2014 Quadrennial Regulatory Review, 733-757 [2017-28329]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 83, Number 5 (Monday, January 8, 2018)]
[Rules and Regulations]
[Pages 733-757]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-28329]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 73

[MB Docket Nos. 14-50, 09-182, 07-294, 04-256, and 17-289; FCC 17-156]


2014 Quadrennial Regulatory Review

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, an Order on Reconsideration repeals and 
modifies several of the Commission's broadcast ownership rules. 
Specifically, this document repeals the Newspaper/Broadcast Cross-
Ownership Rule, the Radio/Television Cross-Ownership Rule, and the 
attribution rule for television joint sales agreements. This document 
also revises the Local Television Ownership Rule to eliminate the 
Eight-Voices Test and to modify the

[[Page 734]]

Top-Four Prohibition to better reflect the competitive conditions in 
local markets. This document provides a favorable presumption for 
waiver of the Local Radio Ownership Rule's market definitions as to 
transactions in certain embedded markets. Lastly, this document rejects 
requests to change the definition of Shared Service Agreements (SSAs) 
and the requirement that commercial television stations disclose SSAs 
by placing the agreements in each station's online public inspection 
file. In addition, the document finds that the record supports adoption 
of an incubator program to promote ownership diversity. The Order on 
Reconsideration grants in part and denies in part the Petitions for 
Reconsideration filed separately by the National Association of 
Broadcasters (NAB), Nexstar Broadcasting, Inc. (Nexstar), and 
Connoisseur Media LLC (Connoisseur).

DATES: Effective February 7, 2018 except for the amendment to Sec.  
73.3613, which contains information collection requirements that are 
not effective until approved by the Office of Management and Budget 
(OMB). The Commission will publish a document in the Federal Register 
announcing the effective date of these changes.

FOR FURTHER INFORMATION CONTACT: Benjamin Arden, Industry Analysis 
Division, Media Bureau, FCC, (202) 418-2605. For additional information 
concerning the PRA information collection requirements contained in the 
Second Report and Order, contact Cathy Williams at (202) 418-2918, or 
via the internet at [email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Order 
on Reconsideration, in MB Docket Nos. 14-50, 09-182, 07-294, 04-256, 
and 17-289; FCC 17-156, was adopted on November 16, 2017, and released 
on November 20, 2017. The complete text of this document is available 
electronically via the search function on the FCC's Electronic Document 
Management System (EDOCS) web page at https://apps.fcc.gov/edocs_public/. The complete document is available for inspection and 
copying during normal business hours in the FCC Reference Information 
Center, 445 12th Street SW, Room CY-A257, Washington, DC 20554. To 
request materials in accessible formats for people with disabilities 
(Braille, large print, electronic files, audio format), send an email 
to [email protected] or call the FCC's Consumer and Governmental Affairs 
Bureau at (202) 418-0530 (voice), (202) 418-0432 (TTY).

Synopsis

I. Introduction

    1. In this Order on Reconsideration (Order), the Commission grants 
in part and denies in part, as set forth in this Order, various 
petitions for reconsideration of the Second Report and Order (81 FR 
76220, Nov. 1, 2016, FCC 16-107, rel. Aug. 25, 2016). Specifically, the 
Commission (1) eliminates the Newspaper/Broadcast Cross-Ownership Rule; 
(2) eliminates the Radio/Television Cross-Ownership Rule; (3) revises 
the Local Television Ownership Rule to eliminate the Eight-Voices Test 
and to modify the Top-Four Prohibition to better reflect the 
competitive conditions in local markets; (4) declines to modify the 
market definitions relied on in the Local Radio Ownership Rule, but 
provides a presumption for certain embedded market transactions; (5) 
eliminates the attribution rule for television joint sales agreements 
(JSAs); and (6) retains the disclosure requirement for shared service 
agreements (SSAs) involving commercial television stations. In 
addition, the Commission finds that the present record supports 
adoption of an incubator program to promote ownership diversity; 
however, the structure and implementation of such a program requires 
further exploration.

II. Background

    2. Congress requires the Commission to review its broadcast 
ownership rules every four years to determine whether they are 
necessary in the public interest as the result of competition and to 
repeal or modify any regulation the Commission determines to be no 
longer in the public interest. On August 10, 2016, the Commission 
adopted the Second Report and Order (released on August 25, 2016) to 
resolve both the 2010 and 2014 quadrennial review proceedings, as well 
as to address various issues related to the attribution of television 
JSAs, diversity initiatives, and SSAs.
    3. The Second Report and Order largely retained the existing 
broadcast ownership rules, reinstated the previously vacated Television 
JSA Attribution Rule, and adopted a definition of SSAs and a disclosure 
requirement for SSAs involving commercial television stations. The 
Commission also committed to explore various diversity-related 
proposals in the record, while declining to adopt other proposals, 
including an incubator program. Several parties sought reconsideration 
of various aspects of the Second Report and Order. NAB petitioned the 
Commission to reconsider its decisions regarding the Local Television 
Ownership Rule, television JSA attribution, SSA disclosure, the 
Newspaper/Broadcast Cross-Ownership Rule, the Radio/Television Cross-
Ownership Rule, and the rejection of NAB's proposal to create an 
incubator program to encourage diversity. On January 24, 2017, the 
Office of Communication, Inc. of the United Church of Christ (UCC), the 
Media Alliance, the National Organization for Women Foundation, the 
Communications Workers of America, the Newspaper Guild, the National 
Association of Broadcast Employees and Technicians, Common Cause, the 
Benton Foundation, Media Council Hawai'i, the Prometheus Radio Project, 
and the Media Mobilizing Project (UCC et al.) filed a motion to strike 
and dismiss the NAB Petition on the grounds that the petition 
improperly evades the strict 25-page limit on reconsideration petitions 
by using a prohibited, undersized font for footnotes and inserting a 
substantial portion of its argument into those footnotes in violation 
of 47 CFR 1.49(a). The motion also alleges that NAB's summary was well 
over twice the permissible length, and improperly contains additional 
arguments in violation of 47 CFR 1.49(c). In reply, NAB states that it 
did not intend to evade any Commission rules and offers to refile if 
the Commission is concerned about UCC et al.'s allegations. In 
addition, NAB cites precedent that the Commission has considered 
previously the merits of an application for review well in excess of 
the 25-page limit and notes that parties adverse to NAB have pleadings 
in the proceeding that violate 47 CFR 1.49 but have been considered on 
the merits by the Commission. The Commission denies UCC et al.'s 
motion. The Commission finds that, to the extent that NAB's pleading 
does not precisely conform to 47 CFR 1.49, no party has been 
prejudiced, and the public interest is best served by considering NAB's 
arguments. The Commission reminds parties, however, to be mindful of 
the requirements of Sec.  1.49.
    4. Nexstar also challenged the Local Television Ownership Rule and 
the attribution of television JSAs, while Connoisseur challenged an 
aspect of the Local Radio Ownership Rule related to embedded markets.

