line in order to fully evaluate the potential
diversity contributions of individual applicants without running afoul
of First Amendment values. The Commission is concerned that the type of
individualized consideration that would be required under an ODP
standard could prove to be administratively inefficient, unduly
resource-intensive, and inconsistent with First Amendment values. The
Commission seeks comment on these issues and its foregoing analysis
regarding the feasibility of adopting an ODP standard.
227. Analysis of Gender-Based Diversity Measures. The Supreme Court
has held that gender-based classifications must satisfy intermediate
scrutiny and, as such, must be substantially related to the achievement
of an important objective. As noted above, the Supreme Court found in
Metro Broadcasting, based on the application of intermediate
constitutional scrutiny, that ``the interest in enhancing broadcast
diversity is, at the very least, an important governmental objective.''
Applying intermediate scrutiny, the DC Circuit overturned the
Commission's former gender preference policy in Lamprecht v. FCC.
Recognizing that Metro Broadcasting established broadcast diversity as
an important government objective, the DC Circuit focused on its
relationship to female ownership. The court stated that the existence
of such a relationship rests on several assumptions, but chose to
address only one: that women who own broadcast stations are more likely
than white men to broadcast ``women's programming.'' The court
concluded that the only available study failed to establish a
statistically meaningful link between ownership by women and
[[Page 29047]]
programming of any particular kind. At this time, the Commission cannot
conclude that the record evidence establishes a relationship between
the Commission's interest in viewpoint diversity and the ownership of
broadcast stations by women that would satisfy intermediate scrutiny.
While the Commission acknowledges that the data show that women-owned
stations are not represented in proportion to the presence of women in
the overall population, the Commission does not believe that the
evidence available at this time reveals that the content provided via
women-owned broadcast stations substantially contributes to viewpoint
diversity in a manner different from other stations or otherwise varies
significantly from that provided by other stations. The only study
included in the record of this proceeding that analyzes the
relationship between female ownership and broadcast content is the
Turner Radio Study, which finds that markets that contain radio
stations with either female or minority ownership are more likely to
broadcast certain progressive and conservative talk shows. This study
does not appear to demonstrate a causal relationship between female or
minority ownership and the diversity of viewpoints or content
available, as it does not control for other factors that may explain
both the presence of a greater diversity of talk shows and a higher
percentage of female or minority ownership in certain markets. In any
event, the Commission tentatively concludes that this study is too
limited in scope to establish a substantial relationship between female
ownership and viewpoint diversity. Other studies in the record
establish that female ownership of broadcast stations is well below the
proportion of women in the population, a fact that is not in dispute in
this proceeding. Because these studies do not indicate that increased
female ownership will increase viewpoint diversity, the Commission
believes that they do not provide a rationale under the foregoing
analysis for gender-based diversity measures. However, the Commission
seeks comment on this preliminary determination as well as any relevant
evidence regarding this issue.
(ii) Constitutional Analysis of the Commission's Interest in Remedying
Past Discrimination
228. As an alternative to establishing a compelling interest in
viewpoint diversity, race- or gender-based measures are permissible as
a remedy to past or present discrimination. To justify race-based
remedial measures, the Commission would have to establish a ``strong
basis in evidence'' of discrimination, i.e., evidence ``approaching a
prima facie case of a constitutional or statutory violation.'' To
substantiate this approach, the Commission would have to identify, with
specificity, evidence of public discrimination within the broadcast
industry or private discrimination in which the government acted as a
``passive participant.'' Less evidence is required for gender-based
measures, although an ``exceedingly persuasive justification'' is still
necessary. The Commission never has asserted a remedial interest in
race- or gender-based broadcast regulation, and courts primarily have
considered such measures in the context of public contracting
decisions. Most commenters in this proceeding have not focused on
establishing a case for remedial measures, although DCS argued that
``remedying the present effects of past discrimination provides a
compelling interest.'' While some evidence supports a finding of
discrimination in the broadcast industry, the Commission tentatively
concludes that it is not of sufficient weight to satisfy constitutional
standards. The Commission seeks comment on the preliminary analysis
described below, including any other relevant precedent or data it
should consider.
229. As the Commission concedes in this Further Notice of Proposed
Rulemaking, the proportions of minorities and females that own
broadcast stations are lower than their proportions in the general
population. An inference of discrimination may arise ``when there is a
significant statistical disparity between the number of qualified
minority contractors willing and able to perform a particular service
and the number of such contractors actually engaged.'' But ``[w]hen
special qualifications are required to fill particular jobs,
comparisons to the general population (rather than to the smaller group
of individuals who possess the necessary qualifications) may have
little probative value.'' Thus, the raw numbers reflecting existing
levels of minority or female ownership by themselves are not sufficient
to overcome the constitutional hurdle that has been established for
race- and gender-based remedial measures. In Croson, the Supreme Court
warns against the ``completely unrealistic assumption that minorities
will choose a particular trade in lockstep proportion to their
representation in the local population.'' There is no evidence in the
current record demonstrating a statistically significant disparity
between the number of minority- and women-owned broadcast stations and
the number of qualified minority and women-owned firms. Commenters are
asked to address whether evidence of such a disparity is ascertainable,
particularly given the low number of minority and women-owned firms.
Based on relevant precedent, the Commission tentatively concludes that
it cannot demonstrate a compelling interest in remedying discrimination
in the Commission's licensing process in the absence of such evidence.
The Commission seeks comment on this tentative conclusion.
230. Anecdotal or historical evidence of discrimination also can
establish that a strong basis in evidence exists for remedial measures,
although such evidence generally is helpful only when it reinforces
statistical evidence. DCS argued that a 2000 study comprising more than
100 interviews demonstrates that broadcast licensing procedures present
challenges to minority and female access to spectrum and licenses. In
the Historical Study, minorities and women repeatedly report
encountering discrimination in their efforts to obtain capital to
finance their broadcast and wireless businesses, secure advertising on
their stations, gain exposure and experience to qualify for ownership
through employment opportunities, and learn of ownership opportunities.
The Historical Study reports no evidence, however, of actual
discrimination by the Commission.
231. DCS also argued that another 2000 study establishes that
barriers inhibiting minority and female access to capital amount to
industry discrimination in which the government has passively
participated. The Capital Markets Study found that both minority- and
women-owned businesses were significantly less likely to obtain
wireless licenses in auctions than were non-minority businesses and
that among current broadcast licensees, minority (but not female)
applications for debt financing were significantly less likely to be
approved than non-minority applications, and minority applicants paid
higher interest rates. The study also contains a literature survey of
empirical studies using data over two decades, which is not specific to
the broadcast industry, finding or suggesting that racial
discrimination exists in U.S. capital markets in both denial rates and
interest rates. However, the study indicates that its results are not
fully conclusive and emphasizes the need for further analysis to
control for potentially important variables. Also, the focus on
wireless auctions and other
[[Page 29048]]
non-broadcast industry information makes it less probative of
discrimination in the broadcast licensing process. Further, the study
does not address the secondary market for licenses.
232. While the evidence offered is informative on these subjects,
the Commission preliminarily finds that it is insufficient to satisfy
the constitutional requirements to support a race- or gender-based
remedial action. In this regard, comparison is instructive to Adarand
v. Slater, a leading public contracting case in which the Tenth Circuit
found the requisite strong basis in evidence. The court found
``significant'' evidence of public discrimination in that case: the
record contained 39 studies revealing an aggregate 13 percent disparity
between minority business availability and utilization in government
contracting, a figure which the court found to be ``significant,'' if
not overwhelming, evidence of discrimination. Nevertheless, the court
relied principally on evidence of private discrimination. The evidence
was similar in nature to that discussed above--denial of access to
capital, as well as the existence of racially exclusionary ``old boy''
networks and union discrimination that prevented access to the skills
and experience needed to form a business--but greater in extent and
weight. The court had the benefit of a Department of Justice report,
prepared in response to the Supreme Court's decision in Adarand,
summarizing 30 congressional hearings and numerous outside studies
providing both statistical and anecdotal evidence of such private
discrimination. Here, in contrast, the only statistical evidence
pertains to discriminatory access to capital. The rest of the evidence
available at this time is anecdotal and, therefore, of more limited
value. Thus, it tentatively appears that the existing evidence of past
discrimination in this case is not nearly as substantial as that
accepted by courts in other contexts.
c. Additional Proposals Related to Minority and Female Ownership
233. As explained above, the Commission tentatively concludes that,
if it reinstate the revenue-based eligible entity standard, it also
would be appropriate to readopt each of the regulatory policies the
Third Circuit remanded in Prometheus II that rely on this standard.
Several commenters asked the Commission to consider additional measures
that they believed would foster ownership diversity. For example, DCS
submitted 47 proposals that it claimed would ``address the barriers to
diverse participation in media ownership and . . . increase minority
and women participation in broadcasting.'' Although DCS advocated
adoption of all of these proposed measures, it focused on four that it
believed the Commission ``should immediately begin implementing.''
These recommendations include: (1) Relaxing the foreign ownership
limitations under Section 310(b)(4) of the Communications Act; (2)
encouraging Congress to reinstate and update tax certificate
legislation; (3) granting waivers of the local radio ownership rule to
parties that ``incubate'' qualified entities; and (4) migrating AM
radio to VHF Channels 5 and 6. In addition, AWM asked the Commission to
consider several actions to address the ``historic underrepresentation
of women'' in ownership of broadcast stations and managerial positions
in the broadcast industry.
234. As discussed below, the Commission has implemented some of
these recommendations. Because the Commission believes that the
remainder of these proposals would raise public interest concerns, may
not provide meaningful assistance to the intended beneficiaries, or are
outside of the proper scope of this broadcast ownership proceeding, the
Commission tentatively concludes that it should not adopt them here.
The Commission seeks comment on this tentative conclusion.
235. Foreign Ownership Restrictions. DCS recommended that the
Commission relax its policies under Section 310(b)(4) of the
Communications Act, which restricts foreign ownership and voting
interests in entities that control Commission licensees. DCS claimed
that this action would provide ``U.S. broadcasters, particularly
minorities, who have difficulty access[ing] capital'' with ``access to
new sources of capital that are not available to them under the current
regulatory paradigm.'' Additionally, in a separate proceeding a broad
coalition of broadcasters, public interest groups, and media brokers
(Coalition for Broadcast Investment or CBI) sought clarification of the
Commission's policies and procedures in reviewing applications or
transactions that propose foreign broadcast ownership that would exceed
the 25 percent benchmark contained in Section 310(b)(4). The Media
Bureau issued a public notice inviting comment on the CBI Request. The
majority of comments filed in response to the public notice supported
CBI's position.
236. In November 2013, the Commission issued a Declaratory Ruling
(78 FR 75563, Dec. 12, 2013, FCC 13-150, rel. Nov. 14, 2013) clarifying
that the plain language of Section 310(b)(4) provides the Commission
the authority to review applications for approval of foreign investment
in the controlling U.S. parent of a broadcast licensee above the 25
percent benchmark on a case-by-case basis. The Commission stated that
such applications may be granted unless it finds that a denial will
serve the public interest. In issuing the Declaratory Ruling, the
Commission observed the range of changes in the media landscape and
marketplace since enactment of the foreign ownership restriction and
noted that limited access to capital is a concern in the broadcast
industry, particularly for small entities, including entities owned by
minorities and women. The Commission further noted that a clear
articulation of its ``approach to Section 310(b)(4) in the broadcast
context has the potential to spur new and increased opportunities for
capitalization for broadcasters, and particularly for minority, female,
small business entities, and new entrants.''
237. Tax Certificate Legislation. DCS also urged the Commission to
``continue to support and encourage Congress to reinstate and expand''
the former tax certificate policy, which permitted firms to defer
capital gains taxation on the sale of media properties to minorities.
It also suggested that an updated tax certificate policy could address
previous congressional concerns if it were race-neutral, encompassed
both media and telecommunications entities, and included limits on the
size of eligible transactions and programs. The Commission agrees that
tax deferral legislation could prove an effective means to enhance
broadcast ownership diversity. The Commission's most recent Section 257
Report to Congress addresses the benefits of tax certificate
legislation to ownership diversity and includes a recommendation that
Congress pass such legislation.
