National Television Multiple Ownership Rule, 73035-73041 [2016-25569]
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Federal Register / Vol. 81, No. 205 / Monday, October 24, 2016 / Rules and Regulations
FEDERAL COMMUNICATIONS
COMMISSION
47 CFR Part 73
[MB Docket No. 13–236; FCC 16–116]
National Television Multiple Ownership
Rule
Federal Communications
Commission.
ACTION: Final rule.
AGENCY:
This document eliminates the
UHF discount from the calculation of
the national television audience reach
cap because it is no longer justified due
to the transition to digital television.
The discount attributes television
stations broadcasting in the UHF
spectrum with only 50 percent of the
television households in their
Designated Market Areas (DMAs). To
avoid imposing undue harm on existing
broadcast television station groups that
exceed the national audience reach cap
without the benefit of the UHF discount,
this Report and Order grandfathers
combinations: In existence on
September 26, 2013 (Grandfather Date),
the release date of the Notice of
Proposed Rulemaking (NPRM) in this
proceeding; created by a transaction that
had received Commission approval on
or before the Grandfather Date; and
proposed in applications pending before
the Commission on the Grandfather
Date.
SUMMARY:
DATES:
Effective November 23, 2016.
FOR FURTHER INFORMATION CONTACT:
Brendan Holland, Industry Analysis
Division, Media Bureau,
Brendan.Holland@fcc.gov, (202) 418–
2757.
This
Report and Order in MB Docket No. 13–
236 was adopted August 24, 2016, and
released September 7, 2016. The full
text of this document is available for
public inspection during regular
business hours in the FCC Reference
Center, 445 12th Street SW., Room CY–
A257, Washington, DC 20554, or online
at https://www.fcc.gov/ecfs/filing/
0907563506002/document/
090756350600263ba. To request this
document in accessible formats for
people with disabilities (e.g. braille,
large print, electronic files, audio
format, etc.) or to request reasonable
accommodations (e.g. accessible format
documents, sign language interpreters,
CART, etc.), send an email to fcc504@
fcc.gov or call the FCC’s Consumer and
Governmental Affairs Bureau at (202)
418–0530 (voice), (202) 418–0432
(TTY).
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SUPPLEMENTARY INFORMATION:
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Synopsis of the Report and Order
1. Background. Three decades ago in
1985, to protect localism, diversity, and
competition, the Commission amended
its national television multiple
ownership rule to include a national
audience reach cap that prohibited a
single entity from owning television
stations that collectively reached more
than 25 percent of the total television
households in the nation. At that time,
the Commission recognized the inherent
physical limitations of the UHF
television band, finding that the
strength of UHF television signals
decreased more rapidly with distance in
comparison to the signals of stations
broadcasting in the VHF band, resulting
in significantly smaller coverage areas
and audience reach. This finding was
significant because, at the time, the vast
majority of viewers received
programming from broadcast television
stations via over-the-air signals. Thus, a
smaller over-the-air signal made it
harder for UHF stations to compete with
incumbent VHF stations, which
maintained greater coverage areas. To
account for this coverage disparity, the
Commission determined that licensees
of UHF stations should be attributed
with only 50 percent of the television
households in their DMAs for purposes
of calculating the national audience
reach cap. This rule is termed the UHF
discount.
2. As early as 1992, the Commission
anticipated the possibility that the
transition to digital television would
obviate the need for the UHF discount,
and sought comment on whether any
distinction between UHF and VHF
stations would be appropriate in light of
the transition. A few years later, in the
Telecommunications Act of 1996 (1996
Act), Congress directed the Commission
to modify its ownership rules to
increase the national audience reach cap
from 25 percent to 35 percent of the
total nationwide audience. In the 1996
Act Implementation Order (11 FCC Rcd
12374), the Commission noted that it
was reviewing the UHF discount in the
context of its television broadcast
ownership rules, and explicitly
cautioned that any entity that acquired
stations during this interim period and
complied with the 35 percent audience
reach cap only by virtue of the UHF
discount would be subject to the
outcome of the pending rule making
proceeding. In the 1998 Biennial Review
Order (15 FCC Rcd 11058), the
Commission retained the UHF discount,
but stated that it would likely be
unnecessary after the digital television
transition and that the Commission
would initiate a proceeding in the future
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to phase out the discount. In the 2002
Biennial Review Order (18 FCC Rcd
13620), the Commission raised the
national audience reach cap to 45
percent and again concluded that, ‘‘the
digital [television] transition [would]
largely eliminate the technical basis for
the UHF discount because UHF and
VHF signals [would] be substantially
equalized.’’ Therefore, the 2002 Biennial
Review Order adopted rules to phase out
the UHF discount for broadcast stations
owned by the Big Four networks (ABC,
CBS, NBC, and Fox) on a market-bymarket basis at the time the markets
transitioned to DTV. The Commission
indicated further that, for networks and
station groups other than those stations
owned and operated by the Big Four
networks, it would decide in a
subsequent biennial ownership review
whether to extend the sunset to all other
networks and station group owners. The
rules at that time contemplated a
gradual, market-by-market transition to
DTV, but this approach was later
replaced by a hard deadline—June 12,
2009.
3. Following adoption of the 2002
Biennial Review Order, Congress
subsequently rolled back the 45 percent
national audience reach cap by
including a provision in the 2004
Consolidated Appropriations Act (CAA)
directing the Commission to set the cap
at 39 percent of national television
households. The CAA further amended
section 202(h) of the 1996 Act to require
a quadrennial review of the
Commission’s broadcast ownership
rules rather than the previously
mandated biennial review. In doing so,
Congress removed the requirement to
review any rules relating to the 39
percent national audience reach cap
from the quadrennial review
requirement. The CAA did not mention
the UHF discount, nor did it address the
potential impact of the DTV transition
on the calculation of the national
audience reach cap.
4. Prior to the enactment of the CAA,
several parties had appealed the
Commission’s 2002 Biennial Review
Order to the U.S. Court of Appeals for
the Third Circuit (Third Circuit). In June
2004, the Third Circuit found, among
other things, that the CAA rendered
moot the challenges to the
Commission’s decision to retain the
UHF discount (373 F.3d 372). The court
further found that the CAA insulated
the national audience reach cap,
including the UHF discount, from the
Commission’s quadrennial review of its
media ownership rules. At the same
time, however, the court stated that its
decision did not foreclose the
Commission’s consideration of the UHF
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discount in a rulemaking separate from
the required quadrennial review of its
ownership rules. The court concluded
that, barring congressional intervention,
the Commission could decide the scope
of its authority to modify or eliminate
the UHF discount outside the context of
section 202(h). Prior to the court’s
decision, in February 2004, the Media
Bureau issued a Public Notice
specifically seeking comment on the
Commission’s authority to modify or
eliminate the UHF discount in light of
the CAA. In particular, the Media
Bureau sought comment on whether the
passage of the 39 percent cap signified
congressional approval, adoption, or
ratification of the 50 percent UHF
discount. The comments and replies
were filed in the docket for the 2002
Biennial Review Order.
5. In July 2006, the Commission
issued a Further Notice of Proposed
Rulemaking (FNPRM) as part of its 2006
quadrennial review of the media
ownership rules (21 FCC Rcd 8834).
Among other things, the FNPRM sought
comment on the UHF discount rule in
light of the Third Circuit’s holding and
queried whether the Commission
should retain, modify, or eliminate the
UHF discount. Comments filed in
response to the FNPRM also refreshed
the Commission’s record on its
authority to alter the UHF discount. In
February 2008, the Commission
concluded in the 2006 Quadrennial
Review Order (23 FCC Rcd 2010) that
the UHF discount was insulated from
review under section 202(h) as a result
of the CAA, and thus beyond the
parameters of the quadrennial review.
But the Commission noted that the
Third Circuit’s 2004 decision had left it
to the Commission to decide the scope
of its authority to modify or eliminate
the UHF discount outside the context of
section 202(h). Accordingly, the
Commission indicated that it would
address the petitions, comments, and
replies filed with respect to the
alteration, retention, or elimination of
the UHF discount in a separate
proceeding, which would be
commenced at a future date.
6. Since June 13, 2009, all full-power
television stations have broadcast their
over-the-air signals exclusively in
digital form. The DTV transition has
enabled broadcasters to provide
multiple programming choices, higher
quality video, and enhanced capabilities
to consumers. Yet the transition has
posed more challenges for VHF
channels than UHF channels because
VHF spectrum has proven to have
characteristics that make it less
desirable for providing digital television
service. For instance, nearby electrical
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devices tend to emit noise that can
cause interference to DTV signals within
the VHF band, creating reception
difficulties in urban areas even a short
distance from the TV transmitter. The
reception of VHF signals also requires
physically larger antennas compared to
UHF signals. For these reasons, among
others, television broadcasters generally
have faced greater challenges providing
consistent reception on VHF signals
than UHF signals in the digital
environment, and some station owners
have therefore opted to migrate their
signals from VHF to UHF. Therefore, on
September 26, 2013, the Commission
issued the NPRM in this proceeding
proposing to eliminate the UHF
discount and grandfather certain
existing television station combinations
that would exceed the 39 percent
national audience reach cap in the
absence of the discount, and seeking
comment on whether a VHF discount
should be adopted (28 FCC Rcd 14324).
7. Authority to Modify the UHF
Discount. We conclude that the
Commission has the authority to modify
the national audience reach cap,
including the authority to revise or
eliminate the UHF discount. We find
that no statute bars the Commission
from revisiting the cap or the UHF
discount in a rulemaking proceeding so
long as such a review is conducted
separately from a quadrennial review of
the broadcast ownership rules pursuant
to section 202(h) of the 1996 Act. The
CAA removed the requirement to review
the national ownership cap from the
Commission’s quadrennial review
requirement, but did not impose a
statutory national audience reach cap or
prohibit the Commission from
evaluating the elements of this rule.