III. Media Ownership Rules

A. Newspaper/Broadcast Cross-Ownership Rule

1. Introduction
    5. Upon reconsideration, the Commission repeals the Newspaper/

[[Page 735]]

Broadcast Cross-Ownership (NBCO) Rule in its entirety. The Commission's 
decision to repeal the rule means that all newspapers (print or 
digital) now will be allowed to combine with television and radio 
stations within the same local market, subject to the remaining 
broadcast ownership rules and any other applicable laws, including 
antitrust laws. The Commission finds that prohibiting newspaper/
broadcast combinations is no longer necessary to serve the goal of 
promoting viewpoint diversity in light of the multiplicity of sources 
of news and information in the current media marketplace and the 
diminished voice of daily print newspapers. Whatever the limited 
benefits for viewpoint diversity of retaining the rule, in today's 
competitive media environment, they are outweighed by the costs of 
preventing traditional news providers from pursuing cross-ownership 
investment opportunities to provide news and information in a manner 
that is likely to ensure a more informed electorate. As such, the NBCO 
Rule no longer serves the public interest and must be repealed pursuant 
to Section 202(h).
2. Background
    6. In the Second Report and Order, the Commission affirmed its 
previous findings that an absolute ban was overly restrictive, but 
concluded that some newspaper/broadcast cross-ownership restrictions 
continued to be necessary to promote viewpoint diversity. It retained 
the general prohibition on common ownership of a broadcast station and 
a daily print newspaper in the same local market, but adopted minor 
changes to the rule to accomplish what the Commission called a modest 
loosening of the absolute ban. The Commission: (1) modified the 
geographic scope of the rule to update its analog parameters and to 
reflect more accurately the markets that newspapers and broadcasters 
actually serve; (2) adopted an explicit exception for failed and 
failing broadcast stations and newspapers; and (3) created a case-by-
case waiver standard whereby the Commission would grant relief from the 
rule if the applicants showed that a proposed merger would not unduly 
harm viewpoint diversity in the market. The Commission declined to 
eliminate the newspaper/radio cross-ownership restriction from the NBCO 
Rule after finding that, despite its earlier tentative conclusion that 
radio stations typically are not primary outlets for local news, radio 
stations nonetheless provide a meaningful amount of local news and 
information such that lifting the restriction could harm viewpoint 
diversity. In addition, the Commission explained that, although the 
rule may benefit ownership diversity incidentally, the agency's purpose 
in retaining the rule was not to promote minority or female ownership. 
NAB petitioned the Commission to reconsider its retention of the NBCO 
Rule.
3. Discussion
    7. The Commission finds that the NBCO Rule must be repealed because 
it is not necessary to promote the Commission's policy goals of 
viewpoint diversity, localism, and competition, and therefore does not 
serve the public interest. Because the Commission is repealing the NBCO 
Rule on other grounds, it is unnecessary to address arguments that the 
rule should be repealed on competition grounds. Similarly, it is 
unnecessary to reach arguments that ownership does not influence 
viewpoint because the Commission is eliminating the rule on the ground 
that, even if ownership might influence viewpoint in certain 
circumstances, the NBCO Rule is not necessary to foster viewpoint 
diversity (nor to promote localism or competition). The parties that 
support reconsideration of the NBCO Rule argue that the modifications 
adopted in the Second Report and Order were insufficient and that the 
rule is obsolete and should be eliminated. The Commission agrees. The 
Commission affirms its longstanding determination that the rule does 
not advance localism and competition goals, and finds that it is no 
longer necessary to promote viewpoint diversity, the rule's only 
remaining policy justification. Although elimination of the rule could 
theoretically diminish viewpoint diversity to a limited extent due to 
the loss of an independent voice as a result of any newspaper/broadcast 
combination, the Commission finds that this impact will be mitigated by 
the multiplicity of alternative sources of local news and information 
available in the marketplace and the overall financial decline of 
newspapers. In addition, the Commission finds that this concern is 
outweighed by the countervailing benefits to consumers that can result 
from newspaper/broadcast combinations. Finally, based on the 
Commission's review of the record, the Commission finds that 
eliminating the rule will have no material effect on minority and 
female broadcast ownership. Accordingly, the Commission grants the 
request that it eliminate the NBCO Rule.
    8. The Marketplace Has Changed Dramatically. On reconsideration, 
the Commission finds that its decision to retain the NBCO Rule failed 
to acknowledge the current realities of the media marketplace. In 1975, 
the broadcast industry was still relatively young, but it had found its 
footing, owing in part to the role that newspaper/broadcast cross-
ownership had played in its success. Supporters of common ownership 
claimed that joint ownership of newspapers and broadcast stations made 
possible the early development of FM and TV service even though these 
pioneering stations often had to be operated at a loss. In adopting the 
cross-ownership rule, the Commission acknowledged the pioneering role 
of newspapers in the broadcast medium but found that common ownership 
with newspapers was no longer a critical factor for broadcaster 
success. The Commission observed that, on the whole, the broadcast 
industry had matured to the point that new entrants could be expected 
to have an interest in pursuing station ownership. It concluded that 
the special reason for encouraging newspaper ownership, even at the 
cost of a lessened diversity, was no longer generally operative in the 
way it once was. The Commission understood its obligation to give 
recognition to the changes which have taken place and see to it that 
its rules adequately reflect the situation as it is, not was.
    9. That same obligation now requires the Commission to eliminate 
the NBCO Rule. Not only have the means of accessing content changed 
dramatically, but the media marketplace has seen an explosion in the 
number and variety of sources of local news and information since the 
Commission adopted the NBCO Rule in 1975. Opponents of the rule point 
to this increase and argue that the NBCO Rule has become obsolete as a 
result.
    10. From the 6,197 full-power radio stations and 851 full-power 
television stations that existed in the late 1960s, the Commission's 
latest broadcast totals place the number of full-power radio stations 
at 15,512 and full-power television stations at 1,775. Contrary to the 
Commission's conclusion in the Second Report and Order, the fact that 
the number of full-power broadcast stations has more than doubled 
represents a significant increase that should be considered when 
evaluating the continued necessity of the NBCO Rule. It was improper 
for the Commission to dismiss data submitted by Bonneville 
International Corp. and The Scranton Times, L.P., demonstrating a 
substantial increase in