238. Incubation. DCS requested that the Commission provide waivers
of the local radio ownership rule to broadcasters that finance or
incubate an SDB or a ``valid eligible entity.'' Specifically, DCS
proposed that an entity that engages in a specified list of
``qualifying incubating activities'' be granted, under certain
conditions, a waiver of the local radio ownership cap ``by one station
per incubating activity.''
239. The Commission shares concerns that proposals like DCS's
incubation proposal that would allow blanket waivers of the local radio
ownership rule could create a substantial loophole to the ownership
caps without sufficient offsetting benefits. The Commission's local
radio rules have been carefully calibrated to protect competition and
[[Page 29049]]
new entry. By allowing broadcasters to exceed these caps, DCS's
proposal could result in more local radio consolidation than is
presently permitted under the Commission's rules. Moreover, it is
unclear based on the record in this proceeding what kind of entities
should be eligible to benefit from incubation. Bonneville/Scranton
suggested that the guidelines for determining entities that would be
eligible to be incubated could be based on the diversity channel set-
aside requirement adopted by the Commission as a condition to the
approval of the merger of XM and Sirius. In that decision, the
Commission ordered the combined new satellite radio entity to set aside
channels to encourage new market entry, enhance viewpoint diversity,
and promote the delivery of programming content to underserved
audiences. Bonneville/Scranton suggested that a voluntary broadcast
incubation program modeled on this condition could permit a currently
licensed broadcaster to select a ``New Voice'' to incubate based on
certain minimal Commission requirements and general selection
considerations, such as small business size and independence from the
broadcaster. NABOB cautioned, however, that ``[a]ny policies the
Commission adopts which do not have the effect of making it desirable
for industry insiders to seek out minorities for broadcast ownership
opportunities will be ineffective in increasing minority ownership.''
The Commission is concerned that implementation of such proposals would
pose substantial legal, administrative, and practical challenges. To
the extent that the program were limited to SDBs, it would pose the
Equal Protection concerns described in detail above. If it were instead
extended in the manner suggested by Bonneville/Scranton, it would be
difficult for the Commission to administer as a broad-based program and
could potentially open a wide loophole in the ownership rules, while
possibly having little or no significant effect on minority and female
ownership.
240. In addition, the Commission is concerned that it would not be
feasible for it to monitor adequately the activities that would qualify
an entity for an incubation waiver. As proposed by DCS, qualifying
activities would encompass a broad array of arrangements, including,
among others, underwriting or financing the operations of eligible
entities, providing loans or other financial assistance to eligible
entities, and local marketing arrangements between independent
programmers and commercial broadcasters. Given the challenges of
monitoring over time the types of complex financing and other
arrangements suggested under DCS's incubation proposal, there is a
substantial risk that the Commission would not be able to ensure that
such arrangements would be, or prospectively would remain, beneficial
to eligible entities or other intended beneficiaries. Accordingly, the
Commission tentatively declines to adopt this proposal in this
proceeding.
241. Migration of VHF Channels 5 and 6. In addition, DCS
recommended that the Commission migrate most AM service to VHF channels
5 and 6. Aside from DCS, it does not appear that any party to this
proceeding has supported this proposal. The Commission tentatively
concludes that this proposal, which would involve extensive changes to
the Commission's current licensing rules and spectrum policies, exceeds
the proper scope of this broadcast ownership proceeding. Moreover, the
Commission notes that Congress has directed the Commission to conduct
an incentive auction of television broadcast spectrum and to reassign
the remaining broadcast channels in order to make more spectrum
available for wireless use. Migrating AM services to VHF channels 5 and
6 has the potential to interfere with the Commission's implementation
of Congress's directive.
242. Additional DCS Proposals. Many of DCS's remaining proposals
recommend changes to a wide range of Commission licensing, service, and
engineering rules and policies. Several of these recommendations
propose modifications to the AM broadcast service. The Commission
recently adopted a notice of proposed rulemaking which seeks to
revitalize the AM band by identifying ways to enhance AM broadcast
quality and proposing technical rules that would enable AM stations to
improve their service. The AM Revitalization NPRM (78 FR 69629, Nov.
20, 2013, FCC 13-139, rel. Oct. 29, 2013) solicits comment on some of
the technical issues DCS has raised in this proceeding, including
modification of: (1) Daytime community coverage standard for existing
AM stations; (2) nighttime community coverage standards for existing AM
stations; and (3) AM antenna efficiency standards. The Commission
anticipates that the AM Revitalization NPRM will lead to an examination
of important issues regarding the viability of AM broadcast service,
and thus, address many of the concerns of minority broadcasters
regarding the technical aspects of their licensed services.
243. Some of DCS's proposals extend into areas that are beyond the
Commission's authority, including proposals that ultimately would
require legislative action or action by other federal entities aside
from the Commission in order to create changes in rules or policies.
Other proposals involve cable operators and other non-broadcast
services that are outside the scope of the quadrennial review
proceedings. Although these proposals are accompanied by detailed and
thoughtful analysis, and some of them may warrant further
consideration, the Commission believes that they are outside the scope
of this proceeding. Thus, the Commission does not anticipate taking
further action within this or successive quadrennial review dockets on
these proposals because they extend beyond its statutory mandate under
Section 202(h).
244. AWM Proposals. AWM's proposals include (1) preparing a primer
on investment in broadcast ownership for smaller and regional lenders
willing to provide loans to new broadcast entrants; (2) preparing a
primer for new entrants that provides guidance on how to find
financing; (3) establishing a link on the Commission's Web site to
provide information on stations that may be available for sale to small
businesses; and (4) allowing sellers to hold a reversionary interest in
a Commission license in certain circumstances. Although several parties
broadly stated that they support some of these proposals, there is
little record on these subjects in the current proceeding. While the
Commission agrees that primers on investment and financing could be
useful to new entrants, the Commission notes that OCBO already engages
in activities that provide similar resources to broadcasters and
potential investors, including the regularly scheduled Capitalization
Strategies Workshops noted above and in the NPRM. The Commission also
believes that specific advice about investment and financing is more
appropriately provided by private parties that are directly involved in
the financial marketplace than by the Commission.
245. In response to AWM's proposal that the Commission create a
public listing of stations that may be available for sale to small
businesses, the Commission note that the Commission currently does not
have at its disposal the information that would be necessary to create
such a resource. In addition, the Commission believes that many
licensees would object to any requirement that would obligate them to
make publicly available information regarding their plans to sell
specific
[[Page 29050]]
stations. Finally, the Commission tentatively finds that AWM's proposal
to allow sellers to hold a reversionary interest in broadcast licensees
as a means of financing sales of broadcast stations to women and
minorities does not address the Commission's historical concerns about
reversionary interests and is insufficiently developed to support
departure from the Commission's longstanding policy against the holding
of such interests. At this time, therefore, the Commission does not
believe there is sufficient justification to adopt these proposed
measures.
E. Disclosure of Shared Service Agreements
1. Introduction
246. In this Further Notice of Proposed Rulemaking, the Commission
considers whether to require broadcast stations to disclose agreements
for sharing services and/or resources with other broadcast stations
that are not commonly owned, as discussed in greater detail below, to
the extent that such agreements are not already separately defined and
required to be filed and/or disclosed under the Commission's rules
(e.g., LMAs and JSAs). Commenters in a number of proceedings have
expressed concern about the impact on competition, localism, and
diversity of agreements whereby one station shares studio space,
operational support, staff, programming, and/or other services or
support with a separately owned station. Often these sharing agreements
are executed in conjunction with an option, right of first refusal,
put/call arrangement, or other similar contingent interest, or a loan
guarantee. Because the Commission does not currently require the filing
or disclosure of all such agreements, the Commission and the public
lack information about the content or breadth of the agreements or the
frequency of their use, inhibiting a thorough analysis of the impact of
these arrangements on the Commission's rules and policy goals.
Accordingly, in order to enable the Commission and the public to better
understand the terms, operation, and prevalence of these agreements,
the Commission proposes to define a class of sharing agreements that
could impact its rules and policy goals and to require the disclosure
of those agreements to enable a comprehensive assessment of their
impact. Specifically, in this Further Notice of Proposed Rulemaking the
Commission proposes to define a category of sharing agreements
designated herein as Shared Service Agreements (SSAs), it proposes to
require the disclosure of SSAs by commercial television stations, and
it seeks comment on the appropriate method for achieving such
disclosure. While considering whether to require the filing of SSAs and
how the term SSA should be defined for this purpose in order to obtain
information that will inform the Commission's decision about what, if
any, general rules might be appropriate with respect to such
agreements, the Commission will, of course, continue to consider such
joint agreements, as relevant and appropriate, in deciding whether
particular individual transactions serve the public interest. Once
disclosure is achieved, the Commission will be able to study these
agreements and to determine what further regulatory action, if any, it
should take with respect to them.
2. Background
247. In the Enhanced Disclosure FNPRM (76 FR 71267, Nov. 17, 2011,
FCC 11-162, rel. Oct. 27, 2011), the Commission sought comment on
whether to require the disclosure of sharing agreements that were not
already defined and required to be disclosed under the Commission's
rules (as are, for example, LMAs and JSAs), and whether to require
stations to include such agreements in their online public files.
Commercial television stations (full-power and Class A) are required
under Section 73.3526 of the Commission's rules to maintain a local
public inspection file, the contents of which include, inter alia, the
station's current authorization, citizen agreements, issues/programs
lists, radio and television LMAs, and radio and television JSAs.
Historically, the file was located at the station's main studio;
however, in the Enhanced Disclosure proceeding, among other actions,
the Commission modified Section 73.3526 for commercial television
stations to require that most of the contents of the public file (e.g.,
LMAs and JSAs) be included in an online public file hosted by the
Commission. In the Enhanced Disclosure Second R&O (77 FR 27631, May 11,
2012, FCC 12-44, rel. Apr. 27, 2012), the Commission declined to adopt
any new disclosure requirements for sharing agreements but indicated
that it would continue to monitor the issue and revisit the disclosure
requirement in the future.
248. Concurrent with the pendency of the Enhanced Disclosure
proceeding, the Commission sought comment in the NPRM about various
types of sharing agreements, noting that commenters to the NOI had
specifically identified sharing agreements and a subcategory of
agreements, local news sharing (LNS) agreements, as matters of concern,
but acknowledging that these terms were not defined in Commission
rules. The NPRM invited views on the potential impact of such
agreements on the Commission's ownership rules and fundamental policy
goals. It identified potential concerns about such agreements and
potential benefits and invited submissions of further information about
how to define such agreements and comment on whether they should be
attributed or disclosed.
249. The records in the Enhanced Disclosure proceeding and in the
2010 Quadrennial Review proceeding do not contain comprehensive data or
information about the breadth, content, or prevalence of sharing
agreements between stations that are not commonly owned. The Commission
is not aware of any public source for this information. Although some
such agreements are filed with the Commission in connection with
applications for assignment or transfer of control of broadcast
licenses, the Commission has no way of knowing how many of these
agreements exist or what they cover. The comments in the earlier
proceedings make clear that there are various types of sharing
agreements, including those that implicate local news production, that
can involve differing levels of coordination--from those that involve
back office functions or leases of property or equipment, to the
sharing of raw video footage, to rebroadcasts of another station's
entire newscast, to near-total outsourcing of a station's day-to-day
operations. Accordingly, any impact on viewers or markets could vary
depending on the substance of the agreement and the level of
coordination. In the absence of greater information about the number of
agreements that exist in the market and their content, the Commission
and the public cannot fully evaluate the potential public interest
harms and benefits of various arrangements, which is necessary for the
Commission to formulate sound public policy.
3. Discussion
250. The Commission believes that commenters have raised important
issues about how and to what extent sharing agreements implicate the
Commission's competition, localism, and diversity policy objectives.
Consideration of these issues is impeded because so little is known
about the content, scope, and prevalence of sharing agreements. In
order to assess these issues, however, the Commission must first define
the agreements between stations that are
[[Page 29051]]
relevant to its improved understanding of how stations share services
and resources and then create a mechanism for making such arrangements
transparent to the public and the Commission. Accordingly, the
Commission seeks comment on a proposed definition of SSAs and a
requirement that commercial television stations be required to disclose
these agreements to the public and the Commission. This is a necessary
first step in determining whether the Commission's public interest
goals will be furthered through additional regulation of these
agreements, as some commenters suggest.
a. Definition of Shared Service Agreement
251. Commenters refer to sharing agreements using various terms,
such as sharing agreements, SSAs, or LNS agreements; however the
Commission's rules do not define these terms. LMAs and JSAs are two
types of sharing agreements that are defined in the Commission's rules.