While the CAA also provides that the
Commission may not apply its
forbearance authority under Section 10
of the Communications Act to any
person or entity exceeding the 39
percent national audience reach cap,
there is nothing in the CAA that
suggests Congress intended to prevent
the Commission from tightening the
cap, repealing the UHF discount, or
otherwise changing its rules at a later
date. Thus, the Commission retains
authority under the Communications
Act to review any aspect of the national
audience reach cap; it simply is not
required to do so as part of the
quadrennial review.
8. Specifically, the Communications
Act gives the Commission the statutory
authority to revisit its own rules and
revise or eliminate them when it
concludes such action is appropriate.
The Act authorizes the agency to
‘‘perform any and all acts, make such
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rules and regulations, and issue such
orders, not inconsistent with this Act, as
may be necessary in the execution of its
functions.’’ Similarly, section 303(r)
provides that the Commission may
‘‘[m]ake such rules and regulations . . .
not inconsistent with this law, as may
be necessary to carry out the provisions
of this Act . . . .’’ Indeed, courts have
held that the Commission has an
affirmative obligation to reexamine its
rules over time. In Bechtel v. FCC (957
F.2d 873), the court observed that
‘‘changes in factual and legal
circumstances may impose upon the
agency an obligation to reconsider a
settled policy or explain its failure to do
so. In the rulemaking context, an agency
also may be obligated to reexamine its
approach if a significant factual
predicate of a prior decision has been
removed.’’ As we explain further below,
this is precisely the case in this
instance.
9. With respect to the UHF discount,
even those advocating retention of the
discount based on the CAA
acknowledge that the CAA does not
even mention the UHF discount. We
disagree with commenters’ suggestion
that the CAA’s legislative history
somehow supports a conclusion that
Congress fully considered either the
UHF discount or the effect of the—then
future—DTV transition. The history of
this immense, omnibus bill does not
reflect any consideration of the UHF
discount or its potential elimination.
There is no basis for the assumption that
Congress, in overruling the
Commission’s decision to raise the
national audience reach cap to 45
percent and mandating it be moved back
down to 39 percent, did so with the
expectation that the Commission would
indefinitely maintain the UHF discount,
especially given that post-DTV
transition there is no technological basis
for the discount. We note further that,
when Congress chose to supersede the
Commission’s action and revise the
national audience reach cap down to 39
percent, it was on notice of the
Commission’s intent to phase out the
discount, which the Commission had
expressed in 1998 and again in 2002.
Congress was also aware, of course, of
the Commission’s broad authority—
indeed, its obligation—to reevaluate its
rules periodically and revise any that no
longer serve the public interest. It could
have foreclosed the Commission from
ever revising the national audience
reach cap or the UHF discount by
making the national cap and the UHF
discount a statutory restriction or by
otherwise withdrawing Commission
authority to modify the cap or the UHF
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discount. It did not do so, opting instead
for the limited measure that reduced the
cap from 45 percent to 39 percent and
relieved the Commission of the
obligation to reevaluate the national
audience reach cap in the mandated
quadrennial ownership review.
10. We agree with commenters who
assert that these actions suggest
Congress’s intent was to prevent
excessive consolidation in the broadcast
market. In fact, as discussed below,
operation of the analog-era discount
after the DTV transition effectively
allows some broadcasters with UHF
stations to reach far more than the 45
percent of the national audience that
Congress thought too high.
11. Our interpretation of the CAA is
consistent with the conclusion of the
Third Circuit. As the court explained,
although Congress excluded the
national audience reach cap from the
quadrennial review requirement under
section 202(h), it did not foreclose
Commission action to review or modify
the UHF discount in a separate context.
12. Elimination of the UHF Discount.
As in the NPRM, we conclude that
television broadcasting in the UHF band
is no longer technically inferior to
operations in the VHF band. UHF
stations no longer suffer from weaker
signals and smaller audience reach, are
less dependent today on over-the-air
coverage, are more desirable than VHF
stations for digital broadcasting, and
therefore UHF station owners no longer
need the UHF discount to remain viable
and competitive. Commenters in this
proceeding have not presented evidence
of any existing technical limitations that
render digital UHF stations inferior to
digital VHF stations.
13. Therefore, we find that the DTV
transition has rendered the UHF
discount technically obsolete, and we
eliminate it from the calculation of the
national audience reach cap. As a result
of the DTV transition, the national cap
is effectively 78 percent for a station
group that includes only UHF stations,
and for any station group that includes
a UHF station, the effective national cap
now exceeds the 39 percent level that
Congress directed the Commission to
establish. Rather than offsetting an
actual service limitation or reflecting a
disparity in signal coverage, the UHF
discount serves only to confer a
factually unwarranted benefit on owners
of UHF television stations that
undermines the purpose of the national
audience reach cap. Furthermore, the
Commission’s ongoing experience
reviewing media transactions after the
DTV transition date indicates that
failure to correct the distortion that the
UHF discount causes in the calculation
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of national audience reach as a result of
the DTV transition creates an ongoing
potential that additional transactions
could undermine the national audience
reach cap.
14. At the time the UHF discount was
established, analog UHF television
stations were demonstrably inferior to
VHF stations, with weaker signals and
a smaller audience reach. Thirty years
after its adoption, however, it is clear
that the UHF discount cannot be
justified in the digital world. While the
discount was needed in the mid-1980s,
the Commission soon found that the
disparity between analog UHF and VHF
stations was unlikely to exist in
perpetuity. Further, three decades ago
roughly 60 percent of U.S. television
households received programming
exclusively over-the air, while
according to the most recent Nielsen
data, approximately 11.5 percent, or
about 13.3 million television
households, are broadcast-only.
15. As early as 1988, the Commission
noted that the disparities between UHF
and VHF services had begun to
decrease. Further, as the disparity
between the two services eroded during
the 1980s and 1990s, the Commission
repealed a number of rules and policies
that had previously treated UHF stations
differently, and occasionally more
favorably, than their VHF counterparts.
In 1988 the Commission eliminated the
UHF Impact Policy, which limited
approval of new or modifications to
existing VHF stations if the approval
would harm existing or potential UHF
stations (3 FCC Rcd 638). In 1995, the
Commission repealed both the Prime
Time Access Rule, which prohibited
network-affiliated television stations in
the top 50 markets from broadcasting
more than three hours of network
programs during prime time (11 FCC
Rcd 546), and the Secondary Affiliation
Rule, which required a third network
seeking an affiliate in a market to offer
its programming first to the independent
station, often a UHF station (10 FCC Rcd
4538). By the mid-1990s, the
Commission went so far as to note that
the disparities between UHF and VHF
stations had been largely ameliorated
and the ability of UHF stations to
compete against VHF stations had
greatly improved (11 FCC Rcd 19949).
16. The most important change,
however, occurred with the DTV
transition, which the Commission had
long recognized would likely eliminate
the inferiority of UHF channels. In the
1998 Biennial Review Order, even
though the Commission ultimately
decided to retain the discount because
the digital television transition was not
yet complete, it indicated that the
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discount’s days were numbered. The
Commission discussed at length its
expectation that the transition to digital
broadcasting would potentially ‘‘rectify
the UHF/VHF disparity’’ and that ‘‘the
eventual modification or elimination of
the discount for DTV [would] be
appropriate.’’ In the subsequent 2002
Biennial Review Order, the Commission
determined that the issue was ripe and
that the forthcoming DTV transition
would substantially equalize UHF and
VHF signals. The DTV transition has
borne out the Commission’s
expectation.
17. UHF spectrum is now highly
desirable in light of its superior
propagation characteristics for digital
television. Since the 2009 DTV
transition, 74 percent of the nation’s
television stations are now operating on
UHF channels, and 80 percent of the
aggregate television viewing population
is served by UHF stations. As a result
of the DTV transition, the number of
UHF stations increased by 221 stations
and the number of VHF stations
decreased by 204 stations, indicating
that over 200 stations, or approximately
15 percent of the total number of
commercial television stations,
switched spectrum bands in favor of
UHF. In April 2010, Broadcasting &
Cable noted that following the June
2009 DTV transition, the majority of
U.S. TV stations had moved to UHF
channels, which are better suited to
broadcasting digital television at lower
power level. Notably, the DTV transition
preserved station coverage, and in many
cases, allowed stations to improve
coverage by upgrading their facilities,
maximizing power, and capitalizing on
improved propagation of digital
television signals. Therefore, stations
have enhanced their coverage and
audience reach as a result of the DTV
transition, both because of the technical
superiority of digital broadcasts on UHF
channels and as a result of the chance
to maximize their signal coverage
during the transition. The evidence
clearly establishes that digital UHF
operations do not suffer from the same
technical limitations as analog UHF
operations. This finding is consistent
with past Commission decisions
scrutinizing the necessity of the UHF
discount and recognizing the increased
economic viability and success of the
UHF band.
18. Simply put, the UHF discount
does not appropriately reflect the
technical and economic reality of UHF
facilities today. In fact, the discount
impedes the objectives of the national
audience reach cap by effectively
expanding the 39 percent cap beyond
even the level that Congress determined
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was too high when it enacted the CCA.
Continued application of the UHF
discount seven years after the DTV
transition has the absurd result of
stretching the national audience reach
cap to allow a station group
broadcasting exclusively on UHF
channels to actually reach up to 78
percent of television households,
dramatically raising the number of
viewers that a station group can reach
and thwarting the intent of the cap.
19. While the discount was intended
to make the calculation of an owner’s
audience reach better reflect the reality
of the audience the stations actually
reached, in current circumstances,
applying the discount creates a loophole
that allows owners to fail to count
audience that the stations actually do
reach. Continued application of the
antiquated UHF discount now has the
unintended consequence of significantly
discounting a station’s actual audience
reach for purposes of the rule when in
reality the station’s audience reach is
not diminished at all by the use of UHF
technology, but rather improved.