[[Page 736]]

the number of broadcast services simply because it represented a 
nationwide increase which may have been spread unevenly across 
individual local markets without citing any evidence to support this 
notion. In addition, the Commission should have taken into account the 
number of low-power broadcast stations, which, as of June 2017, 
includes 417 Class A television stations; 1,968 low-power television 
(LPTV) stations; and 1,966 low-power FM (LPFM) stations--none of which 
services existed when the rule was adopted. This situation is a stark 
contrast to the state of affairs in 1975, when the changed 
circumstances in the broadcasting industry that prompted adoption of 
the NBCO Rule included a trend in which the number of channels open for 
new licensing had diminished substantially.
    11. Equally, if not more significantly, NAB cites evidence of the 
growing prevalence of independent digital-only news outlets with no 
print or broadcast affiliation, many with a local or hyperlocal focus. 
Thirteen years ago, the Third Circuit agreed with the Commission that 
the record suggested that cable and the internet contribute to 
viewpoint diversity; the panel members simply disagreed about the 
degree and importance of this trend at that time. Since then, however, 
the picture has changed significantly. Even the U.S. Supreme Court 
recently recognized the importance of the internet and social media as 
sources of news and information for many Americans. As this trend 
continues to gain momentum and new voices proliferate, the dominance of 
traditional news outlets diminishes. Although the record contains some 
evidence that local television stations and newspapers may still be 
consumers' primary sources of local news and information, the 
Commission finds that it improperly discounted the role of non-
traditional news outlets, including internet and digital-only, in the 
local media marketplace.
    12. The Commission concluded in the Second Report and Order that 
online outlets do not serve as a substitute for newspapers and 
broadcasters providing local news and information. As noted below, this 
conclusion does not appear to reflect the record evidence as to how the 
internet has transformed the American people's consumption of news and 
information, the direction of current trends in this regard, and in 
particular how those trends have affected younger adults. At a minimum, 
the record reflects studies that reject the premise that people have a 
primary or single source for most of their local news and information. 
Rather, the picture revealed by the data is that of a richer and more 
nuanced ecosystem of community news and information than researchers 
have previously identified, in which Americans turn to a wide range of 
platforms to get local news and information. Thus, the contributions of 
such outlets cannot be dismissed out of hand as the existence of these 
non-traditional news outlets nevertheless results in greater access to 
independent information sources in local markets. Furthermore, the 
Commission failed to acknowledge adequately evidence in the record 
demonstrating the emergence of online outlets that offer local content 
and have no affiliation with traditional broadcast or print sources.
    13. Numerous studies cited in the record establish the emergence 
and growth of alternative sources of local news and information, 
including digital-only local news outlets as well as other online 
sources of local news and information. For example, according to a 2014 
Pew Research study, out of 438 digital news sites examined, more than 
half had a local focus, with the typical outlet described as focused on 
coverage of local or even neighborhood-level news. Even by 2011, a Pew 
study confirmed that while newspapers remain popular sources for some 
such information, 69 percent of those surveyed said that if their local 
newspaper no longer existed, it would not have a major impact on their 
ability to keep up with information and news about their community. By 
2016, Pew reported that just 20 percent of U.S. adults often get news 
from print newspapers, with even steeper declines in particular 
demographics--only 5 percent of those aged 18 through 29, and only 10 
percent of those aged 30 through 49. According to the earlier Pew 
study, for the 79 percent of Americans who are online, the internet is 
the first or second most important source for 15 of the 16 local topics 
examined. Nearly half of adults (47 percent) use mobile devices to get 
local news and information, and for none of Pew's topics did more than 
6 percent of respondents say they depended on the website of a legacy 
news organization. Among adults under age 40, the web ranks first or 
ties for first for 12 of the 16 local topics asked about. Furthermore, 
in the Second Report and Order, the Commission too readily dismissed 
cable news programming as primarily targeted to a wide geographic 
audience, without considering that most of the major cable operators 
carry locally-focused cable news networks in parts of their footprint.
    14. On reconsideration, the Commission finds that the record 
clearly demonstrates that the wealth of additional information sources 
available in the media marketplace today, apart from traditional 
newspapers and broadcasters, strongly supports repealing the NBCO Rule. 
These dramatic and ongoing changes in the media industry negate 
concerns that repealing the NBCO Rule will harm viewpoint diversity. 
The Commission does not perceive a need for the rule in light of the 
current trends toward greater consumer reliance on these alternative 
sources of local news and information. The Commission's failure to 
account properly for the multiplicity of news and information sources 
available in the current media marketplace factored heavily in its 
unjustified retention of the NBCO Rule.
    15. The Decline of the Newspaper Industry Has Diminished its Voice. 
In addition, restrictions on common ownership of daily print newspapers 
and broadcast stations are no longer justified to protect viewpoint 
diversity as the strength of daily print newspapers has declined 
significantly since 1975. In the Second Report and Order, the 
Commission failed to credit properly the evidence in the record 
regarding the challenges facing the newspaper industry and the 
resulting effects on the ability of print newspapers to serve their 
readers. Rather than merely modifying the rule's waiver standard and 
adjusting its carve-outs, the Commission should have acknowledged the 
diminution of newspapers' voices and concluded that the time has come 
to eliminate the rule altogether.
    16. In light of the long decline of the newspaper industry, the 
loss of an independent daily newspaper voice in a community will have a 
much smaller impact on viewpoint diversity than would have been the 
case in 1975. In addition, as discussed below, repeal of the NBCO Rule 
will permit newspaper/broadcast combinations that can strengthen local 
voices and thus enable the combined outlets to better serve their 
communities.
    17. The NBCO Rule Prevents Combinations that Could Benefit 
Localism. The Commission repeatedly has recognized that the NBCO Rule 
does not promote localism and actually may hinder it by preventing 
local news outlets from achieving efficiencies by combining resources 
needed to gather, report, and disseminate local news and information. 
The Commission nevertheless retained newspaper/broadcast cross-
ownership restrictions in order to promote its goal of viewpoint

[[Page 737]]