A single sharing agreement, however named, may include provisions for
time brokerage, local news production, joint advertising sales, and
various other station-related services. All of these different kinds of
arrangements present questions about the level and type of coordinated
activity that may exist between stations and the impact of such
cooperation on the public interest. Therefore, the Commission
tentatively concludes that it should define SSAs broadly enough to
capture all types of resource sharing and collaboration that may take
place between stations as the best means to inform the public and the
Commission about the scope of any joint activities between stations.
This information will provide the basis for informed decision making
about any necessary future Commission regulation impacting SSAs or
particular categories of SSAs.
252. Accordingly, for the purpose of implementing the proposed
disclosure requirements discussed below, the Commission tentatively
defines an SSA as any agreement or series of agreements, whether
written or oral, in which (1) a station, or any individual or entity
with an attributable interest in the station, provides any station-
related services, including, but not limited to, administrative,
technical, sales, and/or programming support, to a station that is not
under common ownership (as defined by the Commission's attribution
rules); or (2) stations that are not under common ownership (as defined
by the Commission's attribution rules), or any individuals or entities
with an attributable interest in those stations, collaborate to provide
or enable the provision of station-related services, including, but not
limited to, administrative, technical, sales, and/or programming
support, to one or more of the collaborating stations.
253. The Commission believes that this definition, by focusing on
the provision of station-related services and collaboration by and
between broadcast stations, encompasses the universe of agreements that
are broadly referred to as ``sharing agreements.'' This would include,
for example, the provision of back office services by one independently
owned station to another; a joint news-gathering operation; or the
joint negotiation of retransmission consent agreements. Each such
example is a type of resource sharing, among many others, and the
agreements that govern such arrangements are appropriately referred to
as SSAs. These agreements, including those that relate to ``back
office'' functions, reflect the range of interaction between stations,
and the Commission believes that disclosure of all such agreements will
permit it to understand the scope of station interactions so that it
can more effectively advance its public policy goals in this area.
254. Moreover, the Commission believes that the definition of SSA
should not be limited to only those agreements to which station
licensees are parties, as the licensees are not always a party to the
sharing agreement that affects their station's operations. For example,
the parent company of one station may contract with the parent company
of another independently owned station to provide station-related
services for the first station, using the same employees for both
stations. If the definition were limited to agreements that involved
licensees, this type of agreement would arguably not be included, even
though this is certainly an example of the type of sharing agreement
the Commission seeks to identify. Accordingly, limiting the definition
of SSAs to agreements between licensees would exclude existing
agreements that the Commission intends to include in the definition, as
well as afford a means to evade any disclosure requirements. Neither
outcome would serve the public interest.
255. The Commission seeks comment on the tentative conclusion that
SSAs should be defined broadly to enable the Commission and the public
to understand the potential concerns and benefits of these agreements.
Is a broad definition the most appropriate way to inform the Commission
and the public about the breadth and prevalence of agreements across
the marketplace? The Commission seeks comment also on the proposed
definition. Is it broad enough to include all types of resource sharing
and service agreements between stations that may be relevant to the
Commission's policy making initiatives? Is the definition too broad,
such that it would apply to agreements that do not involve the
provision of station-related services and/or collaboration between
stations to enable the provision of such services? Is there an
alternate definition that would better serve the Commission's purpose?
The Commission's transaction review experience indicates that SSAs are
often accompanied by contingent interest agreements. The Commission
seeks comment on whether this is also the case for SSAs that are not
part of a transaction. If so, the Commission seeks comment on whether
and how it should seek to achieve additional transparency concerning
such contingent interest arrangements in this this proceeding. The
Commission encourages those who disagree with the proposed definition
to provide specific alternative language to define SSAs for purposes of
this proceeding.
256. Should the term SSA instead be defined more narrowly, and if
so how? For example, are there sharing agreements that are
insignificant to the operation of the station(s), such that disclosure
would not meaningfully benefit the Commission's or the public's
understanding of station operations, and that should thus be excluded
from the definition of SSA for this purpose? If so, what types of
exclusions to the definition should the Commission adopt? Would a de
minimis financial exception be appropriate (i.e., if the total dollar
amount of the goods or services provided under the agreement is below a
certain total dollar amount)? If so, what should the cutoff be? How
should the Commission determine where to set the cutoff? Could such an
exclusion omit significant agreements that involve in-kind
contributions? Should the Commission define SSAs to implicate only
agreements that involve local news operations or the provision or
production of programming? Is so, how would such a definition be
crafted? Would it implicate any special legal or Constitutional
considerations? If so, how could the Commission address such issues?
Should the Commission limit the definition of SSAs only to those
involving stations in the same local market? Could such a limitation
exclude agreements that have a significant impact on station operations
[[Page 29052]]
or programming? As discussed in the following section, the Commission
proposes to limit disclosure of SSAs to commercial television stations.
Accordingly, should the Commission limit the definition of SSAs to only
those agreements involving exclusively commercial television stations?
The Commission notes that commenters focus primarily on sharing
agreements involving commercial television stations; accordingly, the
Commission tentatively concludes that any disclosure requirement for
SSAs should be limited to agreements involving exclusively commercial
television stations. The Commission seeks comment on whether to expand
the disclosure requirement to include agreements involving commercial
radio stations and/or noncommercial stations. Are there many examples
of agreements between commercial television stations and other types of
stations (e.g., noncommercial stations, AM/FM stations)? What are the
costs and benefits of the definition the Commission proposes and of any
alternate definitions offered? How would a narrower definition be
reconciled with the Commission's and the public's interest in
understanding the breadth and prevalence of agreements across the
marketplace?
b. Disclosure of Shared Service Agreements
257. Although the Commission believes that commenters have raised
meaningful concerns about the potential impact of sharing agreements on
competition, diversity, and localism in television markets, it also
acknowledges that broadcast commenters have provided evidence that such
agreements may produce public interest benefits. Currently, the
Commission and the public lack a full understanding of the agreements
and the ability to assess the impact of the agreements on Commission
policy goals. Thus, the Commission tentatively concludes that
disclosure of SSAs as defined in this proceeding is necessary to inform
the Commission and the public of joint operations and collaborations
between independently owned commercial television stations. Section
73.3613, which governs the filing of contracts with the Commission,
requires that a summary of the substance of oral contracts subject to
filing under that section must be reported in writing. The Commission
proposes that any disclosure requirement it may adopt for SSAs
similarly require that the substance of oral SSAs be reported in
writing. The Commission seeks comment on this proposal.
258. The Commission believes that disclosure of such agreements
involving commercial television stations will permit the Commission to
better understand the operation of stations and to assess the impact,
if any, of SSAs on the television marketplace. Furthermore, members of
the public will be able to gain a greater understanding of the
relationships between independently owned stations that are parties to
SSAs, which will allow them to evaluate whether such interaction has an
impact on programming or other station operations. The Commission seeks
comment on its tentative conclusion that disclosure of SSAs as defined
herein is necessary to enable the Commission and the public to assess
the implications of these agreements for the marketplace and the
Commission's public policy goals. Does the Commission have any
alternate means of assessing the breadth and prevalence of these
agreements or their impact and implications? If so, what means are
currently available to the Commission and the public?
259. The Commission seeks comment on the manner in which SSAs are
to be disclosed to the public and the Commission. For example, should a
television station be required to place a copy of each SSA for the
station in its public inspection file? Under such a requirement, should
the Commission require that these agreements be placed in the local
public inspection file located in the station's main studio or in the
station's online public file, or both? Should the disclosure
requirement apply to each station that is involved in the agreement
(e.g., the recipient of services and the provider of the services)?
Would a requirement to disclose only in a physical (i.e., not online)
public inspection file limit the Commission's and the public's ability
to learn about the content, scope, and prevalence of sharing
agreements? The Commission already requires that all radio and
television LMAs and JSAs between commercial broadcast stations be
disclosed by placing them in the station's public file, regardless of
whether the agreements are attributable or filed with the Commission.
Should the Commission extend this existing requirement for LMAs and
JSAs to include all SSAs for commercial television stations? What are
the costs and benefits of each method of disclosure? As noted above,
certain types of sharing agreements are already specifically defined in
the Commission's rules and are already subject to various regulations
and policies (e.g., LMAs and JSAs). The Commission does not believe
that the adoption of any proposal in this Further Notice of Proposed
Rulemaking should result in a duplicate disclosure obligation for such
agreements. For example, if the Commission were to extend the existing
public inspection file disclosure requirement for LMAs and JSAs to
SSAs, an agreement that satisfies the definition of a JSA and an SSA
would only need to be placed in the public inspection file once.
However, in the event that the Commission adopts a disclosure
requirement for SSAs that is different than the disclosure requirements
already in existence for other types of sharing agreements--for
example, a dedicated docket in the Commission's Electronic Comment
Filing System (ECFS) or a new form--the Commission seeks comment on the
extent to which that disclosure requirement should apply to other
sharing agreements that are already subject to various disclosure
requirements, as well as the associated benefits, burdens, and costs of
any such approach.
260. Should the Commission consider a requirement that SSAs be
filed pursuant to Section 73.3613 of the Commission's rules? What are
the benefits or drawbacks of this alternative? Pursuant to Section
73.3613, licensees or permittees of commercial or noncommercial AM, FM,
television, or International broadcast stations must file copies of
certain contracts (including written summaries of oral contracts) with
the Commission within 30 days of execution. These contracts cover a
broad array of agreements that relate to station ownership and
operation. Because the Commission proposes to limit the disclosure of
SSAs to commercial television stations, as noted above, any new filing
requirement under 73.3613 would be similarly tailored. How would such a
requirement be structured? Should the Commission consider adopting a
different filing process? For example, should the Commission create a
new form to be filed with the Commission or open a dedicated docket in
ECFS, in which licensees, permittees, or applicants would file copies
of agreements? What would such a process entail and what would be the
benefits and/or drawbacks of that process?
261. In addition, the Commission proposes that any disclosure
requirement it may adopt be subject to the same redaction allowances
made available with respect to the filing of LMAs and JSAs, namely,
that licensees may redact confidential or proprietary information.
Currently, stations are
[[Page 29053]]
permitted to redact confidential or proprietary information when
disclosing LMAs and JSAs, though the information must be made available
to the Commission upon request. The Commission proposes that the same
procedure apply to the disclosure of SSAs. Would this approach be
desirable with respect to the disclosure requirements the Commission is
proposing here? Should it consider limiting any disclosure or filing
requirement to larger markets, such as the top 50 or 100 Designated
Market Areas? What considerations would justify any proposed
limitation, and what other factors should the Commission consider in
evaluating any limitation? While such an approach might reduce burdens
on stations in smaller markets, is the impact of SSAs in smaller
markets potentially greater due to the typically smaller number of
stations in these markets, such that limiting disclosure to larger
markets would not be advisable? For each potential alternative
proposed, the Commission seeks comment on the associated benefits,
burdens, and costs. How much time should it provide for stations to
come into compliance with this proposed filing requirement? What
burdens would the proposed disclosure requirement place on stations,
and what costs are associated with those burdens? How often would these
burdens or costs be incurred? Do SSAs as defined herein typically last
for a period of multiple years, and if so does that fact mitigate any
associated burdens or costs, and by how much? How would the possible
exclusions from the definition of SSA discussed above impact the
burdens and costs?