20. Additionally, during the DTV
transition, many stations that were
broadcasting on VHF channels at the
time the 39 percent cap was instituted
shifted to UHF channels. Even after the
transition, a number of stations that
initially elected to operate on a VHF
channel sought to relocate to a UHF
channel to resolve technical difficulties
encountered in broadcasting digitally on
a VHF channel. Despite having signal
coverage that was equal to, or even
better than, its previous VHF channel,
the former VHF station now received—
for the first time—the benefit of the UHF
discount, i.e., a 50 percent reduction in
the audience reach attributed to the
station, all based on a discount intended
to offset the inferiority of analog UHF
signals. For instance, a licensee that
traded an analog VHF station for a
digital UHF station would now appear
to have room to acquire additional
stations under the 39 percent cap
simply by virtue of having changed
spectrum, even though the number of
stations owned by the licensee and the
audience reached by those stations
remained the same. Such a result serves
as an unwarranted windfall for stations
that migrated from VHF to UHF in the
DTV transition, in light of the general
technical superiority of the digital UHF
channels.
21. For example, in 2009, just prior to
the DTV transition, Fox owned 27
stations with a total national audience
reach of 37.22 percent before
application of the UHF discount and
31.20 percent after application of the
UHF discount. In 2010, immediately
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after the DTV transition, Fox continued
to own 27 stations with a total national
audience reach of 37.10 percent before
application of the UHF discount.
However, because five of Fox’s stations
switched from analog VHF channels to
digital UHF channels in the transition,
Fox’s national audience reach
calculation suddenly decreased with the
benefit of the UHF discount, which
allowed the station group to calculate its
audience reach as only 24.75 percent—
despite the fact that Fox still owned the
same number of stations in the same
markets reaching the same audiences.
Although only five of Fox’s stations
switched from analog VHF to digital
UHF channels in the DTV transition,
these stations were all located in the top
10 DMAs, which account for a
significant percentage of the television
households in the nation. As a result,
reducing the national audience reach by
50 percent for just a handful of stations
in these larger markets had the effect of
greatly reducing Fox’s national audience
reach calculation and potentially
allowing significant additional
consolidation, although it had no effect
on its actual national audience reach.
This example demonstrates the absurd
results created by the continued
existence of the discount.
22. We do not agree with commenters
arguing that, apart from technical
considerations, the discount remains
necessary to promote competition,
localism, and diversity, help nonnetwork broadcast groups compete with
stations owned and operated by the
major broadcast networks, and foster the
creation of new networks. Further,
contrary to claims of some commenters,
the Commission’s decision in the 2002
Biennial Review Order to continue the
UHF discount for stations not owned
and operated by the Big Four networks
was not based on a finding that such
stations continued suffering from
economic handicaps. The Commission
clearly articulated that the UHF
discount was predicated on the
competitive disparity arising from the
technical differences between the two
types of channels, and merely deferred
a decision on eliminating the discount.
Any competitive disparity between UHF
and VHF flowed from the technological
disparity.
23. As we have detailed above,
following the transition to DTV, stations
broadcasting on UHF spectrum are no
longer competitively disadvantaged as
compared to stations broadcasting on
VHF spectrum. The record does not
reflect evidence of any existing
competitive disparity resulting from the
continued deficiency of UHF signals.
For example, no party has proffered
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evidence that advertisers routinely
discount the prices paid for advertising
on UHF stations versus VHF stations, as
commenters alleged in the 2002 biennial
review proceeding. Thus, we find no
evidence that UHF stations today face a
`
competitive disparity vis-a-vis VHF
stations. In fact, as we note above, a
number of former analog VHF stations
chose to switch to UHF channels,
further belying the suggestion that a
competitive disparity persists between
the two types of channels. We note
further that the Commission has
eliminated previously the historic steep
discount in annual regulatory fees
assessed for UHF stations, combining
UHF and VHF stations into a single fee
category beginning in Fiscal Year 2014,
thereby eliminating a distinction based
on the historical disadvantages of UHF.
24. Of course, this is not to say that
all stations are now competitive equals.
Disparities continue to exist between
stations in terms of viewership,
advertising revenue, retransmission
consent fees, and programming, to name
a few. But these competitive disparities
are not the result of any current
technical differences between UHF and
VHF stations. Because UHF stations are
no longer technologically
disadvantaged, they can now compete
effectively in a market with VHF
stations. Disparities between stations
today are the result of market
competition, programming choices,
network affiliation, and capitalization.
We do not believe that retention of the
UHF discount would resolve any of
these competitive differences. Finally,
we disagree with any claim that
removing the discount would frustrate
the original purpose of the national cap;
instead, removing the discount will
prevent networks from expanding their
reach, and our grandfathering regime,
discussed below, will ensure that
broadcasters that otherwise would
exceed the cap after the discount is
eliminated—none of which are the Big
Four networks—will be grandfathered.
25. Further, when the Commission
stated in the 2002 Biennial Review
Order that the UHF discount continues
to be necessary to promote entry and
competition among broadcast networks,
the DTV transition was still a number of
years in the future. Contrary to the
Commission’s observations nearly a
decade and a half ago, we do not see
that the UHF discount is leading to the
creation of new broadcast networks
today. The record contains no evidence
that new broadcast networks are being
built today by assembling a national
station group of UHF broadcast stations.
Similarly, our most recent annual report
on the state of competition among video
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providers does not reflect a trend of
emerging UHF broadcast networks.
Instead, it appears that new
programming networks are emerging as
cable networks, online video
programmers, and multi-cast digital
networks—methods that do not rely on
the UHF discount. Therefore, the record
in this proceeding does not support a
conclusion that perpetuation of the UHF
discount would foster the creation of
new broadcast networks.
26. We do not agree with commenters
claiming that eliminating the UHF
discount also requires an examination of
the national audience reach cap.
Reexamining the cap is not within the
scope of the NPRM, and we decline to
initiate a further rulemaking proceeding
at this time for that purpose. No party
has presented persuasive reasons for
revisiting the national cap at this time,
and doing so would be far more
complex than the decision to eliminate
the UHF discount, which we conclude
clearly lacks any remaining justification.
Initiating a new rulemaking proceeding
to undertake a complex review of the
public interest basis for the national
cap, which is the media ownership limit
that Congress examined most recently,
would only delay the correction of
audience reach calculations necessitated
by the DTV transition. Delay would
unnecessarily complicate efforts to bring
the cap back into alignment with its
stated level as broadcasters continue to
increase their reach. Continued
application of the discount absent its
technical justification simply distorts
the operation of the national audience
reach cap by exempting the portions of
the audience that are receiving a signal
from being counted and allowing
licensees that operate on UHF channels
to reach more than 39 percent of
viewers nationwide. Removal of the
analog-era discount thus maintains the
efficacy of the national cap. Although
we do not foreclose the possibility of
examining the national audience reach
cap in the future, we find that action
now to address the effects of the DTV
transition by eliminating the UHF
discount is appropriate.
27. In this regard, our elimination of
the UHF discount is unlike our adoption
of the attribution rule for television joint
sales agreements (TV JSAs), which the
Third Circuit, in its recent ruling in
connection with our quadrennial review
of the multiple ownership rules, held
was contrary to our periodic review
obligation under section 202(h) (824
F.3d 33). (‘‘[T]he Commission cannot
expand its attribution policies for an
ownership rule to which § 202(h)
applies unless it has, within the
previous four years, fulfilled its
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obligation to review that rule and
determine whether it is in the public
interest.’’) The Local TV ownership rule
clearly is subject to periodic review
under section 202(h), whereas the
national television ownership cap is not
subject to that obligation. In addition,
unlike our initial action on TV JSAs, we
are grandfathering station groups that
will exceed the national cap after we
eliminate the UHF discount, so
elimination of the UHF discount will
not require divestitures by station
owners. Finally, as discussed above,
retention of the UHF discount is
indefensible, regardless of the level of
the cap, because it is irrational in light
of the digital transition. Therefore, we
reject the recent contentions of the
National Association of Broadcasters
and Fox that the Third Circuit’s recent
decision supports a conclusion that we
cannot eliminate the UHF discount
separately from a review of the national
audience reach cap.
28. Grandfathering Existing Broadcast
Station Combinations. We adopt the
proposal for grandfathering reflected in
the NPRM. Specifically, we grandfather
broadcast station ownership groups that
would exceed the 39 percent national
audience reach cap as a result of the
elimination of the UHF discount as of
September 26, 2013, the date of the
NPRM. As further proposed, we also
grandfather proposed station
combinations for which an assignment
or transfer application was pending
with the Commission or that were part
of a transaction that had received
Commission approval as of that date if
such station groups would otherwise
exceed the cap. We require any
grandfathered ownership combination
subsequently assigned or transferred to
comply with the national audience
reach cap in existence at the time of the
transfer of control or assignment of
license. We find that these provisions
provide an appropriate balance between
the valid expectations of broadcast
station ownership groups who exceed
the cap solely as a result of the
elimination of the UHF discount and the
goals and purposes of the 39 percent
national audience reach cap. For this
reason, we refuse to adopt a more
limited grandfathering regimen or no
grandfathering provision whatsoever, as
urged by some commenters.
29. No broadcasters will exceed the
national cap following the elimination
of the UHF discount with a combination
that will not be fully grandfathered by
this decision. No broadcast transactions
since the release of the NPRM have
resulted in an entity exceeding the
national ownership cap. Thus, as a
practical matter, there is no actual
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difference in grandfathering as of the
date of the NPRM or the date of this
Report and Order. Despite one
commenter’s claims, the Commission
has continued to evaluate and approve
broadcast transaction applications
during the pendency of this proceeding.
The grandfathering proposal adopted
today protects the existing ownership
structure as of the release of this Report
and Order for all broadcast television
station groups that will exceed the
national audience reach cap upon the
elimination of the UHF discount. Given
the long history of notice that the UHF
discount would be eliminated following
the DTV transition and the potential for
significant distortion of the national
audience reach cap—indeed, the
potential to double the national cap—
the decision to use the date of the NPRM
as the grandfathering date is fully
supported and best serves the public
interest.
30. Grandfathering as of the date of
the NPRM is consistent with previous
Commission decisions. For example, the
grandfathering of interests in connection
with the Commission’s equity/debt plus
rule and the attribution of Local
Marketing Agreements (LMAs) each
used the date of the notice in those
proceedings as the cut-off date (14 FCC
Rcd 12559 and 14 FCC Rcd 12903).