diversity. Because the NBCO Rule is no longer necessary to foster 
viewpoint diversity, and the rule can be repealed without harming the 
public interest, the potential benefits to localism arising from common 
ownership finally can accrue. The Commission expects that eliminating 
the NBCO Rule will allow both broadcasters and newspapers to seek out 
new sources of investment and operational expertise, increasing the 
quantity and quality of local news and information they provide in 
their local markets.
    18. There is ample evidence in the record that eliminating the rule 
will help facilitate such investment and enable both broadcasters and 
newspapers to better serve the public. For example, Cox Media Group, 
LLC (Cox) asserts that collaboration and cost-sharing between its 
television station and its newspaper in Dayton, Ohio, helped them be 
the first to report on what became a national story about the failures 
of the Veterans Administration to provide adequate medical services. In 
addition, Cox previously provided several examples showing how the 
combination of resources across its commonly owned newspaper, 
television, and radio properties in both Dayton and Atlanta, Georgia, 
allowed them to report on breaking news stories more quickly and 
accurately and to also provide more thorough coverage of events, such 
as political elections, that involve numerous interviews and in-depth 
issue reporting. Cox asserts that the common ownership of multiple 
outlets has enabled its media properties ``to vastly improve service at 
a time when the economics of the newspaper and broadcast business would 
seem to dictate the opposite.'' In addition, the News Media Alliance 
(NMA) provided numerous examples of the benefits to local programming 
involving cross-owned media outlets in various markets. For example, a 
cross-owned newspaper/television combination in Phoenix combined 
resources to report on stories such as the shooting of Congresswoman 
Gabrielle Giffords and 18 others in Tucson, the Yarnell Hill fire that 
killed 19 firefighters and destroyed more than 100 homes, and a massive 
dust storm. In South Bend, Indiana, a commonly owned local newspaper, 
television station, and two radio stations regularly worked together on 
issues of local significance, such as uncovering harmful substances in 
drinking water, hosting town-hall meetings for political candidates and 
local officials, sending a reporter to Iraq, commemorating the 150th 
anniversary of the local Studebaker factory, providing weather 
information, and covering Notre Dame sports. NMA also cited prior 
Commission studies for the proposition that, on average, a cross-owned 
television station produces more local news and more coverage of local 
and state political candidates than comparable non-cross-owned 
television stations. NMA pointed to the finding in one Commission study 
that cross-owned television stations, on average, air 50 percent more 
local news than non-cross-owned stations. The Commission's Media 
Ownership Study 4 also found that the total amount of local news aired 
by all television stations in the market may be negatively correlated 
with newspaper/broadcast cross-ownership. As noted in the FNPRM (79 FR 
29010, May 20, 2014, FCC 14-28, rel. Apr. 14, 2014), however, the study 
authors cautioned that this finding was imprecisely measured and not 
statistically different from zero. An earlier Commission study cited by 
NMA found that cross-owned television stations aired between seven to 
ten percent more local news, which still represents a meaningful 
increase in the average amount of local news aired on cross-owned 
television stations. This study also found that cross-owned television 
stations, on average, provide roughly 25 percent more coverage of local 
and state politics. The Commission has acknowledged that prior 
Commission studies have found that cross-owned radio stations are more 
likely to air news and public affairs programming and are four to five 
times more likely to have a news format than a non-cross-owned station. 
Comments in this proceeding bear that out, providing anecdotal 
evidence, such as that offered by Morris Communications, which 
explained that its radio stations in Topeka, Kansas, and in Amarillo, 
Texas, were able to invest more heavily in local news production and in 
news staff because of their cross-ownership with the local newspaper. 
As the Commission discussed in the Second Report and Order, the record 
contains support for the proposition that newspaper/broadcast 
combinations can promote localism by creating efficiencies through the 
sharing of expertise, resources, and capital that can lead to a higher 
quantity and quality of local news programming. The Commission has long 
accepted that proposition, but it concluded in its previous decisions 
that some restrictions remained necessary to promote viewpoint 
diversity. The Commission concludes now that the potential public 
interest benefits of permitting newspaper/broadcast combinations 
outweigh the minimal loss of viewpoint diversity that may result from 
eliminating the rule. With the elimination of the NBCO Rule these 
localism benefits can finally begin to materialize.
    19. In light of the well-documented and continuing struggles of the 
newspaper industry, the efficiencies produced by newspaper/broadcast 
combinations are more important than ever. A report in February 2017 
examining the health of small newspapers was cautiously optimistic 
about the future of publications with a community or hyperlocal focus 
but acknowledged that their battle for survival will not be easy and 
will require new approaches and strategies that take advantage of their 
niche position. Removing the regulatory obstacle of this outdated rule 
will help financially troubled newspapers carry on their important 
work. While the Commission recognizes that cost-savings gained from 
common ownership will not necessarily be invested in the production of 
local news, by allowing newspapers and broadcasters to collaborate and 
combine resources, the Commission's action in this Order creates new 
opportunities for local broadcasters and newspapers to better serve the 
local news and information needs of their communities.
    20. The NBCO Rule Must be Eliminated. The Commission's decision to 
repeal the rule reflects the situation as it currently is, not as it 
was more than 40 years ago. Whereas the Commission determined in 1975 
that newspaper/broadcast combinations were no longer necessary to 
support the growth of the broadcast industry and that the interest in 
viewpoint diversity required separate ownership of newspapers and 
broadcast licenses, the Commission now determines that this restriction 
is no longer necessary to promote viewpoint diversity and can 
potentially harm localism, and that removing the restriction best 
serves the public interest.
    21. Indeed, even to the extent that eliminating the rule would 
permit transactions that would reduce the number of outlets for news 
and information in local markets, the markets will continue to have far 
more voices than when the rule was enacted. The modern media 
marketplace abounds with new, non-traditional voices, the number of 
local broadcasters has increased dramatically, and the strength of 
local newspapers relative to other media has diminished as a result of 
the difficulties facing the industry and the rise of new voices. And 
the Commission expects the number of

[[Page 738]]