II. Procedural Matters
A. Ex Parte Rules
262. Permit-But-Disclose. The proceeding for this Further Notice of
Proposed Rulemaking shall be treated as a ``permit-but-disclose''
proceeding in accordance with the Commission's ex parte rules. Persons
making ex parte presentations must file a copy of any written
presentation or a memorandum summarizing any oral presentation within
two business days after the presentation (unless a different deadline
applicable to the Sunshine period applies). Persons making oral ex
parte presentations are reminded that memoranda summarizing the
presentation must (1) list all persons attending or otherwise
participating in the meeting at which the ex parte presentation was
made, and (2) summarize all data presented and arguments made during
the presentation. If the presentation consisted in whole or in part of
the presentation of data or arguments already reflected in the
presenter's written comments, memoranda or other filings in the
proceeding, the presenter may provide citations to such data or
arguments in his or her prior comments, memoranda, or other filings
(specifying the relevant page and/or paragraph numbers where such data
or arguments can be found) in lieu of summarizing them in the
memorandum. Documents shown or given to Commission staff during ex
parte meetings are deemed to be written ex parte presentations and must
be filed consistent with rule 1.1206(b). In proceedings governed by
rule 1.49(f) or for which the Commission has made available a method of
electronic filing, written ex parte presentations and memoranda
summarizing oral ex parte presentations, and all attachments thereto,
must be filed through the electronic comment filing system available
for that proceeding, and must be filed in their native format (e.g.,
.doc, .xml, .ppt, searchable .pdf). Participants in this proceeding
should familiarize themselves with the Commission's ex parte rules.
B. Comment Filing Procedures
263. Comments and Replies. Pursuant to Sec. Sec. 1.415 and 1.419
of the Commission's rules, 47 CFR 1.415 and 1.419, interested parties
may file comments and reply comments on or before the dates indicated
on the first page of this document. Comments may be filed using the
Commission's Electronic Comment Filing System (ECFS). See Electronic
Filing of Documents in Rulemaking Proceedings, 63 FR 24121 (1998).
[ssquf] Electronic Filers: Comments may be filed electronically
using the Internet by accessing the ECFS: https://fjallfoss.fcc.gov/ecfs2/.
[ssquf] Paper Filers: Parties who choose to file by paper must file
an original and one copy of each filing. If more than one docket or
rulemaking number appears in the caption of this proceeding, filers
must submit two additional copies for each additional docket or
rulemaking number.
Filings can be sent by hand or messenger delivery, by commercial
overnight courier, or by first-class or overnight U.S. Postal Service
mail. All filings must be addressed to the Commission's Secretary,
Office of the Secretary, Federal Communications Commission.
[ssquf] All hand-delivered or messenger-delivered paper filings for
the Commission's Secretary must be delivered to FCC Headquarters at 445
12th St. SW., Room TW-A325, Washington, DC 20554. The filing hours are
8:00 a.m. to 7:00 p.m. All hand deliveries must be held together with
rubber bands or fasteners. Any envelopes and boxes must be disposed of
before entering the building.
[ssquf] Commercial overnight mail (other than U.S. Postal Service
Express Mail and Priority Mail) must be sent to 9300 East Hampton
Drive, Capitol Heights, MD 20743.
[ssquf] U.S. Postal Service first-class, Express, and Priority mail
must be addressed to 445 12th Street SW., Washington, DC 20554.
264. People with Disabilities: To request materials in accessible
formats for people with disabilities (braille, large print, electronic
files, audio format), send an email to fcc504@fcc.gov or call the
Consumer & Governmental Affairs Bureau at (202) 418-0530 (voice), (202)
418-0432 (tty).
C. Supplemental Initial Regulatory Flexibility Analysis
265. As required by the Regulatory Flexibility Act of 1980, as
amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was
incorporated in the NPRM in this proceeding. The Commission sought
written public comment on the proposals in the NPRM, including comment
on the IRFA. The Commission received no comments in direct response to
the IRFA. Additionally, the Commission has prepared this Supplemental
IRFA of the possible significant economic impact on small entities of
the proposals in the Further Notice of Proposed Rulemaking. Written
public comments are requested on this Supplemental IRFA. Comments must
be identified as responses to the Supplemental IRFA and must be filed
by the deadlines for comments provided on the first page of the Further
Notice of Proposed Rulemaking. The Commission will send a copy of the
Further Notice of Proposed Rulemaking, including this Supplemental
IRFA, to the Chief Counsel for Advocacy of the Small Business
Administration (SBA). In addition, the Further Notice of Proposed
Rulemaking and Supplemental IRFA (or summaries thereof) will be
published in the Federal Register.
1. Need for, and Objectives of, the Further Notice of Proposed
Rulemaking
266. The Further Notice of Proposed Rulemaking initiates the 2014
Quadrennial Review of the broadcast ownership rules, which was
initiated pursuant to Section 202(h) of the Telecommunications Act of
1996 (1996
[[Page 29054]]
Act). This review will incorporate and build on the record of the
ongoing 2010 Quadrennial Review. The Commission is required by statute
to review its media ownership rules every four years to determine
whether they ``are necessary in the public interest as the result of
competition'' and to ``repeal or modify any regulation it determines to
be no longer in the public interest.''
267. The media ownership rules that are subject to this quadrennial
review are the local television ownership rule, the local radio
ownership rule, the newspaper/broadcast cross-ownership rule, the
radio/television cross-ownership rule, and the dual network rule. As
discussed in more detail below, the Further Notice of Proposed
Rulemaking proposes to retain two rules without modification--the local
radio ownership rule and the dual network rule--and seeks comment on
potential changes to two others--the local television ownership rule
and the newspaper/broadcast cross-ownership rule. The Further Notice of
Proposed Rulemaking also seeks comment on whether to eliminate the
radio/television cross-ownership rule. In addition, the Further Notice
of Proposed Rulemaking seeks comment on issues referred to the
Commission in the Third Circuit's remand in Prometheus Radio Project v.
FCC (Prometheus II) of certain aspects of the Commission's 2008
Diversity Order. Lastly, the Further Notice of Proposed Rulemaking
seeks comment on the proposed disclosure of certain sharing agreements.
268. Local Television Ownership Rule. In the Further Notice of
Proposed Rulemaking, the Commission seeks comment on whether the
current local television ownership rule remains necessary in the public
interest and should be retained with a limited modification.
Specifically, the Commission seeks comment on whether to retain the
existing ownership limits, including the top-four prohibition and the
eight voices test, but replace the Grade B contour overlap test used to
determine when to apply the local television ownership rule with a
digital noise limited service contour (NLSC) test, rather than the DMA-
based approach proposed in the NPRM.
269. The item tentatively concludes that the current local
television ownership rule remains necessary in the public interest and
should be retained with a limited modification. Based on the current
media marketplace and the record in this proceeding, the public
interest would be best served by replacing the Grade B contour overlap
test used to determine when to apply the local television ownership
rule with a digital NLSC test, rather than the DMA-based approach
proposed in the NPRM. The Commission believes that the local television
ownership rule is necessary to promote competition. The Commission
further believes that the competition-based rule proposed in the
Further Notice of Proposed Rulemaking also would promote viewpoint
diversity by helping to ensure the presence of independently owned
broadcast television stations in local markets and would be consistent
with the Commission's localism goal. The Commission finds that the
local television ownership rule proposed in the Further Notice of
Proposed Rulemaking would be consistent with the goal of promoting
minority and female ownership of broadcast television stations. The
Commission believes that the competition-based rule would also
indirectly advance the Commission's viewpoint diversity goal by helping
to ensure the presence of independently owned broadcast television
stations in the local market, thereby increasing the likelihood of a
variety of viewpoints. In addition, while the Commission does not
propose to retain the rule with the specific purpose of preserving the
current levels of minority and female ownership, the Commission
tentatively finds that retaining the existing rule would effectively
address the concerns of those commenters who suggested that additional
consolidation would have a negative impact on minority and female
ownership of broadcast television stations. Ultimately, the Commission
believes that its proposed limited modification of the rule will better
promote competition, and that this benefit would outweigh any burdens,
which would be minimized by the proposal to grandfather combinations.
270. The Further Notice of Proposed Rulemaking also tentatively
concludes that retaining the existing failed/failing station waiver
criteria would be in the public interest. The Commission evaluated the
various proposed waiver standards proffered by commenters, and is
concerned that many of the proposed waiver criteria would be difficult
to monitor or enforce, are not rationally related to the ability of
each station to compete in the local market, and could be manipulated
in order to obtain a waiver. Ultimately, the Commission predicts that
such standards would significantly expand the circumstances in which a
waiver of the local television ownership rule would be granted. The
Commission is concerned that such relaxation would be inconsistent with
the tentative conclusion that the public interest is best served by
retaining the existing television ownership limits. Moreover, the
Commission believes that the existing waiver standard is not unduly
restrictive and that it provides appropriate relief in markets of all
sizes. Waiver of the Commission's rules is meant to be exceptional
relief, and the item tentatively finds that the existing waiver
criteria strike an appropriate balance between enforcing the ownership
limits and providing relief from the rule on a case-by-case basis.
271. Local Radio Ownership Rule. The Further Notice of Proposed
Rulemaking seeks comment on whether the current local radio ownership
rule remains necessary in the public interest and should be retained
without modification. The Further Notice of Proposed Rulemaking seeks
comment also on whether to retain the existing AM/FM subcaps.
272. The Commission tentatively finds that the current local radio
ownership rule remains necessary in the public interest and should be
retained without modification. The Commission believes that the rule is
necessary to promote competition. In addition, the Commission believes
that the radio ownership limits promote viewpoint diversity ``by
ensuring a sufficient number of independent radio voices and by
preserving a market structure that facilitates and encourages new entry
into the local media market.'' Similarly, the Commission tentatively
finds that a competitive local radio market helps to promote localism,
as a competitive marketplace will lead to the selection of programming
that is responsive to the needs and interests of the local community.
The Commission tentatively finds also that the local radio ownership
rule is consistent with the goal of promoting minority and female
ownership of broadcast television stations. Ultimately, the Commission
believes that these benefits outweigh any burdens that may result from
its proposal to retain the rule without modification.
273. The Commission agrees with commenters that supported retention
of the AM subcaps in order to promote new entry. The Commission
believes that broadcast radio, in general, continues to be a more
likely avenue for new entry in the media marketplace--including entry
by small businesses and entities seeking to serve niche audiences--as a
result of radio's ability to more easily reach certain demographic
groups and the relative affordability of radio stations compared to
other mass media. AM stations are generally the least expensive option
for entry into the radio market, often by a
[[Page 29055]]
significant margin, and therefore permit new entry for far less capital
investment than is required to purchase an FM station. While some
commenters suggested that eliminating the subcaps could result in
divestiture of properties that could be acquired by new entrants, the
Commission tentatively finds that this speculative rationale is not
persuasive. Therefore, consistent with Commission precedent, the
Commission believes that the public interest is best served by
retaining the existing AM subcaps, which would continue to further
competition, and possibly also viewpoint diversity, by promoting new
entry.
274. In addition, the Commission tentatively finds that there
continue to be technical and marketplace differences between AM and FM
stations that justify retention of both the AM and FM subcaps in order
to promote competition in local radio markets. As the Commission has
noted previously, FM stations enjoy unique technical advantages over AM
stations, such as increased bandwidth and superior audio signal
fidelity. In addition, AM signal propagation varies with the time of
day (i.e., AM signals travel much farther at night than during the
day), and many AM stations are required to cease operation at sunset.
These technological differences often, but not always, result in
greater listenership and revenues for FM stations.
275. While the technological and marketplace differences between AM
and FM stations generally benefit FM stations, and thus support
retention of the FM subcaps, there continue to be many markets in which
AM stations are ``significant radio voices.'' For example, a study
provided by Clear Channel found that throughout the 300 Arbitron Metro
markets, there are 187 a.m. stations ranked in the top five in terms of
all-day audience share. And according to NAB, AM stations are among the
top revenue earners in some of the largest radio markets (e.g., New
York, Chicago, and Los Angeles). Therefore, the Commission tentatively
finds that retention of the existing AM subcaps is necessary to prevent
a single station owner from acquiring excessive market power through
concentration of ownership of AM stations in markets in which AM
stations are significant radio voices.
276. In addition, the Commission tentatively concludes that it is
not in the public interest to tighten the numerical ownership limits;
therefore, the Commission sees no need to reassess the subcaps
associated with each numerical tier, as proposed by Mt. Wilson. Indeed,
tightening the subcaps absent a concurrent tightening of the numerical
ownership limits would result in an internal inconsistency in the rule,
as an entity would be unable to own all the stations otherwise
permitted under certain numerical tiers. For example, in markets with
30-44 stations, an entity currently may own up to seven stations,
provided that no more than four of the stations are in the same
service. If the subcap was tightened to three stations in the same
service, an entity could then only own up to six stations, even though
the rule's premise is that the public interest is best served by
permitting ownership of up to seven stations in this particular market.