Therefore, the Commission is not
persuaded to designate the adoption
date of this Report and Order as the
grandfathering date for the UHF
discount as some commenters request.
Proposing such a grandfathering date
would have provided an incentive to
broadcasters to rush to engage in new
transactions that could have diluted the
effectiveness of the Commission’s action
to preserve the national audience reach
cap by eliminating the outdated and
technically unsupported UHF discount,
perpetuating the distortive effect of this
anachronistic regulation.
31. Further, this grandfathering date
does not disrupt expectations because
the industry has been on notice for at
least 20 years that the UHF discount
would likely be eliminated following
the transition to DTV. The Commission
further stated in the 1998 Biennial
Review Order that it expected to
eliminate the UHF discount after
completion of the DTV transition. The
Commission, in fact, had previously
decided to phase out the UHF discount,
although that phase-out was rendered
moot by congressional action. The
grandfathering proposal adopted today
ensures that, going forward, the national
audience reach of broadcast station
groups is reflected accurately in the
broadcast television market while not
penalizing those station groups which
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exceed the national audience reach cap
solely as a result of eliminating the UHF
discount.
32. The grandfathering mechanism
adopted here does not make the
decision to eliminate the UHF discount
retroactive. This action does not alter
the past lawfulness of station
combinations, does not impose any
liability for having assembled station
groups that would be prohibited going
forward, and does not introduce any
retrospective obligations for past
conduct. As noted above, by
grandfathering existing station groups
that would exceed the national audience
reach cap without the continued benefit
of the UHF discount as of the date of the
NPRM, we protect all existing broadcast
television station ownership
combinations that would otherwise
exceed the cap from the future effect of
this change, even though application of
the revised rule to them would not be
considered retroactive.
33. While some commenters urge
adoption of permanent grandfathering of
station groups that resulted in the
creation of a new broadcast network, the
Commission concludes that its decision
not to allow the transferability of
grandfathering is fully consistent with
prior Commission practice regarding
grandfathering; for example, the 1999
Local TV Ownership Order (14 FCC Rcd
12903) and the 2014 Expanding the
Economic and Innovation Opportunities
of Spectrum Through Incentive
Auctions Order (29 FCC Rcd 6567). This
approach strikes the appropriate balance
between avoiding imposition of the
hardship of divestiture on owners of
existing station combinations who have
long owned the combination in reliance
on the rules, and moving the industry
toward compliance with current rules
when owners voluntarily decide to sell
their stations. The grandfathering rule
adopted preserves several existing
combinations that resulted in new
broadcast networks. Networks continue
to exist with owned and operated
station groups that comply with the
national audience reach cap, or which
are far below the nearly 65 percent
nationwide coverage reached by one
grandfathered station group. In addition,
even if the Commission permitted a
grandfathered station group to be
transferred intact, there would be no
obligation for the new buyer to maintain
the stations’ current network affiliation
or the programming aired by the current
licensee. Thus, we conclude 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 national audience reach cap at
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the time of transfer or assignment
simply because the combination once
resulted in a new network.
34. Finally, we find that the record
does not support one commenters’
request that the Commission fashion a
specific waiver standard for violations
of the national audience reach cap that
result from elimination of the UHF
discount. Parties may always petition
the Commission for a waiver under our
existing rules if they believe unique
circumstances warrant a waiver in a
particular case. However, we expect
such circumstances to be rare and
isolated given that only a few existing
broadcast television station ownership
groups will exceed the cap after
elimination of the discount. Ultimately,
there are many different ways to
structure an assignment or transfer of
control that may present varying levels
of concern regarding the potential
impact of a proposed transaction. Given
the fact-specific nature of our review of
such transactions, a specific waiver
standard is not appropriate. Instead, we
conclude that a case-by-case approach
will best serve the public interest by
allowing the Commission to consider
the unique circumstances of any
proposed transaction involving
grandfathered combinations and its
potential impact on competition.
35. VHF Discount. We disagree with
commenters claiming that eliminating
the UHF discount also requires the
concurrent adoption of a VHF discount.
As noted above, the DTV transition has
made UHF spectrum generally more
desirable than VHF spectrum for
purposes of digital television
broadcasting. Yet, despite the challenges
to the digital VHF band, the current
record does not demonstrate that digital
television operations in the VHF band
are universally technically inferior to
operations in the UHF band in a manner
or to a degree that would warrant a
discount. The record does not provide
clear evidence that digital VHF stations
consistently suffer from significant
technical disadvantages in audience
coverage sufficient to justify adoption of
a discount. Further, the record lacks
evidence that the economic viability of
VHF stations would be threatened
without a discount. Moreover, the
Commission has already taken steps to
assist individual VHF stations in
addressing technical concerns.
Accordingly, we decline to adopt a VHF
discount at this time.
36. Procedural Matters. As required
by the Regulatory Flexibility Act of
1980, as amended (RFA), the
Commission has prepared a Final
Regulatory Flexibility Analysis (FRFA)
relating to this Report and Order in MB
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Docket No. 13–236, which is
summarized below.
37. This Report and Order does not
contain proposed information
collection(s) subject to the Paperwork
Reduction Act of 1995. In addition,
therefore, it does not contain any new
or modified information collection
burden for small business concerns with
fewer than 25 employees, pursuant to
the Small Business Paperwork Relief
Act of 2002.
38. Final Regulatory Flexibility
Analysis. The Regulatory Flexibility Act
(RFA) directs the Commission to
provide a description of and, where
feasible, an estimate of the number of
small entities that will be affected by the
rules adopted in the Report and Order.
The RFA generally defines the term
‘‘small entity’’ as having the same
meaning as the terms ‘‘small business,’’
‘‘small organization,’’ and ‘‘small
governmental jurisdiction.’’ In addition,
the term ‘‘small business’’ has the same
meaning as the term ‘‘small business
concern’’ under the Small Business Act.
A small business concern is one which:
(1) Is independently owned and
operated; (2) is not dominant in its field
of operation; and (3) satisfies any
additional criteria established by the
SBA.
39. Television Broadcasting. The SBA
designates television broadcasting
stations with $38.5 million or less in
annual receipts as small businesses.
Television broadcasting includes
establishments primarily engaged in
broadcasting images together with
sound. These establishments operate
television broadcasting studios and
facilities for the programming and
transmission of programs to the public.
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. The Commission
estimates that there are 1,387 licensed
commercial television stations in the
United States. In addition, according to
Commission staff review of the BIA/
Kelsey Media Access Pro Television
Database as of March 25, 2016, 1,264 (or
about 91 percent) of the estimated 1,387
commercial television stations have
revenues of $38.5 million or less and,
thus, qualify as small entities under the
SBA definition. We therefore estimate
that the majority of commercial
television broadcasters are small
entities. The Commission has also
estimated the number of licensed
noncommercial educational (NCE)
television stations to be 390. These
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stations are non-profit, and therefore
considered to be small entities.
40. We note, however, that in
assessing whether a business concern
qualifies as small under the above
definition, business (control) affiliations
must be included. Our estimate,
therefore, likely overstates the number
of small entities that might be affected
by our action because the revenue figure
on which it is based does not include or
aggregate revenues from affiliated
companies. In addition, an element of
the definition of small business is that
the entity not be dominant in its field
of operation. We are unable at this time
to define or quantify the criteria that
would establish whether a specific
television station is dominant in its field
of operation. Accordingly, the estimate
of small businesses to which rules may
apply does not exclude any television
station from the definition of a small
business on this basis and is therefore
possibly over-inclusive to that extent.
41. The Report and Order modifies
the calculations underlying the national
television multiple ownership rule as
set forth above, which would affect
reporting, recordkeeping, or other
compliance requirements. The
conclusion modifies 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 we do not
anticipate that compliance will require
the expenditure of any additional
resources as the proposed modification
to the calculations underlying the
national television multiple ownership
rule will not place any additional
obligations on small businesses.
42. 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
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14:53 Oct 21, 2016
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account the resources available to small
entities; (2) the clarification,
consolidation, or simplification of
compliance and 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. The NPRM invited
comment on issues that had the
potential to have significant impact on
some small entities.
43. The rule change adopted in this
Report and Order, as set forth above, is
intended to achieve our public interest
goal of competition. By recognizing the
technical advancements of the UHF
band after the DTV transition, this
Report and Order seeks to create a
regulatory landscape that reflects the
current value of UHF spectrum in order
to better assess national television
ownership figures. Further, this Report
and Order complies with the President’s
directive for independent agencies to
review their existing regulations to
determine whether such regulations
should be modified, streamlined,
expanded, or repealed so as to make the
agency’s regulatory program more
effective or less burdensome in
achieving the regulatory objectives. By
eliminating an outdated rule, we seek to
reduce the costs and burdens of
compliance on firms generally,
including small business entities. And
we find that the benefits of our decision
to eliminate the UHF discount outweigh
any costs or other burdens that may
result from our action. In addition, the
grandfathering proposal the
Commission adopts in the Report and
Order aims to create a more effective
regulatory landscape by addressing
current market realities. Overall, this
Report and Order seeks to expand
broadcast ownership opportunities for
station owners, which includes small
entities, by accurately reflecting
broadcast television ownership in the
digital age. Given that the technical
justification for the UHF discount no
longer exists, continued application of
the discount stifles competition by
encouraging consolidation instead of
promoting new entrants in local
broadcast television markets. Therefore,
the Commission believes the rule
change adopted in this Report and
Order will benefit small entities, not
burden them.
44. Ordering Clauses. Accordingly, it
is ordered that, pursuant to the authority
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73041
contained in Sections 1, 2(a), 4(i),
303(r), 307, 309, and 310 of the
Communications Act of 1934, as
amended, this Report and Order is
adopted. The rule modification below
shall be effective November 23, 2016.
It is further ordered that the
commission shall send a copy of this
Report and Order to Congress and to the
Government Accountability Office
pursuant to the Congressional Review
Act.
Federal Communications Commission.
Gloria J. Miles,
Federal Register Liaison Officer. Office of the
Secretary.
List of Subjects in 47 CFR Part 73
Television, Radio.