voices to continue to grow, as the internet, in particular, has lowered 
the barriers to entry and provided a publicly accessible platform for 
individuals and organizations to serve the news and information needs 
of their local communities. Furthermore, eliminating the NBCO Rule will 
permit efficient combinations that will allow broadcasters and 
newspapers to combine resources and enable them to better serve their 
local communities. On balance, therefore, the Commission concludes that 
retaining the rule does not serve the public interest.
    22. The Commission consistently has recognized that changing 
circumstances in the marketplace warrant a retreat from a total ban; 
accordingly, the Commission has attempted to impose various limits on 
the rule through the years. The Commission's overall direction has been 
toward a growing acknowledgment that the rule is not always necessary 
to promote viewpoint diversity and should be modified to reflect 
changes in the marketplace. The Commission's action in this Order is 
simply the logical extension of this acknowledgment in response to the 
radically altered media marketplace.
    23. As noted in the 2002 Biennial Review Order (68 FR 46286, Aug. 
5, 2003, FCC 03-127, rel. July 2, 2003), the Commission must consider 
the impact of [its] rules on the strength of media outlets, 
particularly those that are primary sources of local news and 
information, as well as on the number of independently owned outlets. 
Maximizing the number of independent voices does not further diversity 
if those voices lack the resources to create and publish news and 
public information. In Prometheus Radio Project v. FCC, 373 F.3d 372 
(3d Cir. 2004) (Prometheus I), the court affirmed the Commission's 
finding in the 2002 Biennial Review Order that the NBCO Rule was 
overbroad and should be relaxed. In the 2006 Quadrennial Review Order 
(73 FR 9481, Feb. 21, 2008, FCC 07-216, rel. Feb. 2008), the Commission 
took into consideration the imperiled state of the newspaper industry, 
recounting statistics and data showing that the shrinking newspaper 
industry had suffered circulation declines, staff layoffs, shuttered 
news bureaus, flat advertising revenues, rising operating costs, and 
falling stock prices. These hardships influenced the Commission's 
finding that the existing ban on newspaper/broadcast combinations 
continued to be overly restrictive.
    24. The newspaper industry had not recovered when the Commission 
began its 2010/2014 ownership review and, indeed, the hardships 
continued to mount. In its 2010 NOI (75 FR 33227, June 11, 2010, FCC 
10-92, rel. May 25, 2010), the Commission described newspapers' 
declining circulation and advertising revenues and asked whether 
relaxing the rule would help newspapers to survive. In the FNPRM, the 
Commission expressed concern for the future of newspapers but disagreed 
with the suggestion that the NBCO Rule should be repealed or relaxed on 
that basis alone. The Commission was reluctant to jeopardize viewpoint 
diversity in local markets in response to assertions that the rule 
limited opportunities for traditional media owners to expand their 
revenues. Now, however, the Commission concludes that the continuance 
of the NBCO Rule is not necessary or appropriate to preserve or promote 
viewpoint diversity under Section 202(h). The Commission anticipates 
that both newspapers and broadcasters will benefit from the rule's 
repeal, as will, ultimately, the public, as discussed above.
    25. The Commission recognized in the FNPRM that the NBCO Rule does 
not promote viewpoint diversity when a newspaper is in financial 
distress, and the FNPRM proposed an exception to the rule for failed 
and failing merger applicants. In the Second Report and Order, the 
Commission adopted that exception and explained that allowing such 
mergers is not likely to harm viewpoint diversity. In addition, the 
Commission incorporated into the rule a case-by-case waiver standard 
for markets of all sizes to account for merger situations that do not 
pose an undue risk to viewpoint diversity.
    26. On reconsideration, the Commission finds that its modifications 
to the NBCO Rule in the Second Report and Order were inadequate. Given 
the current state of the newspaper industry, it might very well be too 
late to save a newspaper that would qualify as failed or failing under 
the exception adopted in the Second Report and Order. The Commission's 
goal should be to keep local voices strong, not to maintain artificial 
barriers that prevent efficient combinations and then wait until 
newspapers reach a failed or failing state before providing regulatory 
relief. In addition, the Commission's case-by-case waiver standard was 
wholly insufficient because the Commission failed to provide any 
meaningful guidance on how it would evaluate each waiver request. An 
exception or a waiver standard may be appropriate when a rule is sound 
and exceptional circumstances exist, but such mechanisms do not redeem 
an unsound rule, as the Commission finds this one to be.
    27. In addition, the modified rule inexplicably left in place a 
definition of daily newspaper that is outdated and illogical in that it 
applies only to newspapers printed at least four days a week. The 
distinction between print newspapers and digital outlets has become 
blurred as some newspapers reduce the number of days a week they 
publish in print and rely more heavily on their online distribution. 
Indeed, many publishers today continuously update the content of the 
online versions of their newspapers as they compete with bloggers and 
social media that rapidly produce and update their own content. 
Applying the NBCO Rule to newspapers only if they are printed in 
hardcopy at least four days per week ignores the reality that what 
defines a newspaper has changed and that many consumers access the 
paper's news and information over the internet throughout the day. A 
newspaper's influence should no longer be measured by how many mornings 
a week it is delivered to the doorstep. Doing so would exacerbate the 
perverse incentive for a newspaper seeking to combine with a 
broadcaster to reduce its print editions in order to avoid triggering 
the rule. Given the current media marketplace and the way consumers 
access content, the rule's reliance on a newspaper's printing schedule 
makes no sense.
    28. As the modified rule adopted in the Second Report and Order is 
not necessary to promote the public interest, the Commission cannot 
retain it consistent with Section 202(h). the Commission emphasizes 
that the rule's repeal in no way reflects a lessening of the importance 
of viewpoint diversity as a Commission policy goal. Rather, the 
Commission concludes that the rule is no longer necessary to promote 
viewpoint diversity.
    29. The Commission finds also that the NBCO Rule should be 
eliminated rather than relaxed. The Commission's previous attempts to 
relax the rule demonstrate the difficulty in designing an approach that 
works effectively for the range of market circumstances across the 
country. Paradoxically, previous attempts at relaxing the rule arguably 
threatened the greatest harm in small markets where cross-ownership may 
be needed most to sustain local news outlets. The record does not 
provide an adequate basis for distinguishing areas where application of 
the rule could serve the public interest from those where it would not. 
There was significant opposition to the modified rule proposed by the 
Commission in this proceeding, and only one commenter proposed a

[[Page 739]]