277. Newspaper/Broadcast Cross-Ownership Rule. The Further Notice
of Proposed Rulemaking seeks comment on the Commission's previous
finding, which has been upheld in the courts, that the current absolute
ban on newspaper/broadcast cross-ownership, first adopted in 1975, is
overly broad. The Commission continues to believe that some restriction
on newspaper/broadcast cross-ownership is necessary to protect and
promote viewpoint diversity in local markets; this view is consistent
with the Commission's longstanding rationale for the NBCO rule. The
Supreme Court has recognized the importance of the Commission's role in
promoting viewpoint diversity, calling it a ``basic tenet of national
communications policy.''
278. In addition, the Further Notice of Proposed Rulemaking seeks
further comment on whether the restriction on newspaper/broadcast
cross-ownership is necessary to protect and promote viewpoint diversity
in local markets. The Further Notice of Proposed Rulemaking seeks
comment on whether the absolute ban should be revised to allow
combinations that would not unduly harm viewpoint diversity or
localism. The Further Notice of Proposed Rulemaking specifically
requests comment on whether the prohibition on newspaper/radio
combinations should be eliminated. The Further Notice of Proposed
Rulemaking seeks comment on approaches that would retain a ban on
newspaper/television combinations in all markets and further seeks
comment on whether to entertain waiver requests on a pure case-by-case
approach, assessing each request independently and considering the
totality of the circumstances each proposed transaction presents, or on
a case-by-case waiver approach that would include presumptions that
favor or disfavor the grant of waiver requests in accordance with
certain prescribed guidelines. The Further Notice of Proposed
Rulemaking seeks comment on whether the Commission should provide for
an exception to a newspaper/television cross-ownership prohibition if
the merger applicant demonstrates that either the television station or
the newspaper has failed or is failing. The Further Notice of Proposed
Rulemaking also seeks comment on possible modifications to the 2006
rule to adjust for aspects of that rule that may be obsolete, difficult
to prove or enforce, or ineffectual.
279. In the event that the newspaper/television restriction were to
be revised, the Further Notice of Proposed Rulemaking seeks comment on
the following aspects of the rule. First, should the obsolete analog
Grade A contour be replaced with an approach that uses both the DMA and
the digital the principal community contour (PCC) to determine when the
newspaper/television prohibition applies in order to approximate the
former analog contour approach as closely as possible? Second, should
the four-factor test that all waiver applicants, even those entitled to
a favorable presumption, were required to satisfy under the 2006 rule
be eliminated? The Further Notice of Proposed Rulemaking suggests that
the factors were vague, subjective, difficult to prove and enforce,
and/or not directly linked to viewpoint diversity. Third, should the
previous local news exception permitted by the 2006 rule under which
the Commission reversed the negative presumption against a waiver when
the proposed combination involved a broadcast station that had not been
offering local newscasts and the applicants committed to airing at
least seven hours of local news per week after the transaction be
eliminated? The Commission tentatively concludes that the potential
difficulties in monitoring and enforcing such an exception would render
it meaningless.
280. Radio/Television Cross-Ownership Rule. The Further Notice of
Proposed Rulemaking seeks comment on whether the radio/television
cross-ownership rule, which limits the combined number of commercial
radio and television stations a single entity may own in the same
market, is no longer necessary in the public interest, and whether it
should be repealed. Based on the current media marketplace and the
evidence adduced in this proceeding, the Further Notice of Proposed
Rulemaking seeks comment on whether the local television ownership rule
and the local radio ownership rule, which the Further Notice of
Proposed Rulemaking proposes to retain with limited modification,
adequately serve the goals
[[Page 29056]]
this rule was intended to promote, namely, competition and diversity in
local markets. Thus, the Further Notice of Proposed Rulemaking seeks
comment on whether this additional prohibition on the cross-ownership
of broadcast facilities is unnecessary. Further, the Further Notice of
Proposed Rulemaking seeks comment on whether this simplification of the
rules will have minimal effects in most markets.
281. The Commission tentatively finds that the radio/television
cross-ownership rule is not necessary to promote competition. The
Commission has found previously that most advertisers do not consider
radio and television to be good substitutes for one another, and that
television and radio stations neither compete in the same product
market nor do they bear any vertical relation to one another. This
position is consistent with the long-standing conclusion of the
Department of Justice, which considers radio advertising as a separate
antitrust market for purposes of its competition analysis. Similarly,
the Commission tentatively finds that most consumers do not consider
radio and television stations to be substitutes for one another and do
not switch between television viewing and radio listening based on
program content. Nothing in the current record undermines the
Commission's previous conclusion that a television-radio combination,
therefore, cannot adversely affect competition in any relevant product
market. Given that radio and television stations do not appear to
compete in the same market and that the local television and radio
rules would prevent significant additional consolidation even in the
absence of this rule, the record does not suggest that repeal of the
radio/television cross-ownership rule would harm competition.
282. The Commission tentatively finds that the radio/television
cross-ownership rule is not necessary to promote localism. The
Commission agrees with industry commenters who maintained that some
limited cross-ownership could create efficiencies that could benefit
the public should broadcasters choose to invest additional resources in
the production of local news and information programming. When
broadcasters engage in joint operations, whether those operations are
focused on programming and news gathering or back office matters, the
Commission believes it likely that financial efficiencies result. Such
efficiencies could lead ultimately to consumer benefits in the form of
additional station investments in equipment for radio or television
newsrooms, an increase in staffing for news and informational programs,
or additional local news coverage on radio stations.
283. The Commission considered carefully whether there is evidence
in the current record that elimination of the radio/television cross-
ownership rule would likely adversely affect minority and female
ownership. The Commission believes that the current record does not
establish that such harm is likely. Furthermore, the Commission does
not believe that record evidence shows that the cross-ownership ban has
protected or promoted minority or female ownership of broadcast
stations, or that it could be expected to do so in the future. Notably,
radio/television cross-ownership combinations were not the focus of
commenters' concerns raised in response to the NPRM. In fact, no
commenter to the NPRM presented empirical data or other analyses that
established that repeal of this rule would harm competition, localism,
or viewpoint diversity in local markets. The Commission tentatively
concludes that the rule is not necessary to promote competition or
localism, and the record reflects that most radio commercial stations
do not broadcast significant amounts of local news and information. The
current record does not suggest that minority/female-owned radio
stations contribute more significantly to viewpoint diversity than
other radio stations or broadcast more meaningful amounts of local news
on which consumers rely as a primary source of information.
284. Moreover, while the Commission acknowledges the concerns
raised by NABOB and others advocating for additional minority ownership
opportunities, the Commission agrees with commenters, including NAB,
that the low level of minority and female broadcast ownership cannot be
attributed solely or primarily to consolidation. Nor has any commenter
shown that these low levels of ownership are a result of the existing
radio/television cross-ownership rule. The Commission recognizes the
presence of many disparate factors, including, most significantly,
access to capital, as longstanding, persistent impediments to ownership
diversity in broadcasting.
285. Dual Network Rule. The Further Notice of Proposed Rulemaking
tentatively concludes that the dual network rule, which permits common
ownership of multiple broadcast networks, but prohibits a merger
between or among the ``top-four'' networks (ABC, CBS, Fox, and NBC),
continues to be necessary to promote competition and localism and
should be retained without modification.
286. The Commission tentatively finds that the dual network rule
remains necessary in the public interest to foster competition in the
provision of primetime entertainment programming and the sale of
national advertising time. Specifically, the Commission tentatively
finds that the primetime entertainment programming supplied by the top-
four broadcast networks is a distinct product, the provision of which
could be restricted if two of the four major networks were to merge.
The Commission also tentatively finds that, consistent with past
Commission findings, the top-four broadcast networks comprise a
``strategic group'' in the national advertising market and compete
largely among themselves for advertisers that seek to reach large,
national mass audiences. Accordingly, the Commission continues to
believe that a top-four network merger would substantially lessen
competition for advertising dollars in the national advertising market,
which would, in turn, reduce incentives for the networks to compete
with each other for viewers by providing innovative, high quality
programming. Based on their distinctive characteristics relative to
other broadcast and cable networks, the Commission tentatively finds
that the top-four broadcast networks serve a unique role in the
provision of primetime entertainment programming and the sale of
national advertising time that justifies retaining a rule specific to
them.
287. In addition, the Commission tentatively finds that, consistent
with past Commission findings, the dual network rule remains necessary
to promote the Commission's localism goal. Specifically, the Commission
tentatively finds that the rule remains necessary to preserve the
balance of bargaining power between the top-four networks and their
affiliates, thus improving the ability of affiliates to exert influence
on network programming decisions in a manner that best serves the
interests of their local communities. Typically, a critical role of a
broadcast network is to provide its local affiliates with high quality
programming. Because this programming is distributed across the
country, broadcast networks have an economic incentive to ensure that
the programming both appeals to a mass, nationwide audience and is
widely shown by affiliates. A network's local affiliates serve a
complementary role by providing local input in network programming
decisions and airing programming that serves the specific
[[Page 29057]]
needs and interests of that specific local community. As a result, the
economic incentives of the networks are not always aligned with the
interests of the local affiliates or the communities they serve.
288. Diversity Order Remand and Eligible Entity Definition. In
addition to evaluating each of the broadcast ownership rules, the
Further Notice of Proposed Rulemaking addresses the Third Circuit's
remand of certain aspects of the 2008 Diversity Order. Based on the
Commission's analysis of the preexisting eligible entity standard as
well as the measures to which it applied, the Third Circuit's remand
instructions, and the record in this proceeding, the Further Notice of
Proposed Rulemaking proposes to reinstate the revenue-based eligible
entity standard and to apply it to the regulatory policies set forth in
the Diversity Order. While the Commission does not have an evidentiary
record demonstrating that this standard specifically increases minority
and female broadcast ownership, the Commission anticipates that
reinstating the previous revenue-based standard will promote small
business participation in the broadcast industry. The Commission
believes that small businesses benefit from flexible licensing policies
and that making it easier for small business applicants to participate
in the broadcast industry will encourage innovation and enhance
viewpoint diversity. The Commission also believes that the benefits of
reinstating the eligible entity standard and applying it to the
regulatory measures set forth in the Diversity Order would outweigh any
potential costs of the decision to do so. Accordingly, the Commission
tentatively determines that this action will advance the policy
objectives that traditionally have guided the Commission's analyses of
broadcast ownership issues and will serve the public interest.
289. Shared Service Agreements. The Further Notice of Proposed
Rulemaking provides further consideration of the regulatory treatment
of various agreements for the sharing of services between broadcast
stations. Because the Commission does not currently require the filing
or disclosure of all sharing agreements that do not contain time
brokerage or joint advertising sales provisions, the Commission has
limited information about the content or breadth of such agreements or
the frequency of their use. Accordingly, in order to allow the
Commission and the public to better understand the terms, operation,
and prevalence of these agreements and their potential impact on the
Commission's competition, localism, and diversity goals, the Further
Notice of Proposed Rulemaking seeks comment on proposals to require the
disclosure of such agreements. Specifically, the Further Notice of
Proposed Rulemaking proposes a specific definition for a category of
sharing agreements designated in the Further Notice of Proposed
Rulemaking as Shared Service Agreements (SSAs). Because the Commission
desires to expand its knowledge of these agreements, the Further Notice
of Proposed Rulemaking proposes to adopt a broad definition of SSAs.
The Further Notice of Proposed Rulemaking, however, seeks comment on
whether to narrow the scope of the definition, seeking comment, for
example, on whether a de minimis financial exception would be
appropriate. The Further Notice of Proposed Rulemaking then seeks
comment on various proposals for the disclosure of SSAs, including that
commercial television stations be required to place copies of such
agreements in their public inspection files, the filing of SSAs
pursuant to 47 CFR 73.3613, or the adoption of a new filing process
(e.g., a new form or a dedicated docket in the Commission's Electronic
Comment Filing System (ECFS)). The Commission proposes that any
disclosure requirement it may adopt be subject to the same redaction
allowances made available to local marketing agreements and joint sales
agreements, namely, that licensees may redact confidential or
proprietary information.