For the reasons discussed in the
preamble, The Federal Communication
Commission amends 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
paragraphs (e)(1) and (e)(2)(i) to read as
follows:
■
§ 73.3555
Multiple ownership.
*
*
*
*
*
(e) * * *
(1) No license for a commercial
television broadcast station shall be
granted, transferred or assigned to any
party (including all parties under
common control) if the grant, transfer or
assignment of such license would result
in such party or any of its stockholders,
partners, members, officers or directors
having a cognizable interest in
television stations which have an
aggregate national audience reach
exceeding thirty-nine (39) percent.
(2) * * *
(i) National audience reach means the
total number of television households in
the Nielsen Designated Market Areas
(DMAs) in which the relevant stations
are located divided by the total national
television households as measured by
DMA data at the time of a grant,
transfer, or assignment of a license.
*
*
*
*
*
[FR Doc. 2016–25569 Filed 10–21–16; 8:45 am]
BILLING CODE 6712–01–P
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Agencies
[Federal Register Volume 81, Number 205 (Monday, October 24, 2016)]
[Rules and Regulations]
[Pages 73035-73041]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-25569]
[[Page 73035]]
=======================================================================
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 73
[MB Docket No. 13-236; FCC 16-116]
National Television Multiple Ownership Rule
AGENCY: Federal Communications Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This document eliminates the UHF discount from the calculation
of the national television audience reach cap because it is no longer
justified due to the transition to digital television. The discount
attributes television stations broadcasting in the UHF spectrum with
only 50 percent of the television households in their Designated Market
Areas (DMAs). To avoid imposing undue harm on existing broadcast
television station groups that exceed the national audience reach cap
without the benefit of the UHF discount, this Report and Order
grandfathers combinations: In existence on September 26, 2013
(Grandfather Date), the release date of the Notice of Proposed
Rulemaking (NPRM) in this proceeding; created by a transaction that had
received Commission approval on or before the Grandfather Date; and
proposed in applications pending before the Commission on the
Grandfather Date.
DATES: Effective November 23, 2016.
FOR FURTHER INFORMATION CONTACT: Brendan Holland, Industry Analysis
Division, Media Bureau, Brendan.Holland@fcc.gov, (202) 418-2757.
SUPPLEMENTARY INFORMATION: This Report and Order in MB Docket No. 13-
236 was adopted August 24, 2016, and released September 7, 2016. The
full text of this document is available for public inspection during
regular business hours in the FCC Reference Center, 445 12th Street
SW., Room CY-A257, Washington, DC 20554, or online at https://www.fcc.gov/ecfs/filing/0907563506002/document/090756350600263ba. To
request this document in accessible formats for people with
disabilities (e.g. braille, large print, electronic files, audio
format, etc.) or to request reasonable accommodations (e.g. accessible
format documents, sign language interpreters, CART, etc.), send an
email to fcc504@fcc.gov or call the FCC's Consumer and Governmental
Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (TTY).
Synopsis of the Report and Order
1. Background. Three decades ago in 1985, to protect localism,
diversity, and competition, the Commission amended its national
television multiple ownership rule to include a national audience reach
cap that prohibited a single entity from owning television stations
that collectively reached more than 25 percent of the total television
households in the nation. At that time, the Commission recognized the
inherent physical limitations of the UHF television band, finding that
the strength of UHF television signals decreased more rapidly with
distance in comparison to the signals of stations broadcasting in the
VHF band, resulting in significantly smaller coverage areas and
audience reach. This finding was significant because, at the time, the
vast majority of viewers received programming from broadcast television
stations via over-the-air signals. Thus, a smaller over-the-air signal
made it harder for UHF stations to compete with incumbent VHF stations,
which maintained greater coverage areas. To account for this coverage
disparity, the Commission determined that licensees of UHF stations
should be attributed with only 50 percent of the television households
in their DMAs for purposes of calculating the national audience reach
cap. This rule is termed the UHF discount.
2. As early as 1992, the Commission anticipated the possibility
that the transition to digital television would obviate the need for
the UHF discount, and sought comment on whether any distinction between
UHF and VHF stations would be appropriate in light of the transition. A
few years later, in the Telecommunications Act of 1996 (1996 Act),
Congress directed the Commission to modify its ownership rules to
increase the national audience reach cap from 25 percent to 35 percent
of the total nationwide audience. In the 1996 Act Implementation Order
(11 FCC Rcd 12374), the Commission noted that it was reviewing the UHF
discount in the context of its television broadcast ownership rules,
and explicitly cautioned that any entity that acquired stations during
this interim period and complied with the 35 percent audience reach cap
only by virtue of the UHF discount would be subject to the outcome of
the pending rule making proceeding. In the 1998 Biennial Review Order
(15 FCC Rcd 11058), the Commission retained the UHF discount, but
stated that it would likely be unnecessary after the digital television
transition and that the Commission would initiate a proceeding in the
future to phase out the discount. In the 2002 Biennial Review Order (18
FCC Rcd 13620), the Commission raised the national audience reach cap
to 45 percent and again concluded that, ``the digital [television]
transition [would] largely eliminate the technical basis for the UHF
discount because UHF and VHF signals [would] be substantially
equalized.'' Therefore, the 2002 Biennial Review Order adopted rules to
phase out the UHF discount for broadcast stations owned by the Big Four
networks (ABC, CBS, NBC, and Fox) on a market-by-market basis at the
time the markets transitioned to DTV. The Commission indicated further
that, for networks and station groups other than those stations owned
and operated by the Big Four networks, it would decide in a subsequent
biennial ownership review whether to extend the sunset to all other
networks and station group owners. The rules at that time contemplated
a gradual, market-by-market transition to DTV, but this approach was
later replaced by a hard deadline--June 12, 2009.
3. Following adoption of the 2002 Biennial Review Order, Congress
subsequently rolled back the 45 percent national audience reach cap by
including a provision in the 2004 Consolidated Appropriations Act (CAA)
directing the Commission to set the cap at 39 percent of national
television households. The CAA further amended section 202(h) of the
1996 Act to require a quadrennial review of the Commission's broadcast
ownership rules rather than the previously mandated biennial review. In
doing so, Congress removed the requirement to review any rules relating
to the 39 percent national audience reach cap from the quadrennial
review requirement. The CAA did not mention the UHF discount, nor did
it address the potential impact of the DTV transition on the
calculation of the national audience reach cap.
4. Prior to the enactment of the CAA, several parties had appealed
the Commission's 2002 Biennial Review Order to the U.S. Court of
Appeals for the Third Circuit (Third Circuit). In June 2004, the Third
Circuit found, among other things, that the CAA rendered moot the
challenges to the Commission's decision to retain the UHF discount (373
F.3d 372). The court further found that the CAA insulated the national
audience reach cap, including the UHF discount, from the Commission's
quadrennial review of its media ownership rules. At the same time,
however, the court stated that its decision did not foreclose the
Commission's consideration of the UHF
[[Page 73036]]
discount in a rulemaking separate from the required quadrennial review
of its ownership rules. The court concluded that, barring congressional
intervention, the Commission could decide the scope of its authority to
modify or eliminate the UHF discount outside the context of section
202(h). Prior to the court's decision, in February 2004, the Media
Bureau issued a Public Notice specifically seeking comment on the
Commission's authority to modify or eliminate the UHF discount in light
of the CAA. In particular, the Media Bureau sought comment on whether
the passage of the 39 percent cap signified congressional approval,
adoption, or ratification of the 50 percent UHF discount. The comments
and replies were filed in the docket for the 2002 Biennial Review
Order.
5. In July 2006, the Commission issued a Further Notice of Proposed
Rulemaking (FNPRM) as part of its 2006 quadrennial review of the media
ownership rules (21 FCC Rcd 8834). Among other things, the FNPRM sought
comment on the UHF discount rule in light of the Third Circuit's
holding and queried whether the Commission should retain, modify, or
eliminate the UHF discount. Comments filed in response to the FNPRM
also refreshed the Commission's record on its authority to alter the
UHF discount. In February 2008, the Commission concluded in the 2006
Quadrennial Review Order (23 FCC Rcd 2010) that the UHF discount was
insulated from review under section 202(h) as a result of the CAA, and
thus beyond the parameters of the quadrennial review. But the
Commission noted that the Third Circuit's 2004 decision had left it to
the Commission to decide the scope of its authority to modify or
eliminate the UHF discount outside the context of section 202(h).
Accordingly, the Commission indicated that it would address the
petitions, comments, and replies filed with respect to the alteration,
retention, or elimination of the UHF discount in a separate proceeding,
which would be commenced at a future date.
6. Since June 13, 2009, all full-power television stations have
broadcast their over-the-air signals exclusively in digital form. The
DTV transition has enabled broadcasters to provide multiple programming
choices, higher quality video, and enhanced capabilities to consumers.
Yet the transition has posed more challenges for VHF channels than UHF
channels because VHF spectrum has proven to have characteristics that
make it less desirable for providing digital television service. For
instance, nearby electrical devices tend to emit noise that can cause
interference to DTV signals within the VHF band, creating reception
difficulties in urban areas even a short distance from the TV
transmitter. The reception of VHF signals also requires physically
larger antennas compared to UHF signals. For these reasons, among
others, television broadcasters generally have faced greater challenges
providing consistent reception on VHF signals than UHF signals in the
digital environment, and some station owners have therefore opted to
migrate their signals from VHF to UHF. Therefore, on September 26,
2013, the Commission issued the NPRM in this proceeding proposing to
eliminate the UHF discount and grandfather certain existing television
station combinations that would exceed the 39 percent national audience
reach cap in the absence of the discount, and seeking comment on
whether a VHF discount should be adopted (28 FCC Rcd 14324).