detailed alternative approach, and the Commission explained why it 
declined to adopt it. Thus, the record does not support a narrowed 
restriction. Moreover, as discussed above, the Commission finds that it 
would be outdated and illogical to adopt a rule based on the 
distinction between print newspapers and digital outlets. Indeed, any 
modified rule that continues to single out newspapers of any kind 
cannot be sustained.
    30. In light of the significantly expanded media marketplace and 
the overall state of the newspaper industry, and the Commission's 
conclusion that the rule is not necessary to promote viewpoint 
diversity, competition, or localism, and may hinder localism, the 
Commission concludes that immediate repeal is required by Section 
202(h) and will permit combinations that would benefit consumers. The 
Commission's decision will enable all broadcasters and newspapers to 
attract new investment in order to preserve and expand their local news 
output.
    31. In addition, though the Commission finds that the entire NBCO 
Rule must be eliminated, the Commission finds that the record provides 
an additional and independent justification for eliminating the 
restriction on newspaper/radio combinations. Opponents of this aspect 
of the rule argue that evidence in the record does not provide adequate 
support for the Commission's conclusion that radio is a sufficiently 
meaningful source of local news and public interest programming such 
that allowing newspaper/radio combinations could harm viewpoint 
diversity. The Commission agrees. As discussed in the following 
section, the Commission is eliminating the Radio/Television Cross-
Ownership Rule based on its finding that the diminished contributions 
of local broadcast radio stations to viewpoint diversity, together with 
increasing contributions from new media outlets and the public interest 
benefits of radio/television combinations, no longer justify continued 
radio/television cross-ownership regulation. For the same reasons 
relating to viewpoint diversity contributions of radio and the 
proliferation of alternative media voices, as well as the 
countervailing public interest benefits of newspaper/radio 
combinations, the Commission concludes that the restriction on 
newspaper/radio combinations is not in the public interest and must be 
eliminated pursuant to Section 202(h).
    32. Minority and Female Ownership. The Commission finds that 
repealing the NBCO Rule will not have a material impact on minority and 
female ownership. After seeking public comment on this topic a number 
of times, the Commission expressed its view that the rule does not 
promote or protect minority and female ownership. Not only have past 
debates on this issue not persuaded the Commission that the ban on 
newspaper/broadcast combinations is necessary to protect or promote 
minority and female ownership, no arguments were made in this 
reconsideration proceeding that would lead the Commission to conclude 
otherwise. On the contrary, two organizations representing minority 
media owners seek relief from the rule's restrictions. Their comments 
directly refute arguments in the record that repealing the rule will 
harm small broadcasters, including minority and women broadcasters, 
because they are at a competitive disadvantage compared to large media 
outlets. As the Commission contemplated in the FNPRM, merging with a 
newspaper could boost the ability of a small broadcaster to compete 
more effectively in the market and to improve its local news offerings. 
The Commission's action in this Order will provide the flexibility to 
do just that.
    33. The Commission agrees with comments stating that lifting the 
ban on newspaper/radio combinations is unlikely to have a significant 
effect on minority and female ownership in the radio market given that 
the thousands of radio stations across the country offer plenty of 
purchasing opportunities for minorities and women and at lower cost 
than most other forms of traditional media. In addition, the Commission 
does not anticipate that lifting the ban on newspaper/television 
combinations will lead to a meaningful decrease in the number of 
minority-owned television stations. Some groups previously expressed 
concern that minority-owned television stations would be targeted for 
acquisition if the ban were relaxed to favor waiver requests for 
certain newspaper/television combinations with stations ranked below 
the top four television stations in a market--a category that includes 
many minority-owned stations. Removing the ban across-the-board will 
ensure that no artificial incentives are created, and the record 
provides no evidence that minority- and female-owned stations will be 
singled out for acquisition, as some commenters have speculated. To the 
contrary, record evidence demonstrates that previous relaxations of 
other ownership rules have not resulted in an overall decline in 
minority and female ownership of broadcast stations, and the Commission 
sees no evidence to suggest that eliminating the NBCO Rule will produce 
a different result and precipitate such a decline. Ultimately, given 
the state of the newspaper industry, the Commission expects that 
broadcasters may be better positioned to be the buyer, rather than the 
seller, in most transactions that flow from the rule's repeal. 
Furthermore, submissions in the record suggest that some minority media 
owners may be poised to pursue cross-ownership acquisition and 
investment opportunities. Therefore, eliminating the rule potentially 
could increase minority ownership of newspapers and broadcast stations.
    34. In addition, the Commission rejects assertions that Prometheus 
III prevents the Commission from repealing or modifying any of its 
broadcast ownership rules on reconsideration. Contrary to such 
assertions, the Third Circuit's holding in Prometheus III does not 
require the Commission to adopt a socially disadvantaged business (SDB) 
definition before it can revise or repeal any rules; rather, the court 
simply required the Commission to complete its analysis of whether to 
adopt such a definition. The Commission completed that required 
analysis in the Second Report and Order and declined to adopt an SDB 
standard.
    35. Finally, in the Second Report and Order, the Commission stated 
that the revised NBCO Rule it adopted would help promote ownership 
diversity. The Commission's comment, however, did not indicate a belief 
that the rule would promote minority and female ownership specifically, 
but rather that the rule would promote ownership diversity generally by 
requiring the separation of newspaper and broadcast station ownership. 
Moreover, the Commission made it clear that promoting viewpoint 
diversity, as opposed to preserving or promoting minority and female 
ownership, was the purpose of its revised rule. The record does not 
suggest that restricting common ownership of newspapers and broadcast 
stations promotes minority and female ownership of broadcast stations, 
and there is evidence in the record that tends to support the contrary. 
Thus, fostering minority and female ownership does not provide a basis 
to retain the rule.

B. Radio/Television Cross-Ownership Rule

1. Introduction
    36. The Commission grants the request for reconsideration of the 
Commission's decision in the Second Report and Order to retain the 
Radio/

[[Page 740]]

Television Cross-Ownership Rule. Ownership of television and radio 
stations will continue to be limited by the Local Television and Local 
Radio Ownership Rules.
2. Background
    37. In the Second Report and Order, the Commission retained the 
Radio/Television Cross-Ownership Rule with only minor technical 
modifications, finding that the rule remained necessary to promote 
viewpoint diversity. Despite its prior tentative conclusion to the 
contrary, the Commission concluded that the Radio/Television Cross-
Ownership Rule remains necessary given that radio stations and 
television stations both contribute in meaningful ways to promote 
viewpoint diversity in local markets. The Commission further claimed 
that the rule continues to play an independent role in serving the 
public interest separate and apart from the Local Radio and Local 
Television Ownership Rules, which are designed primarily to promote 
competition. In its petition for reconsideration, NAB asserts that the 
decision in the Second Report and Order to retain the Radio/Television 
Cross-Ownership Rule (with only minor technical modifications) was 
arbitrary and capricious and contrary to Section 202(h) of the 1996 
Act.
3. Discussion
    38. On reconsideration, the Commission eliminates the Radio/
Television Cross-Ownership Rule, concluding that it is no longer 
necessary to promote viewpoint diversity in local markets. The 
Commission concludes that the Commission erred in finding in the Second 
Report and Order that broadcast radio stations contribute to viewpoint 
diversity to a degree that justifies retention of the rule, 
particularly in light of other local media outlets that contribute to 
viewpoint diversity. The Commission also concludes that, given that the 
rule already permits a significant degree of common ownership, it is 
doing very little to promote viewpoint diversity and its elimination 
therefore will have a negligible effect. The record in this proceeding 
gives no cause to disturb the long-standing conclusion that the rule is 
not necessary to promote localism. However, elimination of the rule is 
likely to have a negligible impact in most markets, so any impact on 
localism--positive or negative--will be similarly negligible. Finally, 
the Commission finds that elimination of the rule is not likely to have 
a negative impact on minority and female ownership.
    39. Contrary to the Commission's findings in the Second Report and 
Order, as discussed below, the Commission finds that broadcast radio 
stations' contributions to viewpoint diversity in local markets no 
longer justify retention of the Radio/Television Cross-Ownership Rule. 
The Commission tentatively concluded in the NPRM (77 FR 2867, Jan. 19, 
2012, FCC 11-186, rel. Dec. 22, 2011) that the rule was no longer 
necessary to promote viewpoint diversity. It then sought further 
comment on that tentative conclusion in the FNPRM. The Commission's 
approach in the NPRM and FNPRM was based on an already robust record--
which was strengthened by comments filed in response to the FNPRM--
demonstrating that local radio stations are not primary sources of 
viewpoint diversity in local markets and that alternative media outlets 
are a growing and important source of viewpoint diversity. The 
Commission, however, reversed itself in the Second Report and Order, 
concluding that the rule should be retained. In doing so, the 
Commission largely relied on limited evidence, much of it anecdotal or 
immaterial, to conclude that radio contributes to viewpoint diversity 
in local markets to a degree sufficient to justify retention of the 
rule. For example, the comments cited by the Commission primarily 
discussed format selection, music programming, and national news 
content, all of which are aspects of radio programming that do not 
inform the Commission's viewpoint diversity analysis.
    40. The Commission also discussed broadcast radio's contributions 
to viewpoint diversity in the NBCO rule section of the Second Report 
and Order. That discussion was equally unpersuasive. The Commission 
failed to demonstrate that broadcast radio stations are significant 
independent sources of local news, relied on statistics that failed to 
distinguish between local and national news content, referenced 
examples of broadcast content on low-power stations, and relied heavily 
on only a handful of anecdotes regarding broadcast radio's 
contributions to viewpoint diversity. The rule does not apply to low-
power stations, and their contribution to diversity is unaffected by 
the decision to retain or repeal the radio-television cross-ownership 
rule. All of these flaws undermine the broad finding that broadcast 
radio stations contribute to viewpoint diversity to an extent that 
continues to justify cross-ownership regulation.
    41. NAB argues that the Commission failed to justify its departure 
from its position in the NPRM and FNPRM that radio stations make only 
limited contributions to local viewpoint diversity. The Commission 
agrees and find that the Commission's conclusion in the Second Report 
and Order that radio contributes to local viewpoint diversity in 
meaningful ways, such that it justified retention of the rule--a clear 
departure from its earlier, well-supported position--was not supported 
by the record. The Commission has long maintained that broadcast radio 
stations are not a primary source of viewpoint diversity in local 
markets. While the record indicates that broadcast radio stations may 
contribute to viewpoint diversity in local markets to a certain degree, 
the Commission finds that, in the current media marketplace, these 
contributions no longer justify restrictions on television/radio cross-
ownership.
    42. For example, the Commission itself acknowledged that consumers' 
reliance on radio for some local news and information has declined 
significantly over time--falling from 54 percent to 34 percent over the 
last two decades--as has the number of all-news commercial radio 
stations--down to 30 stations from (the already low) 50 stations in the 
mid-1980s out of over 11,000 commercial radio stations. Moreover, the 
overwhelming majority of programming on news-talk stations is 
nationally syndicated, rather than locally produced. Comments in the 
record, which the Second Report and Order did not address or dispute, 
support these findings. A Gallup poll found that only six percent of 
Americans turn to radio as their main news source, and a Pew study 
found that the percentage of Americans reporting that they got any news 
from radio on the previous day dropped from more than 50 percent in 
1990 to 33 percent in 2012 (consistent with earlier findings cited by 
the Commission). Only five percent cite radio as a main source for 
political and arts and cultural information, four percent for crime 
updates, and three percent or less for information on various other 
topics. A 2013 Pew study confirmed the overall trend, finding that news 
programming had been relegated to an even smaller corner of the 
listening landscape. Even within this smaller universe, a substantial 
segment consists of National Public Radio (NPR)-affiliated 
noncommercial broadcast radio stations, which are not subject to the 
broadcast ownership limits. At present, NPR has over 900 member 
stations in the U.S. As discussed above, the attempt in the Second 
Report and Order to overcome