290. The Commission believes that disclosure of these agreements
will further its understanding of the television marketplace and inform
future policy decisions to address any potential negative impacts of
SSAs on the Commission's competition, localism, and diversity goals.
The Further Notice of Proposed Rulemaking tentatively concludes that
disclosure will permit the Commission to better understand the
operation of stations and to assess the impact, if any, of such
combined operation on the television marketplace and that members of
the public will be able to gain a greater understanding of the
relationship between independently owned stations that are parties to
SSAs, which will allow them to evaluate whether this interaction has an
impact on programming or other station operations.
2. Legal Basis
291. The Further Notice of Proposed Rulemaking is adopted pursuant
to Sections 1, 2(a), 4(i), 303, 307, 308, 309, 310, and 403 of the
Communications Act of 1934, as amended, 47 U.S.C. 151, 152(a), 154(i),
303, 307, 308, 309, 310, and 403, and Section 202(h) of the
Telecommunications Act of 1996.
3. Description and Estimate of the Number of Small Entities to Which
the Proposed Rules Will Apply
292. 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. The RFA generally defines the
term ``small entity'' as having the same meaning as the terms ``small
business,'' ``small organization,'' and ``small governmental
jurisdiction'' In addition, the term ``small business'' has the same
meaning as the term ``small business concern'' under the Small Business
Act. A ``small business concern'' is one which: (1) Is independently
owned and operated; (2) is not dominant in its field of operation; and
(3) satisfies any additional criteria established by the Small Business
Administration (SBA). The final rules adopted herein affect small
television and radio broadcast stations and small entities that operate
daily newspapers. A description of these small entities, as well as an
estimate of the number of such small entities, is provided below.
293. Television Broadcasting. The SBA defines a television
broadcasting station that has no more than $35.5 million in annual
receipts as a small business. The definition of business concerns
included in this industry states that establishments are primarily
engaged in broadcasting images together with sound. These
establishments operate television broadcasting studios and facilities
for the programming and transmission of programs to the public. 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 studio, from an affiliated network, or from
external sources. Census data for 2007 indicate that 2,076 such
establishments were in operation during that year. Of these, 1,515 had
annual receipts of less than $10.0 million per year and 561 had annual
receipts of more than $10.0 million per year. Based on this data and
the associated size standard, the Commission concludes that the
majority of such establishments are small.
294. The Commission has estimated the number of licensed commercial
television stations to be 1,387. According to Commission staff review
of the BIA Kelsey Inc. Media Access Pro
[[Page 29058]]
Television Database (BIA) as of November 26, 2013, 1,249 (or about 90
percent) of an estimated 1,387 commercial television stations in the
United States have revenues of $35.5 million or less and, thus, qualify
as small entities under the SBA definition.
295. The Commission notes, however, that in assessing whether a
business concern qualifies as small under the above definition,
business (control) affiliations must be included. This estimate,
therefore, likely overstates the number of small entities that might be
affected by this 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. The Commission is
unable at this time to define or quantify the criteria that would
establish whether a specific television station is dominant in its
field of operation. Accordingly, the estimate of small businesses to
which rules may apply does not exclude any television station from the
definition of a small business on this basis and is therefore possibly
over-inclusive to that extent.
296. Radio Broadcasting. The proposed policies could apply to radio
broadcast licensees, and potential licensees of radio service. The SBA
defines a radio broadcast station as a small business if such station
has no more than $35.5 million in annual receipts. Business concerns
included in this industry are those ``primarily engaged in broadcasting
aural programs by radio to the public.'' According to Commission staff
review of the BIA Publications, Inc. Master Access Radio Analyzer
Database as of November 26, 2013, about 11,331 (or about 99.9 percent)
of 11,341 commercial radio stations have revenues of $35.5 million or
less and thus qualify as small entities under the SBA definition. The
Commission notes, however, that, in assessing whether a business
concern qualifies as small under the above definition, business
(control) affiliations must be included. This estimate, therefore,
likely overstates the number of small entities that might be affected
by this action, because the revenue figure on which it is based does
not include or aggregate revenues from affiliated companies.
297. In addition, an element of the definition of ``small
business'' is that the entity not be dominant in its field of
operation. The Commission is unable at this time to define or quantify
the criteria that would establish whether a specific radio station is
dominant in its field of operation. Accordingly, the estimate of small
businesses to which rules may apply does not exclude any radio station
from the definition of a small business on this basis and therefore may
be over-inclusive to that extent. Also, as noted, an additional element
of the definition of ``small business'' is that the entity must be
independently owned and operated. The Commission notes that it is
difficult at times to assess these criteria in the context of media
entities and the estimates of small businesses to which they apply may
be over-inclusive to this extent.
298. Daily Newspapers. The SBA has developed a small business size
standard for the census category of Newspaper Publishers; that size
standard is 500 or fewer employees. Business concerns included in this
category are those that ``carry out operations necessary for producing
and distributing newspapers, including gathering news; writing news
columns, feature stories, and editorials; and selling and preparing
advertisements.'' Census Bureau data for 2007 show that there were
4,852 firms in this category that operated for the entire year. Of this
total, 4,771 firms had employment of 499 or fewer employees, and an
additional 33 firms had employment of 500 to 999 employees. Therefore,
the Commission estimates that the majority of Newspaper Publishers are
small entities that might be affected by this action.
4. Description of Projected Reporting, Recordkeeping, and Other
Compliance Requirements
299. The Further Notice of Proposed Rulemaking proposes rule
changes that will affect reporting, recordkeeping, and other compliance
requirements. Each of these changes is described below.
300. The Further Notice of Proposed Rulemaking proposes
modifications to several of the media ownership rules as set forth in
Section A above. The proposals, if ultimately adopted, would modify
several FCC forms and their instructions: (1) FCC Form 301, Application
for Construction Permit For Commercial Broadcast Station; (2) FCC Form
314, Application for Consent to Assignment of Broadcast Station
Construction Permit or License; and (3) FCC Form 315, Application for
Consent to Transfer Control of Corporation Holding Broadcast Station
Construction Permit or License. The Commission may have to modify other
forms that include in their instructions the media ownership rules or
citations to media ownership proceedings, including Form 303-S and Form
323. The impact of these changes will be the same on all entities, and
the Commission does not anticipate that compliance will require the
expenditure of any additional resources.
301. In addition, the Further Notice of Proposed Rulemaking
proposes changes that would affect reporting, recordkeeping, or other
compliance requirements with regard to the proposed disclosure of SSAs.
If this proposal is ultimately adopted, commercial television stations
will be required to disclose all SSAs to the public and the Commission.
Depending on the method of disclosure for SSAs that may ultimately be
adopted, commercial television stations may be required to upload all
SSAs to their online public file or place a copy of all SSAs in their
physical local public inspection file. In addition, if the Commission
were to require the filing of SSAs pursuant to 47 CFR 73.3613,
commercial television stations would be required to file a paper copy
of such contracts with the Commission; list the contracts on their FCC
Form 323, Ownership Report for Commercial Broadcast Station; and either
place the SSAs in their local public inspection file or maintain an up-
to-date list of all contracts reported on Form 323 and make such
contracts available on request. Other proposed alternatives may include
the creation of a new form for the filing of SSAs or the creation of a
dedicated docket in the Commission's Electronic Comment Filing System
that could be used for filing purposes.
5. Steps Taken To Minimize Significant Economic Impact on Small
Entities, and Significant Alternatives Considered
302. 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.
303. In conducting the quadrennial review, the Commission has three
chief alternatives available for each of the Commission's media
ownership rules -- eliminate the rule, modify it, or, if the Commission
determines that the rule is ``necessary in the public interest,''
retain it. The Commission believes that the rules proposed in the
Further Notice of
[[Page 29059]]
Proposed Rulemaking, which are intended to achieve its policy goals of
competition, localism, and diversity, will continue to benefit small
entities by fostering a media marketplace in which they are able to
compete effectively and by promoting additional broadcast ownership
opportunities, as described below, among a diverse group of owners,
including small entities. This Supplemental IRFA discusses below
several ways in which the rules may benefit small entities as well as
steps taken, and significant alternatives considered, to minimize any
potential burdens on small entities.
304. Local Television Ownership Rule. The Commission proposes to
retain the local television ownership rule with only a minor
modification, consistent with the proposal in the NPRM. In the NPRM,
the Commission proposed to retain the rule but sought comment on a
number of alternatives to this proposal. Specifically, the NPRM
proposed to retain the top-four prohibition, eight-voices test, and
numerical limits of the existing rule, while proposing to replace the
Grade B contour overlap provision with a DMA-based approach. The NPRM
also invited comment on whether to adopt a market size waiver standard,
the impact of multicasting on the local television ownership rule, and
the impact of the proposed rule on minority and female ownership.
305. Multiple commenters asserted that the Commission should
retain, or tighten, the local television ownership rule to promote
competition and create ownership opportunities for new entrants. In
contrast, broadcast commenters asserted that the local television
ownership rule should be eliminated or substantially relaxed as a
result of competition for viewers and advertising revenue from non-
broadcast video alternatives. A number of commenters argued that such
relief is warranted particularly for broadcasters--including small
entities--that operate in small and mid-sized markets. Broadcast
commenters also support adoption of a more flexible waiver standard for
small and mid-sized markets.
306. In the Further Notice of Proposed Rulemaking, the Commission
tentatively finds that the local television ownership rule remains
necessary in the public interest and should be maintained with a
limited modification. Accordingly, under the proposed modified
television ownership rule an entity may own up to two television
stations in the same DMA if (1) the digital NLSCs of the stations (as
determined by Section 73.622(e)) do not overlap; or (2) at least one of
the stations is not ranked among the top four stations in the market
and at least eight independently owned television stations will remain
in the DMA following the combination. In calculating the number of
stations remaining post-merger, only those stations whose digital NLSC
overlaps with the digital NLSC of at least one of the stations in the
proposed combination will be considered. In addition, the Commission
proposes to retain the existing failed/failing station waiver policy.
307. As noted above, the NPRM proposed to replace the Grade B
contour overlap provision with a DMA-based approach. The Commission
tentatively finds, however, that adoption of a DMA-based approach to
replace the analog Grade B contour as the trigger for the rule would
unduly expand the reach of the local television ownership rule in some
DMAs, particularly in those DMAs that cover large rural areas in the
western United States where numerous small television stations operate.
Thus, the Further Notice of Proposed Rulemaking proposes to adopt
instead the use of a digital NLSC as the functional equivalent of the
analog Grade B contour, which is no longer relevant following the
digital television transition. In the Further Notice of Proposed
Rulemaking, the Commission tentatively affirms the NPRM's proposal to
grandfather existing ownership combinations that would exceed the
numerical limits under the revised contour approach, though the
Commission proposes that, going forward, the sale of such combinations
must comply with the local television ownership rule then in effect.
The Commission believes that this approach will avoid disruption of
settled expectations and prevent any impact on the provision of
television service by smaller stations operating in rural areas.
Moreover, the Commission believes that by preventing stations with the
largest market shares from combining to achieve excessive market power,
the local television ownership rule protects against potential harm to
broadcasters with smaller market shares, including small entities.
Accordingly, the Commission believes that the rule, as modified, will
continue to ensure that local television markets do not become too
concentrated and, by doing so, will allow more firms, including those
that are small entities, to enter local markets and compete
effectively.
308. The Further Notice of Proposed Rulemaking also addresses the
competitive challenges faced by broadcasters that operate in small
markets--including small entities--by proposing to retain the existing
failed/failing station waiver policy. The Commission finds that the
existing waiver standard is not unduly restrictive and provides
appropriate relief in markets of all sizes. In particular, the
Commission notes that a review of recent transactions demonstrates that
waivers under the failed/failing station policy are frequently granted
in small and mid-sized markets, which often provides relief for small
entities. Moreover, waiver of the Commission's rules is meant to be
exceptional relief, and the Commission believes that the existing
waiver criteria strike an appropriate balance between enforcing the
ownership limits and providing relief from the rule in circumstances
where it is truly appropriate. However, the Further Notice of Proposed
Rulemaking seeks comment on whether to relax the failed/failing station
waiver criteria or establish additional grounds for waiver. For
example, the items asks whether there are circumstances in which the
Commission should refrain from applying the four-percent all-day
audience share requirement or adopt a higher threshold.