7. Authority to Modify the UHF Discount. We conclude that the
Commission has the authority to modify the national audience reach cap,
including the authority to revise or eliminate the UHF discount. We
find that no statute bars the Commission from revisiting the cap or the
UHF discount in a rulemaking proceeding so long as such a review is
conducted separately from a quadrennial review of the broadcast
ownership rules pursuant to section 202(h) of the 1996 Act. The CAA
removed the requirement to review the national ownership cap from the
Commission's quadrennial review requirement, but did not impose a
statutory national audience reach cap or prohibit the Commission from
evaluating the elements of this rule. While the CAA also provides that
the Commission may not apply its forbearance authority under Section 10
of the Communications Act to any person or entity exceeding the 39
percent national audience reach cap, there is nothing in the CAA that
suggests Congress intended to prevent the Commission from tightening
the cap, repealing the UHF discount, or otherwise changing its rules at
a later date. Thus, the Commission retains authority under the
Communications Act to review any aspect of the national audience reach
cap; it simply is not required to do so as part of the quadrennial
review.
8. Specifically, the Communications Act gives the Commission the
statutory authority to revisit its own rules and revise or eliminate
them when it concludes such action is appropriate. The Act authorizes
the agency to ``perform any and all acts, make such rules and
regulations, and issue such orders, not inconsistent with this Act, as
may be necessary in the execution of its functions.'' Similarly,
section 303(r) provides that the Commission may ``[m]ake such rules and
regulations . . . not inconsistent with this law, as may be necessary
to carry out the provisions of this Act . . . .'' Indeed, courts have
held that the Commission has an affirmative obligation to reexamine its
rules over time. In Bechtel v. FCC (957 F.2d 873), the court observed
that ``changes in factual and legal circumstances may impose upon the
agency an obligation to reconsider a settled policy or explain its
failure to do so. In the rulemaking context, an agency also may be
obligated to reexamine its approach if a significant factual predicate
of a prior decision has been removed.'' As we explain further below,
this is precisely the case in this instance.
9. With respect to the UHF discount, even those advocating
retention of the discount based on the CAA acknowledge that the CAA
does not even mention the UHF discount. We disagree with commenters'
suggestion that the CAA's legislative history somehow supports a
conclusion that Congress fully considered either the UHF discount or
the effect of the--then future--DTV transition. The history of this
immense, omnibus bill does not reflect any consideration of the UHF
discount or its potential elimination. There is no basis for the
assumption that Congress, in overruling the Commission's decision to
raise the national audience reach cap to 45 percent and mandating it be
moved back down to 39 percent, did so with the expectation that the
Commission would indefinitely maintain the UHF discount, especially
given that post-DTV transition there is no technological basis for the
discount. We note further that, when Congress chose to supersede the
Commission's action and revise the national audience reach cap down to
39 percent, it was on notice of the Commission's intent to phase out
the discount, which the Commission had expressed in 1998 and again in
2002. Congress was also aware, of course, of the Commission's broad
authority--indeed, its obligation--to reevaluate its rules periodically
and revise any that no longer serve the public interest. It could have
foreclosed the Commission from ever revising the national audience
reach cap or the UHF discount by making the national cap and the UHF
discount a statutory restriction or by otherwise withdrawing Commission
authority to modify the cap or the UHF
[[Page 73037]]
discount. It did not do so, opting instead for the limited measure that
reduced the cap from 45 percent to 39 percent and relieved the
Commission of the obligation to reevaluate the national audience reach
cap in the mandated quadrennial ownership review.
10. We agree with commenters who assert that these actions suggest
Congress's intent was to prevent excessive consolidation in the
broadcast market. In fact, as discussed below, operation of the analog-
era discount after the DTV transition effectively allows some
broadcasters with UHF stations to reach far more than the 45 percent of
the national audience that Congress thought too high.
11. Our interpretation of the CAA is consistent with the conclusion
of the Third Circuit. As the court explained, although Congress
excluded the national audience reach cap from the quadrennial review
requirement under section 202(h), it did not foreclose Commission
action to review or modify the UHF discount in a separate context.
12. Elimination of the UHF Discount. As in the NPRM, we conclude
that television broadcasting in the UHF band is no longer technically
inferior to operations in the VHF band. UHF stations no longer suffer
from weaker signals and smaller audience reach, are less dependent
today on over-the-air coverage, are more desirable than VHF stations
for digital broadcasting, and therefore UHF station owners no longer
need the UHF discount to remain viable and competitive. Commenters in
this proceeding have not presented evidence of any existing technical
limitations that render digital UHF stations inferior to digital VHF
stations.
13. Therefore, we find that the DTV transition has rendered the UHF
discount technically obsolete, and we eliminate it from the calculation
of the national audience reach cap. As a result of the DTV transition,
the national cap is effectively 78 percent for a station group that
includes only UHF stations, and for any station group that includes a
UHF station, the effective national cap now exceeds the 39 percent
level that Congress directed the Commission to establish. Rather than
offsetting an actual service limitation or reflecting a disparity in
signal coverage, the UHF discount serves only to confer a factually
unwarranted benefit on owners of UHF television stations that
undermines the purpose of the national audience reach cap. Furthermore,
the Commission's ongoing experience reviewing media transactions after
the DTV transition date indicates that failure to correct the
distortion that the UHF discount causes in the calculation of national
audience reach as a result of the DTV transition creates an ongoing
potential that additional transactions could undermine the national
audience reach cap.
14. At the time the UHF discount was established, analog UHF
television stations were demonstrably inferior to VHF stations, with
weaker signals and a smaller audience reach. Thirty years after its
adoption, however, it is clear that the UHF discount cannot be
justified in the digital world. While the discount was needed in the
mid-1980s, the Commission soon found that the disparity between analog
UHF and VHF stations was unlikely to exist in perpetuity. Further,
three decades ago roughly 60 percent of U.S. television households
received programming exclusively over-the air, while according to the
most recent Nielsen data, approximately 11.5 percent, or about 13.3
million television households, are broadcast-only.
15. As early as 1988, the Commission noted that the disparities
between UHF and VHF services had begun to decrease. Further, as the
disparity between the two services eroded during the 1980s and 1990s,
the Commission repealed a number of rules and policies that had
previously treated UHF stations differently, and occasionally more
favorably, than their VHF counterparts. In 1988 the Commission
eliminated the UHF Impact Policy, which limited approval of new or
modifications to existing VHF stations if the approval would harm
existing or potential UHF stations (3 FCC Rcd 638). In 1995, the
Commission repealed both the Prime Time Access Rule, which prohibited
network-affiliated television stations in the top 50 markets from
broadcasting more than three hours of network programs during prime
time (11 FCC Rcd 546), and the Secondary Affiliation Rule, which
required a third network seeking an affiliate in a market to offer its
programming first to the independent station, often a UHF station (10
FCC Rcd 4538). By the mid-1990s, the Commission went so far as to note
that the disparities between UHF and VHF stations had been largely
ameliorated and the ability of UHF stations to compete against VHF
stations had greatly improved (11 FCC Rcd 19949).
16. The most important change, however, occurred with the DTV
transition, which the Commission had long recognized would likely
eliminate the inferiority of UHF channels. In the 1998 Biennial Review
Order, even though the Commission ultimately decided to retain the
discount because the digital television transition was not yet
complete, it indicated that the discount's days were numbered. The
Commission discussed at length its expectation that the transition to
digital broadcasting would potentially ``rectify the UHF/VHF
disparity'' and that ``the eventual modification or elimination of the
discount for DTV [would] be appropriate.'' In the subsequent 2002
Biennial Review Order, the Commission determined that the issue was
ripe and that the forthcoming DTV transition would substantially
equalize UHF and VHF signals. The DTV transition has borne out the
Commission's expectation.
17. UHF spectrum is now highly desirable in light of its superior
propagation characteristics for digital television. Since the 2009 DTV
transition, 74 percent of the nation's television stations are now
operating on UHF channels, and 80 percent of the aggregate television
viewing population is served by UHF stations. As a result of the DTV
transition, the number of UHF stations increased by 221 stations and
the number of VHF stations decreased by 204 stations, indicating that
over 200 stations, or approximately 15 percent of the total number of
commercial television stations, switched spectrum bands in favor of
UHF. In April 2010, Broadcasting & Cable noted that following the June
2009 DTV transition, the majority of U.S. TV stations had moved to UHF
channels, which are better suited to broadcasting digital television at
lower power level. Notably, the DTV transition preserved station
coverage, and in many cases, allowed stations to improve coverage by
upgrading their facilities, maximizing power, and capitalizing on
improved propagation of digital television signals. Therefore, stations
have enhanced their coverage and audience reach as a result of the DTV
transition, both because of the technical superiority of digital
broadcasts on UHF channels and as a result of the chance to maximize
their signal coverage during the transition. The evidence clearly
establishes that digital UHF operations do not suffer from the same
technical limitations as analog UHF operations. This finding is
consistent with past Commission decisions scrutinizing the necessity of
the UHF discount and recognizing the increased economic viability and
success of the UHF band.
18. Simply put, the UHF discount does not appropriately reflect the
technical and economic reality of UHF facilities today. In fact, the
discount impedes the objectives of the national audience reach cap by
effectively expanding the 39 percent cap beyond even the level that
Congress determined
[[Page 73038]]
was too high when it enacted the CCA. Continued application of the UHF
discount seven years after the DTV transition has the absurd result of
stretching the national audience reach cap to allow a station group
broadcasting exclusively on UHF channels to actually reach up to 78
percent of television households, dramatically raising the number of
viewers that a station group can reach and thwarting the intent of the
cap.
19. While the discount was intended to make the calculation of an
owner's audience reach better reflect the reality of the audience the
stations actually reached, in current circumstances, applying the
discount creates a loophole that allows owners to fail to count
audience that the stations actually do reach. Continued application of
the antiquated UHF discount now has the unintended consequence of
significantly discounting a station's actual audience reach for
purposes of the rule when in reality the station's audience reach is
not diminished at all by the use of UHF technology, but rather
improved.