[[Page 741]]

the record in this proceeding of radio's relatively minor contribution 
as a source of local news and the Commission's historical recognition 
of radio's reduced role in promoting viewpoint diversity is 
unpersuasive. The record supports far better the Commission's tentative 
conclusions in the NPRM and FNPRM regarding radio's limited 
contributions to viewpoint diversity in local markets.
    43. In addition, the Commission finds that, as NAB contends, the 
Commission's decision to retain the rule did not properly acknowledge 
the realities of the digital media marketplace, in which consumers now 
have access to a multitude of information sources that contribute to 
viewpoint diversity in local markets. In the Second Report and Order, 
the Commission found that platforms such as the internet or cable do 
not contribute significantly to viewpoint diversity in local markets 
and therefore do not meaningfully protect against the potential loss of 
viewpoint diversity that would result from increased radio/television 
cross-ownership. The Commission disagrees with arguments that the 
Commission properly found that cable and satellite programming do not 
meaningfully contribute to coverage of local issues and that 
information available online usually originates from traditional media 
sources. The Commission finds instead that the Commission erred in 
discounting the role that non-traditional sources play in the local 
media marketplace and that the contributions of such outlets result in 
greater access to independent information sources in local markets. In 
particular, evidence in the record clearly demonstrates the emergence 
of online outlets--including many unaffiliated with broadcast or print 
sources--that now offer local news and information. And as discussed 
above, the Commission finds that it failed to properly credit the local 
news offerings of cable operators. Even if cable and online outlets are 
not yet primary sources of local news and information programming, 
their contributions cannot be overlooked. While the Commission relied 
on a handful of anecdotes to overcome its earlier, compelling findings 
regarding broadcast radio's limited contributions to local news and 
information programming, it refused to give appropriate consideration 
to more persuasive evidence of the increasing contributions of non-
traditional media--a trend the Commission had previously noted, and 
which has continued.
    44. The decline of radio's role in providing local news and 
information, together with the rise of online sources, marks a change 
from the circumstances the Commission faced when it upheld the rule in 
the 2006 Quadrennial Review Order. Accordingly, the Commission finds 
that contributions to viewpoint diversity from platforms such as the 
internet and cable, while not primary sources of viewpoint diversity in 
local markets, help mitigate any potential loss of viewpoint diversity 
that might result from limited increases in radio/television cross-
ownership.
    45. Importantly, the Commission does not mean to suggest that 
broadcast radio stations make no contribution to viewpoint diversity in 
local markets--they do. In order to continue to justify the radio/
television cross-ownership limits under Section 202(h), however, the 
Commission is compelled to consider these contributions in the context 
of the broader marketplace as it exists today, in which broadcast 
television, print, cable, and online sources all contribute to 
viewpoint diversity. Broadcast radio's contributions notwithstanding, 
the wide selection of sources now available renders the Radio/
Television Cross-Ownership Rule obsolete in today's vibrant media 
marketplace.
    46. Moreover, the Commission finds that because the rule already 
permits significant cross-ownership in local markets, eliminating it 
will have only a minimal impact on common ownership, as parties will 
continue to be constrained by the applicable ownership limits in the 
Local Television and Local Radio Ownership Rules. For example, pursuant 
to the Radio/Television Cross-Ownership Rule, in the largest markets, 
entities are permitted to own, in combination, either two television 
stations and six radio stations or one television station and seven 
radio stations. The Local Radio Ownership Rule permits an entity to own 
a maximum of eight radio stations in a single market. Therefore, in the 
largest markets, absent the Radio/Television Cross-Ownership Rule, an 
entity approaching the limits of the existing cap will be permitted to 
acquire only one additional radio station and remain in compliance with 
the Local Radio Ownership Rule. Likewise, an entity with one television 
station already could acquire only one additional station in these 
large markets under the Local Television Ownership Rule. Thus, the 
effect of eliminating the radio/television cross-ownership rule will be 
small and, as discussed above, mitigated by contributions to viewpoint 
diversity from other media outlets. In addition, the local ownership 
limits for television and radio, while intended primarily to promote 
competition, will continue to prevent an undue concentration of 
broadcast facilities, thereby preserving opportunities for diverse 
local ownership, and are therefore adequate to serve the goals the 
Radio/Television Cross-Ownership Rule was intended to promote.
    47. In light of its limited benefits, the Commission finds that the 
Radio/Television Cross-Ownership Rule no longer strikes an appropriate 
balance between the protection of viewpoint diversity and the potential 
public interest benefits that could result from the efficiencies gained 
by common ownership of radio and television stations in a local market, 
efficiencies that the Commission has previously recognized. For 
example, NAB cites numerous Commission studies that found that radio/
television cross-ownership produces public interest benefits, including 
increased news and public affairs programming. The Tribune Company also 
provides examples of how its co-owned radio/television combinations 
have been able to improve outreach to their local community and work 
collaboratively to improve coverage of issues of local concern. The 
current rule prevents localism benefits from accruing more broadly, 
without providing meaningful offsetting benefits to viewpoint 
diversity. As such, the Commission can no longer justify retention of 
the Radio/Television Cross-Ownership Rule under Section 202(h). In 
light of the significant common ownership already allowed under the 
rule, it is not appropriate to modify and retain the rule, which the 
Commission has found is no longer in the public interest under Section 
202(h). Indeed, the record demonstrates that there is no policy 
justification--competition, localism, or viewpoint diversity--upon 
which to base such a revised rule. Because the Commission is 
eliminating the Radio/Television Cross-Ownership Rule on the grounds 
discussed herein, it is not necessary to reach alternative arguments 
involving the impact of ownership on viewpoint diversity.
    48. Minority and Female Ownership. Lastly, consistent with the 
Commission's preliminary view in the FNPRM, the Commission finds that 
the record fails to demonstrate that eliminating the Radio/Television 
Cross-Ownership Rule is likely to harm minority and female ownership. 
While broadcast radio remains an important entry point into media 
ownership, eliminating this rule will not result in significant 
additional consolidation because of the constraints of the Local Radio 
Ownership Rule. Furthermore, there is no evidence that any additional