309. Local Radio Ownership Rule. The Further Notice of Proposed
Rulemaking proposes to retain the local radio ownership rule without
modification, consistent with the NPRM. In the NPRM, the Commission
proposed to retain the rule and sought comment on alternatives to this
proposal. Specifically, the NPRM proposed to retain the AM/FM subcaps,
which limit the number of radio stations in the same service that an
entity can own. The Commission also sought comment on whether and, if
so, how, to incorporate new audio platforms into the rule and sought
additional comment on the impact of such platforms on the broadcast
radio industry. In addition, the NPRM sought comment on whether to
adopt a specific waiver standard for the local radio ownership rule and
on how the proposed rule would affect minority and female ownership
opportunities.
310. Several commenters supported the tentative conclusion to
retain the local radio ownership rule, including the AM/FM subcaps.
They asserted that the AM band, in particular, is a critical point of
new entry in the marketplace. By contrast, many broadcast commenters
supported eliminating or loosening the rule, including the AM/FM
subcaps. In particular, NAB disputes the tentative conclusion that the
subcaps promote new entry, asserting instead that elimination of the
subcaps could spur market activity that
[[Page 29060]]
leads to divested properties that could be purchased by new entrants,
including small businesses and minority and women-owned businesses.
311. The Commission proposes to retain the local radio ownership
rule, including the AM/FM subcaps, finding that AM subcaps in
particular promote new entry in the broadcast radio marketplace.
Accordingly, an entity may own: (1) Up to eight commercial radio
stations in radio markets with 45 or more radio stations, no more than
five of which can be in the same service (AM or FM); (2) up to seven
commercial radio stations in radio markets with 30-44 radio stations,
no more than four of which can be in the same service (AM or FM); (3)
up to six commercial radio stations in radio markets with 15-29 radio
stations, no more than four of which can be in the same service (AM or
FM); and (4) up to five commercial radio stations in radio markets with
14 or fewer radio stations, no more than three of which can be in the
same service (AM or FM), provided that an entity may not own more than
50 percent of the stations in such a market, except that an entity may
always own a single AM and single FM station combination.
312. The Commission tentatively concludes that, consistent with
previous Commission findings, broadcast radio continues to be a viable
avenue for new entry in the media marketplace, including by small
businesses, minorities, women, and entities seeking to serve niche
audiences. Specifically, the Commission tentatively finds that AM
stations are generally the least expensive option for entry into the
radio market, often by a significant margin, and therefore permit new
entry for far less capital investment than is required to purchase an
FM station. The Commission believes that retention of the local radio
ownership limits, including the AM/FM subcaps, will foster
opportunities for new entry in local radio markets, particularly by
small entities. Moreover, the Commission believes that by limiting the
consolidation of market power among the dominant groups, the rule will
ensure that small radio station owners remain economically viable.
313. Newspaper/Broadcast Cross-Ownership Rule. The Further Notice
of Proposed Rulemaking seeks additional comment on the NPRM's proposals
regarding the newspaper/broadcast cross-ownership (NBCO) rule. The NPRM
offered a myriad of tentative conclusions and inquired about detailed
scenarios. In particular, the NPRM sought comment on a number of
alternatives, including whether to modify the top 20 DMA distinction,
the top-four restriction, or the eight voices test. The NPRM also
proposed to eliminate the use of a station's analog signal contour in
favor of a DMA-based approach for triggering the rule.
314. The Commission received a substantial number of comments on
the NBCO rule, several of which discuss issues that may be of interest
to small entities. For instance, several commenters claimed that
lifting the newspaper/radio cross-ownership restriction will revitalize
local news on radio stations and will provide struggling newspapers
with a broader base of financial support and an increased ability to
reach audiences. In the Further Notice of Proposed Rulemaking, the
Commission seeks comment on whether the restriction on newspaper/radio
cross-ownership is no longer necessary to promote viewpoint diversity
and therefore should be eliminated from the NBCO rule.
315. Additionally, in the Further Notice of Proposed Rulemaking,
the Commission tentatively concludes that it should not adopt a bright-
line rule allowing some newspaper/television combinations, even under
narrowly prescribed circumstances. The Commission is aware that bright-
line rules are more likely to produce predictable and consistent
outcomes in an expeditious and less costly manner than rules that
incorporate a waiver process, which is inherently more uncertain. The
Commission is concerned, however, that a bright-line rule is too blunt
an instrument to be used for allowing newspaper/television cross-
ownership, no matter how limited. Of particular interest to small
entities, the Commission also is concerned that a bright-line rule
allowing only certain combinations in the largest markets could
foreclose merger opportunities in smaller markets where a combination
might be acceptable.
316. Although the Commission tentatively concludes that a general
prohibition on newspaper/television combinations in all markets is the
appropriate starting point when considering the impact of newspaper/
television cross-ownership on viewpoint diversity, it recognizes that
particular combinations might be shown to be consistent with its
diversity goal. Therefore, it proposes to entertain requests for waiver
of the general prohibition. An approach that incorporates a waiver
process would provide the Commission with the flexibility to take into
account the particular circumstances of a proposed merger and
potentially provide relief for broadcasters--including small entities--
by allowing the combination of a newspaper and a television station
where appropriate.
317. The Commission requests comment on what type of waiver process
would enable it to identify any acceptable newspaper/television
combinations most accurately and effectively. It asks whether it should
implement a pure case-by-case approach that evaluates the totality of
the circumstances for each individual transaction, considering each
waiver request anew without measuring it against a set of defined
criteria or awarding the applicant an automatic presumption based on a
prima facie showing of particular elements. Additionally, the
Commission seeks comment on an approach whereby the Commission would
ascribe a favorable presumption to certain waiver applicants in the
top-20 DMAs and a negative presumption to all other waiver applicants.
It seeks comment on requiring as conditions for a favorable presumption
that: (1) The proposed merger does not involve a television station
ranked among the top-four television stations in the DMA and (2) at
least eight major media voices remain in the DMA following the
transaction. The Commission seeks comment on the pros and cons, costs
and benefits of both these approaches.
318. As noted above, the NPRM also proposed to eliminate the use of
a station's Grade A contour in favor of a DMA-based approach for
triggering the rule. As commenters note, however, because DMAs can be
much larger in size than the former Grade A contour areas, the proposed
DMA-based approach could expand the reach of the rule and prohibit
cross-ownership when there is no overlap between the community in which
a newspaper is published and the primary service area of a broadcast
station. To avoid that possibility, the Further Notice of Proposed
Rulemaking proposes instead to prohibit cross-ownership of a full-power
television station and a daily newspaper when: (1) The community of
license of the television station and the community of publication of
the newspaper are in the same Nielsen DMA, and (2) the Principal
Community Contour (PCC) of the television station, as defined in
Section 73.625 of the Commission's rules, encompasses the entire
community in which the newspaper is published. Under this proposal,
both conditions must be met in order for the cross-ownership
prohibition to be triggered. Furthermore, the Commission proposes to
grandfather those existing combinations that would exceed the ownership
limit by virtue of
[[Page 29061]]
the change to this new DMA/PCC approach. The Commission believes that
this approach will avoid disruption of settled expectations and prevent
any impact on the provision of television service by smaller stations.
Moreover, the Commission believes that the newspaper/television cross-
ownership limits--including the top 20 DMA distinction, the top-four
restriction, and the eight voices test--will continue to foster diffuse
ownership among media outlets and thereby create more ownership
opportunities for small entities.
319. Radio/Television Cross-Ownership Rule. In the Further Notice
of Proposed Rulemaking, the Commission seeks comment on whether to
eliminate the radio/television cross-ownership rule, which limits the
combined number of commercial radio and television stations a single
entity may own in the same market. In the NPRM, the Commission
tentatively concluded that the radio/television cross-ownership rule is
not currently necessary to promote the public interest. The Commission
sought comment on a range of issues, including whether radio and
television stations constitute different markets, whether repeal of the
rule would encourage more and better competition in local media
markets, whether repeal of the rule would result in additional
broadcast consolidation, and what impact, if any, repeal would have on
small, independent broadcasters, including those stations owned by
minorities and women. The Commission indicated in the NPRM that changes
in the marketplace and evidence from the media ownership studies
specifically supported the tentative conclusion that the rule is not
necessary to promote viewpoint diversity in local media markets.
320. Most broadcast commenters supported the Commission's tentative
conclusion, and asserted that the cross-ownership rule is no longer
necessary to protect the public interest, particularly in light of
competition from new media technologies and Internet-based information
outlets. Not all broadcasters, however, agreed. Mt. Wilson, an
independent broadcaster, asserted that CBS, its primary competitor, is
able to wield significant power in the radio market because of its
ability to leverage its non-radio holdings, which, in turn, adversely
affects the ability of independent radio owners in the market to
compete effectively. Mt. Wilson argued that elimination of the radio/
television cross-ownership rule will benefit group owners, such as CBS,
by allowing them to acquire additional co-owned radio stations in a
market, and thereby giving them a further competitive benefit to the
disadvantage of independent broadcasters.
321. Commenters who supported retention of the rule also expressed
concern about the potential loss of viewpoint diversity in local
markets if the rule were to be repealed. They were skeptical of
conclusions in the media ownership studies that consolidated broadcast
stations air more local content, and thus, contribute more to viewpoint
diversity than independent voices. Commenters also asserted that the
Commission must take into account the public's reliance on broadcast
stations and newspapers as the primary sources of information for
individuals to learn about their local communities and to participate
in local civic affairs.
322. In addition, public interest commenters claimed that broadcast
radio is one of the few remaining entry points into media ownership for
women and minorities, and that its usefulness as such would potentially
be limited if the radio/television cross-ownership rule were
eliminated. Other commenters argued more generally that any media
consolidation disproportionately affects opportunities for women and
minorities to become and remain broadcast station owners and that
female- and minority-owned stations thrive in markets that are less
concentrated. NHMC et al. contended that strengthening, or at least
retaining, broadcast ownership limits is one of the few race- and
gender-neutral ways to increase broadcast station ownership by women
and minorities, thereby, avoiding the constitutional concerns raised by
race- and gender-specific remedies. NABOB asked that the Commission not
take any action that would further erode minority broadcast ownership,
particularly given that new media outlets are not positioned to replace
traditional broadcasters and the information services they provide to
minority communities. NABOB contended that any deregulation allows
consolidation and it asserted that consolidation enhances an entity's
competitive advantage in obtaining advertising.
323. Consistent with prior Commission holdings, the Commission
tentatively finds that the radio/television cross-ownership rule is not
necessary to promote competition. The Commission has found previously
that most advertisers do not consider radio and television to be good
substitutes for one another and that television and radio stations do
not compete in the same product market. This position is consistent
with the long-standing conclusion of the Department of Justice, which
considers radio advertising as a separate antitrust market for purposes
of its competition analysis. The Further Notice of Proposed Rulemaking
tentatively finds that most consumers do not consider radio and
television stations to be substitutes for one another and do not switch
between television viewing and radio listening based on program
content. Contrary to Mt. Wilson's conflicting opinion, the Commission
believes that the weight of the evidence in the record of this
proceeding and precedent supports these tentative conclusions.
324. The Further Notice of Proposed Rulemaking tentatively
concludes that the radio/television cross-ownership rule is not
necessary to promote localism. The Commission agrees with industry
commenters who maintained that some limited cross-ownership could
create efficiencies that could benefit the public should broadcasters
choose to invest additional resources in the production of local news
and information programming. When broadcasters engage in joint
operations, whether those operations are focused on programming and
news gathering or back office matters, the Commission believes it
likely that financial efficiencies result. Such efficiencies could lead
ultimately to consumer benefits in the form of additional station
investments in equipment for radio or television newsrooms, an increase
in staffing for news and informational programs, or additional local
news coverage on radio stations.
325. The Commission seeks comment on whether the radio/television
cross-ownership rule is not necessary to promote viewpoint diversity.