20. Additionally, during the DTV transition, many stations that
were broadcasting on VHF channels at the time the 39 percent cap was
instituted shifted to UHF channels. Even after the transition, a number
of stations that initially elected to operate on a VHF channel sought
to relocate to a UHF channel to resolve technical difficulties
encountered in broadcasting digitally on a VHF channel. Despite having
signal coverage that was equal to, or even better than, its previous
VHF channel, the former VHF station now received--for the first time--
the benefit of the UHF discount, i.e., a 50 percent reduction in the
audience reach attributed to the station, all based on a discount
intended to offset the inferiority of analog UHF signals. For instance,
a licensee that traded an analog VHF station for a digital UHF station
would now appear to have room to acquire additional stations under the
39 percent cap simply by virtue of having changed spectrum, even though
the number of stations owned by the licensee and the audience reached
by those stations remained the same. Such a result serves as an
unwarranted windfall for stations that migrated from VHF to UHF in the
DTV transition, in light of the general technical superiority of the
digital UHF channels.
21. For example, in 2009, just prior to the DTV transition, Fox
owned 27 stations with a total national audience reach of 37.22 percent
before application of the UHF discount and 31.20 percent after
application of the UHF discount. In 2010, immediately after the DTV
transition, Fox continued to own 27 stations with a total national
audience reach of 37.10 percent before application of the UHF discount.
However, because five of Fox's stations switched from analog VHF
channels to digital UHF channels in the transition, Fox's national
audience reach calculation suddenly decreased with the benefit of the
UHF discount, which allowed the station group to calculate its audience
reach as only 24.75 percent--despite the fact that Fox still owned the
same number of stations in the same markets reaching the same
audiences. Although only five of Fox's stations switched from analog
VHF to digital UHF channels in the DTV transition, these stations were
all located in the top 10 DMAs, which account for a significant
percentage of the television households in the nation. As a result,
reducing the national audience reach by 50 percent for just a handful
of stations in these larger markets had the effect of greatly reducing
Fox's national audience reach calculation and potentially allowing
significant additional consolidation, although it had no effect on its
actual national audience reach. This example demonstrates the absurd
results created by the continued existence of the discount.
22. We do not agree with commenters arguing that, apart from
technical considerations, the discount remains necessary to promote
competition, localism, and diversity, help non-network broadcast groups
compete with stations owned and operated by the major broadcast
networks, and foster the creation of new networks. Further, contrary to
claims of some commenters, the Commission's decision in the 2002
Biennial Review Order to continue the UHF discount for stations not
owned and operated by the Big Four networks was not based on a finding
that such stations continued suffering from economic handicaps. The
Commission clearly articulated that the UHF discount was predicated on
the competitive disparity arising from the technical differences
between the two types of channels, and merely deferred a decision on
eliminating the discount. Any competitive disparity between UHF and VHF
flowed from the technological disparity.
23. As we have detailed above, following the transition to DTV,
stations broadcasting on UHF spectrum are no longer competitively
disadvantaged as compared to stations broadcasting on VHF spectrum. The
record does not reflect evidence of any existing competitive disparity
resulting from the continued deficiency of UHF signals. For example, no
party has proffered evidence that advertisers routinely discount the
prices paid for advertising on UHF stations versus VHF stations, as
commenters alleged in the 2002 biennial review proceeding. Thus, we
find no evidence that UHF stations today face a competitive disparity
vis-[agrave]-vis VHF stations. In fact, as we note above, a number of
former analog VHF stations chose to switch to UHF channels, further
belying the suggestion that a competitive disparity persists between
the two types of channels. We note further that the Commission has
eliminated previously the historic steep discount in annual regulatory
fees assessed for UHF stations, combining UHF and VHF stations into a
single fee category beginning in Fiscal Year 2014, thereby eliminating
a distinction based on the historical disadvantages of UHF.
24. Of course, this is not to say that all stations are now
competitive equals. Disparities continue to exist between stations in
terms of viewership, advertising revenue, retransmission consent fees,
and programming, to name a few. But these competitive disparities are
not the result of any current technical differences between UHF and VHF
stations. Because UHF stations are no longer technologically
disadvantaged, they can now compete effectively in a market with VHF
stations. Disparities between stations today are the result of market
competition, programming choices, network affiliation, and
capitalization. We do not believe that retention of the UHF discount
would resolve any of these competitive differences. Finally, we
disagree with any claim that removing the discount would frustrate the
original purpose of the national cap; instead, removing the discount
will prevent networks from expanding their reach, and our
grandfathering regime, discussed below, will ensure that broadcasters
that otherwise would exceed the cap after the discount is eliminated--
none of which are the Big Four networks--will be grandfathered.
25. Further, when the Commission stated in the 2002 Biennial Review
Order that the UHF discount continues to be necessary to promote entry
and competition among broadcast networks, the DTV transition was still
a number of years in the future. Contrary to the Commission's
observations nearly a decade and a half ago, we do not see that the UHF
discount is leading to the creation of new broadcast networks today.
The record contains no evidence that new broadcast networks are being
built today by assembling a national station group of UHF broadcast
stations. Similarly, our most recent annual report on the state of
competition among video
[[Page 73039]]
providers does not reflect a trend of emerging UHF broadcast networks.
Instead, it appears that new programming networks are emerging as cable
networks, online video programmers, and multi-cast digital networks--
methods that do not rely on the UHF discount. Therefore, the record in
this proceeding does not support a conclusion that perpetuation of the
UHF discount would foster the creation of new broadcast networks.
26. We do not agree with commenters claiming that eliminating the
UHF discount also requires an examination of the national audience
reach cap. Reexamining the cap is not within the scope of the NPRM, and
we decline to initiate a further rulemaking proceeding at this time for
that purpose. No party has presented persuasive reasons for revisiting
the national cap at this time, and doing so would be far more complex
than the decision to eliminate the UHF discount, which we conclude
clearly lacks any remaining justification. Initiating a new rulemaking
proceeding to undertake a complex review of the public interest basis
for the national cap, which is the media ownership limit that Congress
examined most recently, would only delay the correction of audience
reach calculations necessitated by the DTV transition. Delay would
unnecessarily complicate efforts to bring the cap back into alignment
with its stated level as broadcasters continue to increase their reach.
Continued application of the discount absent its technical
justification simply distorts the operation of the national audience
reach cap by exempting the portions of the audience that are receiving
a signal from being counted and allowing licensees that operate on UHF
channels to reach more than 39 percent of viewers nationwide. Removal
of the analog-era discount thus maintains the efficacy of the national
cap. Although we do not foreclose the possibility of examining the
national audience reach cap in the future, we find that action now to
address the effects of the DTV transition by eliminating the UHF
discount is appropriate.
27. In this regard, our elimination of the UHF discount is unlike
our adoption of the attribution rule for television joint sales
agreements (TV JSAs), which the Third Circuit, in its recent ruling in
connection with our quadrennial review of the multiple ownership rules,
held was contrary to our periodic review obligation under section
202(h) (824 F.3d 33). (``[T]he Commission cannot expand its attribution
policies for an ownership rule to which Sec. 202(h) applies unless it
has, within the previous four years, fulfilled its obligation to review
that rule and determine whether it is in the public interest.'') The
Local TV ownership rule clearly is subject to periodic review under
section 202(h), whereas the national television ownership cap is not
subject to that obligation. In addition, unlike our initial action on
TV JSAs, we are grandfathering station groups that will exceed the
national cap after we eliminate the UHF discount, so elimination of the
UHF discount will not require divestitures by station owners. Finally,
as discussed above, retention of the UHF discount is indefensible,
regardless of the level of the cap, because it is irrational in light
of the digital transition. Therefore, we reject the recent contentions
of the National Association of Broadcasters and Fox that the Third
Circuit's recent decision supports a conclusion that we cannot
eliminate the UHF discount separately from a review of the national
audience reach cap.
28. Grandfathering Existing Broadcast Station Combinations. We
adopt the proposal for grandfathering reflected in the NPRM.
Specifically, we grandfather broadcast station ownership groups that
would exceed the 39 percent national audience reach cap as a result of
the elimination of the UHF discount as of September 26, 2013, the date
of the NPRM. As further proposed, we also grandfather proposed station
combinations for which an assignment or transfer application was
pending with the Commission or that were part of a transaction that had
received Commission approval as of that date if such station groups
would otherwise exceed the cap. We require any grandfathered ownership
combination subsequently assigned or transferred to comply with the
national audience reach cap in existence at the time of the transfer of
control or assignment of license. We find that these provisions provide
an appropriate balance between the valid expectations of broadcast
station ownership groups who exceed the cap solely as a result of the
elimination of the UHF discount and the goals and purposes of the 39
percent national audience reach cap. For this reason, we refuse to
adopt a more limited grandfathering regimen or no grandfathering
provision whatsoever, as urged by some commenters.
29. No broadcasters will exceed the national cap following the
elimination of the UHF discount with a combination that will not be
fully grandfathered by this decision. No broadcast transactions since
the release of the NPRM have resulted in an entity exceeding the
national ownership cap. Thus, as a practical matter, there is no actual
difference in grandfathering as of the date of the NPRM or the date of
this Report and Order. Despite one commenter's claims, the Commission
has continued to evaluate and approve broadcast transaction
applications during the pendency of this proceeding. The grandfathering
proposal adopted today protects the existing ownership structure as of
the release of this Report and Order for all broadcast television
station groups that will exceed the national audience reach cap upon
the elimination of the UHF discount. Given the long history of notice
that the UHF discount would be eliminated following the DTV transition
and the potential for significant distortion of the national audience
reach cap--indeed, the potential to double the national cap--the
decision to use the date of the NPRM as the grandfathering date is
fully supported and best serves the public interest.
30. Grandfathering as of the date of the NPRM is consistent with
previous Commission decisions. For example, the grandfathering of
interests in connection with the Commission's equity/debt plus rule and
the attribution of Local Marketing Agreements (LMAs) each used the date
of the notice in those proceedings as the cut-off date (14 FCC Rcd
12559 and 14 FCC Rcd 12903). Therefore, the Commission is not persuaded
to designate the adoption date of this Report and Order as the
grandfathering date for the UHF discount as some commenters request.
Proposing such a grandfathering date would have provided an incentive
to broadcasters to rush to engage in new transactions that could have
diluted the effectiveness of the Commission's action to preserve the
national audience reach cap by eliminating the outdated and technically
unsupported UHF discount, perpetuating the distortive effect of this
anachronistic regulation.