In addition, the Further Notice of Proposed Rulemaking tentatively
finds that the current record does not support claims that elimination
of the radio/television cross-ownership rule would have a negative
impact on minority and female ownership. Notably, radio/television
cross-ownership combinations were not the focus of commenters' concerns
raised in response to the NPRM. In fact, no commenter to the NPRM
presented empirical data or other analyses that established that repeal
of this rule would harm competition, localism, or viewpoint diversity
in local markets. Moreover, while the Commission acknowledges the
concerns raised by those advocating for additional minority ownership
opportunities, the Commission agrees with commenters, including NAB,
that the low level of minority and female broadcast ownership cannot be
attributed solely or primarily to consolidation. Nor has any commenter
shown that these low levels
[[Page 29062]]
of ownership are a result of the existing radio/television cross-
ownership rule. The Commission recognizes the presence of many
disparate factors, including, most significantly, access to capital, as
longstanding, persistent impediments to ownership diversity in
broadcasting.
326. Shared Service Agreements. The proposed filing requirement for
SSAs is not expected to have a significant economic impact on any
entities, whether small or otherwise. The filing requirement is limited
to commercial television stations, so any small entities that are
licensees of commercial radio stations and any small entities that are
licensees of noncommercial television or radio stations are exempt from
the filing requirement. Furthermore, the Commission believes that SSAs
are generally executed for a period of multiple years, which likely
limits the number of agreements that will be subject to the proposed
disclosure requirement. However, the Further Notice of Proposed
Rulemaking seeks comment on ways to limit the disclosure requirement
that could reduce the burden while not negatively impacting the policy
justifications for requiring disclosure. For example, the Commission
asks whether any category of agreements between stations should be
excluded from the definition of SSA in this proceeding, for instance by
adopting a de minimis financial exclusion, limiting the definition to
agreements that involve local news production or that only involve
stations from the same local market. The Further Notice of Proposed
Rulemaking also seeks comment on how much time should be provided for
compliance with the proposed requirement, which could reduce the burden
on all stations. Finally, the Further Notice of Proposed Rulemaking
seeks comment on whether to limit the disclosure requirement to certain
larger markets (e.g., the top 50 or 100 Designated Market Areas).
327. In addition, the Further Notice of Proposed Rulemaking seeks
comment on multiple alternatives for the proposed disclosure
requirement. These alternatives include placing the SSAs in the
stations' public inspection files (online or physical), filing the
agreements with the Commission, the creation of a new form for the
filing of SSAs, or the creation of a dedicated docket in ECFS that
could be used for filing purposes. This gives commenters the
opportunity to demonstrate that one of these alternatives may have less
of an economic impact on small businesses and/or all entities. The
Commission will consider all such comments.
328. Diversity Order Remand/Eligible Entity Definition. The
Commission solicited comment in the NPRM on whether the Commission
should reinstate the preexisting revenue-based eligible entity
definition to support the measures the Third Circuit vacated and
remanded as well as other measures the Commission may implement in the
future. In addition, the Commission sought comment on whether re-
adoption of the revenue-based standard would support the Commission's
traditional diversity, localism, and competition goals in other ways,
particularly by enhancing ownership opportunities for small businesses
and other new entrants.
329. As noted above, the Further Notice of Proposed Rulemaking
tentatively concludes that the Commission should reinstate the
preexisting revenue-based eligible entity definition, which includes
those entities, commercial or noncommercial, that would qualify as
small businesses consistent with SBA standards for its industry
grouping, based on revenue. Specifically, the Commission believes that
reinstating the revenue-based standard will promote small business
participation in the broadcast industry. The Commission believes that
small-sized applicants and licensees benefit from flexible licensing,
auctions, transactions, and construction policies. Often, small-
business applicants have financing and operational needs distinct from
those of larger broadcasters. By easing certain regulations for small
broadcasters, the Commission believes that it will promote the public
interest goal of making access to broadcast spectrum available to a
broad range of applicants. The Commission also believes that enabling
more small businesses to participate in the broadcast industry will
encourage innovation and expand viewpoint diversity.
330. In addition, the Commission proposes to readopt each measure
relying on the eligible entity definition that was remanded in
Prometheus II. These measures include: (1) Revision of Rules Regarding
Construction Permit Deadlines; (2) Modification of Attribution Rule;
(3) Distress Sale Policy; (4) Duopoly Priority for Companies that
Finance or Incubate an Eligible Entity; (5) Extension of Divestiture
Deadline in Certain Mergers; and (6) Transfer of Grandfathered Radio
Station Combinations. The Commission's intent in proposing the
reinstatement of the previous revenue-based eligible entity
definition--and in applying it to the construction, licensing,
transaction, and auction measures to which it previously applied--is to
expand broadcast ownership opportunities for new entrants, including
small entities. Therefore, the Commission anticipates that the measures
proposed in the Further Notice of Proposed Rulemaking will benefit
small entities, not burden them.
331. The Commission tentatively concludes that it does not have
sufficient evidence at this time to satisfy the constitutional
standards necessary to adopt race- or gender-conscious measures. In
evaluating the possibility of adopting a socially disadvantaged
business (SDB) standard based on the definition employed by the SBA, or
any other race-conscious standard, the first question the Commission
must consider is whether the standard could be justified by a
``compelling governmental interest.'' Assuming that such an interest
could be established, the Commission then would have to be able to
demonstrate that the application of the race-conscious standard to
specific measures or programs would be ``narrowly tailored'' to further
that interest. While the Commission tentatively finds that a reviewing
court could deem the Commission's interest in promoting a diversity of
viewpoints compelling, the Commission believes that it does not have
sufficient evidence at this time to demonstrate that adoption of race-
conscious measures would be narrowly tailored to further that interest.
Additionally, the Commission tentatively finds that it cannot conclude
that the record evidence establishes a relationship between the
Commission's interest in viewpoint diversity and the ownership of
broadcast stations by women that would satisfy intermediate scrutiny.
While the Commission acknowledges that the data show that women-owned
stations are not represented in proportion to the presence of women in
the overall population, the Commission does not believe that the
evidence available at this time reveals that the content provided via
women-owned broadcast stations substantially contributes to viewpoint
diversity in a manner different from other stations or otherwise varies
significantly from that provided by other stations. Further, the
Commission tentatively finds that it does not have sufficient evidence
to establish a compelling interest in remedying past discrimination.
332. In addition, the Commission reject commenters' arguments that
the Commission is required to adopt an SDB standard or another race-
conscious eligible entity standard in this proceeding in light of the
court's
[[Page 29063]]
instructions in Prometheus II. The Commission also disagrees with
arguments that the Commission is not permitted to conclude this
proceeding until the Commission has completed any and all studies or
analyses that may enable it to take such action in the future
consistent with current standards of constitutional law. The Commission
intends to follow the Third Circuit's direction that the Commission
consider adopting an SDB definition before completion of this
proceeding and evaluate the feasibility of adopting a race-conscious
eligibility standard based on an extensive analysis of the available
evidence. The Commission does not believe that the Third Circuit
intended to prejudge the outcome of the Commission's analysis of the
evidence or the feasibility of implementing a race-conscious standard
that would be consistent both with applicable legal standards and the
Commission's practices and procedures.
333. The Commission also declined to adopt at this time an eligible
entity definition that incorporates the Overcoming Disadvantage
Preference (ODP) standard proposed by the Commission's Diversity
Advisory Committee in 2010. Commenters generally did not suggest
criteria, other than race and ethnic origin, that could be considered
in an individualized, holistic evaluation system like that approved in
Grutter. Commenters recommended that the Commission replace its
revenue-based eligible entity definition with an ODP standard as a
race-neutral means of advancing ownership diversity. The Commission
notes that it is not entirely clear whether the proposed ODP standard
would be subject to heightened constitutional scrutiny. Moreover, the
Commission believes that it does not have a sufficient record at
present on a number of issues that would need to be resolved prior to
the implementation of an ODP standard. Among other issues, no commenter
provided input on (1) what social or economic disadvantages should be
cognizable under an ODP standard, (2) how the Commission could validate
claims of eligibility for ODP status, (3) whether applicants should
bear the burden of proving specifically that they would contribute to
diversity as a result of having overcome certain disadvantages, (4) how
the Commission could measure the overcoming of a disadvantage if an
applicant is a widely held corporation rather than an entity with a
single majority shareholder or a small number of control persons, and
(5) how the Commission could evaluate the effectiveness of the use of
an ODP standard. Even if the Commission could develop an adequate
record on these issues, the Commission is concerned that it may lack
the resources to conduct such individualized reviews. Moreover, the
Commission would have to walk a very fine line in order to fully
evaluate the potential diversity contributions of individual applicants
without running afoul of First Amendment values. The Commission is
concerned that the type of individualized consideration that would be
required under an ODP standard could prove to be administratively
inefficient, unduly resource-intensive, and inconsistent with First
Amendment values.
334. The Commission also tentatively declined to act on various
recommendations from commenters regarding the promotion of minority and
female ownership. These recommendations include: (1) Relaxing the
foreign ownership limitations under section 310(b)(4) of the
Communications Act; (2) encouraging Congress to reinstate and update
tax certificate legislation; (3) granting waivers of the local radio
ownership rule to parties that ``incubate'' qualified entities; and (4)
migrating AM radio to VHF Channels 5 and 6. In addition, the Alliance
for Women in Media, Inc. (AWM) asked the Commission to consider several
actions to address the ``historic underrepresentation of women'' in
ownership of broadcast stations and managerial positions in the
broadcast industry. The Commission has already implemented some of
these recommendations. Because the Commission believes that the
remainder of these proposals would raise public interest concerns, may
not provide meaningful assistance to the intended beneficiaries, or are
outside of the proper scope of this broadcast ownership proceeding, the
Commission tentatively concludes that it should not adopt them here.
6. Federal Rules That May Duplicate, Overlap, or Conflict With the
Proposed Rule
335. None.
D. Ordering Clauses
336. Accordingly, it is ordered, that pursuant to the authority
contained in sections 1, 2(a), 4(i), 303, 307, 309, 310, and 403 of the
Communications Act of 1934, as amended, 47 U.S.C. 151, 152(a), 154(i),
303, 307, 309, 310, and 403, and section 202(h) of the
Telecommunications Act of 1996, this Further Notice of Proposed
Rulemaking is adopted.
337. It is further ordered that the Commission's Consumer and
Governmental Affairs Bureau, Reference Information Center, shall send a
copy of the Further Notice of Proposed Rulemaking, including the
Supplemental Initial Regulatory Flexibility Analysis, to the Chief
Counsel for Advocacy of the Small Business Administration.
List of Subjects 47 CFR Part 73
Radio, Reporting and recordkeeping requirements, Television.
Federal Communications Commission.
Marlene H. Dortch,
Secretary.
Proposed Rules
For the reasons discussed in the preamble, the Federal
Communications Commission proposes to amend 47 CFR part 73 as follows:
PART 73--RADIO BROADCAST SERVICES
0
1. The authority citation for part 73 continues to read as follows:
Authority: 47 U.S.C. 154, 303, 334, 336, and 339.
0
2. Amend Sec. 73.3555 by revising paragraph (b) to read as follows:
Sec. 73.3555 Multiple ownership.
* * * * *
(b) Local television multiple ownership rule. An entity may
directly or indirectly own, operate, or control two television stations
licensed in the same Designated Market Area (DMA) (as determined by
Nielsen Media Research or any successor entity) if:
(1) The digital noise limited service contours of the stations (as
determined by Sec. 73.622) do not overlap; or
(i) At the time the application to acquire or construct the
station(s) is filed, at least one of the stations is not ranked among
the top four stations in the DMA, based on the most recent all-day
(9:00 a.m.-midnight) audience share, as measured by Nielsen Media
Research or by any comparable professional, accepted audience ratings
service; and
(ii) At least 8 independently owned and operating, full-power
commercial and noncommercial TV stations would remain post-merger in
the DMA in which the communities of license of the TV stations in
question are located. Count only those TV stations the digital noise
limited service contours of which overlap with the digital noise
limited service contour of at least one of the stations in the proposed
combination. In areas where there is no Nielsen DMA, count the TV
stations present in an area that would be the functional equivalent
[[Page 29064]]
of a TV market. Count only those TV stations the digital noise limited
service contours of which overlap with the digital noise limited
service contour of at least one of the stations in the proposed
combination.
(2) [Reserved]
* * * * *
[FR Doc. 2014-10870 Filed 5-19-14; 8:45 am]
BILLING CODE 6712-01-P