31. Further, this grandfathering date does not disrupt expectations
because the industry has been on notice for at least 20 years that the
UHF discount would likely be eliminated following the transition to
DTV. The Commission further stated in the 1998 Biennial Review Order
that it expected to eliminate the UHF discount after completion of the
DTV transition. The Commission, in fact, had previously decided to
phase out the UHF discount, although that phase-out was rendered moot
by congressional action. The grandfathering proposal adopted today
ensures that, going forward, the national audience reach of broadcast
station groups is reflected accurately in the broadcast television
market while not penalizing those station groups which
[[Page 73040]]
exceed the national audience reach cap solely as a result of
eliminating the UHF discount.
32. The grandfathering mechanism adopted here does not make the
decision to eliminate the UHF discount retroactive. This action does
not alter the past lawfulness of station combinations, does not impose
any liability for having assembled station groups that would be
prohibited going forward, and does not introduce any retrospective
obligations for past conduct. As noted above, by grandfathering
existing station groups that would exceed the national audience reach
cap without the continued benefit of the UHF discount as of the date of
the NPRM, we protect all existing broadcast television station
ownership combinations that would otherwise exceed the cap from the
future effect of this change, even though application of the revised
rule to them would not be considered retroactive.
33. While some commenters urge adoption of permanent grandfathering
of station groups that resulted in the creation of a new broadcast
network, the Commission concludes that its decision not to allow the
transferability of grandfathering is fully consistent with prior
Commission practice regarding grandfathering; for example, the 1999
Local TV Ownership Order (14 FCC Rcd 12903) and the 2014 Expanding the
Economic and Innovation Opportunities of Spectrum Through Incentive
Auctions Order (29 FCC Rcd 6567). This approach strikes the appropriate
balance between avoiding imposition of the hardship of divestiture on
owners of existing station combinations who have long owned the
combination in reliance on the rules, and moving the industry toward
compliance with current rules when owners voluntarily decide to sell
their stations. The grandfathering rule adopted preserves several
existing combinations that resulted in new broadcast networks. Networks
continue to exist with owned and operated station groups that comply
with the national audience reach cap, or which are far below the nearly
65 percent nationwide coverage reached by one grandfathered station
group. In addition, even if the Commission permitted a grandfathered
station group to be transferred intact, there would be no obligation
for the new buyer to maintain the stations' current network affiliation
or the programming aired by the current licensee. Thus, we conclude
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 national audience reach cap at the
time of transfer or assignment simply because the combination once
resulted in a new network.
34. Finally, we find that the record does not support one
commenters' request that the Commission fashion a specific waiver
standard for violations of the national audience reach cap that result
from elimination of the UHF discount. Parties may always petition the
Commission for a waiver under our existing rules if they believe unique
circumstances warrant a waiver in a particular case. However, we expect
such circumstances to be rare and isolated given that only a few
existing broadcast television station ownership groups will exceed the
cap after elimination of the discount. Ultimately, there are many
different ways to structure an assignment or transfer of control that
may present varying levels of concern regarding the potential impact of
a proposed transaction. Given the fact-specific nature of our review of
such transactions, a specific waiver standard is not appropriate.
Instead, we conclude that a case-by-case approach will best serve the
public interest by allowing the Commission to consider the unique
circumstances of any proposed transaction involving grandfathered
combinations and its potential impact on competition.
35. VHF Discount. We disagree with commenters claiming that
eliminating the UHF discount also requires the concurrent adoption of a
VHF discount. As noted above, the DTV transition has made UHF spectrum
generally more desirable than VHF spectrum for purposes of digital
television broadcasting. Yet, despite the challenges to the digital VHF
band, the current record does not demonstrate that digital television
operations in the VHF band are universally technically inferior to
operations in the UHF band in a manner or to a degree that would
warrant a discount. The record does not provide clear evidence that
digital VHF stations consistently suffer from significant technical
disadvantages in audience coverage sufficient to justify adoption of a
discount. Further, the record lacks evidence that the economic
viability of VHF stations would be threatened without a discount.
Moreover, the Commission has already taken steps to assist individual
VHF stations in addressing technical concerns. Accordingly, we decline
to adopt a VHF discount at this time.
36. Procedural Matters. As required by the Regulatory Flexibility
Act of 1980, as amended (RFA), the Commission has prepared a Final
Regulatory Flexibility Analysis (FRFA) relating to this Report and
Order in MB Docket No. 13-236, which is summarized below.
37. This Report and Order does not contain proposed information
collection(s) subject to the Paperwork Reduction Act of 1995. In
addition, therefore, it does not contain any new or modified
information collection burden for small business concerns with fewer
than 25 employees, pursuant to the Small Business Paperwork Relief Act
of 2002.
38. Final Regulatory Flexibility Analysis. The Regulatory
Flexibility Act (RFA) directs the Commission to provide a description
of and, where feasible, an estimate of the number of small entities
that will be affected by the rules adopted in the Report and Order. The
RFA generally defines the term ``small entity'' as having the same
meaning as the terms ``small business,'' ``small organization,'' and
``small governmental jurisdiction.'' In addition, the term ``small
business'' has the same meaning as the term ``small business concern''
under the Small Business Act. A small business concern is one which:
(1) Is independently owned and operated; (2) is not dominant in its
field of operation; and (3) satisfies any additional criteria
established by the SBA.
39. Television Broadcasting. The SBA designates television
broadcasting stations with $38.5 million or less in annual receipts as
small businesses. Television broadcasting includes establishments
primarily engaged in broadcasting images together with sound. These
establishments operate television broadcasting studios and facilities
for the programming and transmission of programs to the public. 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. The Commission estimates that there are 1,387
licensed commercial television stations in the United States. In
addition, according to Commission staff review of the BIA/Kelsey Media
Access Pro Television Database as of March 25, 2016, 1,264 (or about 91
percent) of the estimated 1,387 commercial television stations have
revenues of $38.5 million or less and, thus, qualify as small entities
under the SBA definition. We therefore estimate that the majority of
commercial television broadcasters are small entities. The Commission
has also estimated the number of licensed noncommercial educational
(NCE) television stations to be 390. These
[[Page 73041]]
stations are non-profit, and therefore considered to be small entities.
40. We note, however, that in assessing whether a business concern
qualifies as small under the above definition, business (control)
affiliations must be included. Our estimate, therefore, likely
overstates the number of small entities that might be affected by our
action because the revenue figure on which it is based does not include
or aggregate revenues from affiliated companies. In addition, an
element of the definition of small business is that the entity not be
dominant in its field of operation. We are unable at this time to
define or quantify the criteria that would establish whether a specific
television station is dominant in its field of operation. Accordingly,
the estimate of small businesses to which rules may apply does not
exclude any television station from the definition of a small business
on this basis and is therefore possibly over-inclusive to that extent.
41. The Report and Order modifies the calculations underlying the
national television multiple ownership rule as set forth above, which
would affect reporting, recordkeeping, or other compliance
requirements. The conclusion modifies 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 we do not anticipate that
compliance will require the expenditure of any additional resources as
the proposed modification to the calculations underlying the national
television multiple ownership rule will not place any additional
obligations on small businesses.
42. 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 and 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. The NPRM invited comment on issues that had the
potential to have significant impact on some small entities.
43. The rule change adopted in this Report and Order, as set forth
above, is intended to achieve our public interest goal of competition.
By recognizing the technical advancements of the UHF band after the DTV
transition, this Report and Order seeks to create a regulatory
landscape that reflects the current value of UHF spectrum in order to
better assess national television ownership figures. Further, this
Report and Order complies with the President's directive for
independent agencies to review their existing regulations to determine
whether such regulations should be modified, streamlined, expanded, or
repealed so as to make the agency's regulatory program more effective
or less burdensome in achieving the regulatory objectives. By
eliminating an outdated rule, we seek to reduce the costs and burdens
of compliance on firms generally, including small business entities.
And we find that the benefits of our decision to eliminate the UHF
discount outweigh any costs or other burdens that may result from our
action. In addition, the grandfathering proposal the Commission adopts
in the Report and Order aims to create a more effective regulatory
landscape by addressing current market realities. Overall, this Report
and Order seeks to expand broadcast ownership opportunities for station
owners, which includes small entities, by accurately reflecting
broadcast television ownership in the digital age. Given that the
technical justification for the UHF discount no longer exists,
continued application of the discount stifles competition by
encouraging consolidation instead of promoting new entrants in local
broadcast television markets. Therefore, the Commission believes the
rule change adopted in this Report and Order will benefit small
entities, not burden them.
44. Ordering Clauses. Accordingly, it is ordered that, pursuant to
the authority contained in Sections 1, 2(a), 4(i), 303(r), 307, 309,
and 310 of the Communications Act of 1934, as amended, this Report and
Order is adopted. The rule modification below shall be effective
November 23, 2016.
It is further ordered that the commission shall send a copy of this
Report and Order to Congress and to the Government Accountability
Office pursuant to the Congressional Review Act.
Federal Communications Commission.
Gloria J. Miles,
Federal Register Liaison Officer. Office of the Secretary.
List of Subjects in 47 CFR Part 73
Television, Radio.
For the reasons discussed in the preamble, The Federal
Communication Commission amends 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 paragraphs (e)(1) and (e)(2)(i) to
read as follows:
Sec. 73.3555 Multiple ownership.
* * * * *
(e) * * *
(1) No license for a commercial television broadcast station shall
be granted, transferred or assigned to any party (including all parties
under common control) if the grant, transfer or assignment of such
license would result in such party or any of its stockholders,
partners, members, officers or directors having a cognizable interest
in television stations which have an aggregate national audience reach
exceeding thirty-nine (39) percent.
(2) * * *
(i) National audience reach means the total number of television
households in the Nielsen Designated Market Areas (DMAs) in which the
relevant stations are located divided by the total national television
households as measured by DMA data at the time of a grant, transfer, or
assignment of a license.
* * * * *
[FR Doc. 2016-25569 Filed 10-21-16; 8:45 am]
BILLING CODE 6712-01-P