[[Page 742]]

common ownership that would be permitted as a result of eliminating the 
Radio/Television Cross-Ownership Rule would disproportionately or 
negatively impact minority- and female-owned stations. Indeed, the 
analyses within the contexts of the Local Television Ownership Rule and 
the Local Radio Ownership Rule suggest that previous relaxations of 
those rules have not resulted in reduced levels of minority and female 
ownership. The Commission finds that the record provides no information 
to suggest that eliminating the Radio/Television Cross-Ownership Rule 
will have a different impact on minority and female ownership. The 
Commission disagrees with the general assertion by UCC et al. that the 
Commission cannot modify any of its media ownership rules without 
further study of the impact on minority and female ownership.
    49. In the Second Report and Order, the Commission found that 
although the rule could help promote opportunities for diversity in 
broadcast television and radio ownership, it was not being retained for 
the purpose of preserving or creating specific amounts of minority and 
female ownership. The Commission's comment, however, did not indicate a 
belief that the rule would promote minority and female ownership 
specifically, but rather that the rule would promote ownership 
diversity generally by requiring the separation of radio and television 
broadcasters. The Commission cannot justify retaining the rule under 
Section 202(h) based on the unsubstantiated hope that the rule will 
promote minority and female ownership.

C. Local Television Ownership Rule

1. Introduction
    50. Upon reconsideration, the Commission finds that the Local 
Television Ownership Rule adopted in the Second Report and Order is not 
supported by the record and must be modified.
2. Background
    51. The Second Report and Order effectively retained the existing 
Local Television Ownership Rule (with only a minor technical 
modification of the contour overlap provision to reflect the transition 
to digital broadcasting), finding that the rule remained necessary to 
promote competition. Despite a record replete with evidence of the 
significant changes in the video marketplace, the Commission's decision 
left in place ownership restrictions originally implemented in 1999. 
Under the rule adopted in the Second Report and Order, an entity may 
own up to two television stations in the same market if: (1) the 
digital noise limited service contours (NLSCs) of the stations (as 
determined by section 73.622(e) of the Commission's rules) do not 
overlap; or (2) at least one of the stations is not ranked among the 
top-four stations in the market and at least eight independently owned 
television stations would remain in the market following the 
combination. NAB and Nexstar filed petitions for reconsideration of the 
Local Television Ownership Rule, specifically challenging the Top-Four 
Prohibition and the Eight-Voices Test.
3. Discussion
    52. On reconsideration, the Commission adopts a revised Local 
Television Ownership Rule, finding that the rule adopted in the Second 
Report and Order is no longer necessary in the public interest as a 
result of competition. The Commission's revised rule reflects its 
assessment of both the current video marketplace and the continued 
importance of broadcast television stations in their local markets. 
Specifically, the Commission finds that the Eight-Voices Test is not 
supported by the record and must be eliminated. In addition, the 
Commission modifies the Top-Four Prohibition by incorporating a new 
case-by-case review process to address evidence in the record that the 
prohibition may be unwarranted in certain circumstances. The Commission 
finds that these modifications to the Local Television Ownership Rule 
are not likely to have a negative impact on minority and female 
ownership.
    53. The Commission rejects the argument that reconsideration is 
inappropriate because petitioners rely on arguments that have been 
fully considered and rejected by the Commission within the same 
proceeding. Neither the Communications Act nor the Commission's rules 
preclude granting petitions for reconsideration that fail to rely on 
new arguments. Likewise, the Commission rejects UCC's claim that 
reconsideration is not warranted unless petitioners present new 
evidence. UCC's reliance on section 1.429(b) of the Commission's rules 
is misplaced, as this section does not require petitioners to support 
their claims of Commission error with new evidence. Commission 
precedent establishes that reconsideration is generally appropriate 
where the petitioner shows either a material error or omission in the 
original order or raises additional facts not known or not existing 
until after the petitioner's last opportunity to respond. Even if a 
petition is repetitious, the Commission can, in its discretion, 
consider it. While the petitioners repeat some arguments made earlier 
in this proceeding, they nonetheless provide valid grounds for the 
Commission to reconsider its previous action. As discussed below, the 
Commission finds that the petitioners have identified material errors 
in the Second Report and Order warranting reconsideration of certain 
aspects of the Local Television Ownership Rule.
    54. Market. The Commission finds that its decision in the Second 
Report and Order to adopt a rule focused on promoting competition among 
broadcast television stations in local television viewing markets was 
appropriate given the record compiled in this proceeding. The 
Commission concluded in the Second Report and Order that non-broadcast 
video offerings still do not serve as meaningful substitutes for local 
broadcast television and that competition within a local market 
motivates a broadcast television station to invest in better 
programming and to provide programming tailored to the needs and 
interests of the local community in order to gain market share. NAB and 
Nexstar urge the Commission to expand the market definition to include 
non-broadcast video alternatives, such as online and multichannel video 
programming distributors (MVPD) video programming sources. While the 
video marketplace has changed substantially since the current 
television ownership limits were adopted in 1999 and since the last 
Commission review of these rules concluded in 2008, broadcast 
television stations still play a unique and important role in their 
local communities. As such, the Commission believes that, on the 
current record, a rule focused on preserving competition among local 
broadcast television stations is still warranted. Thus, the Commission 
does not include other types of video programming providers within the 
market to which the restriction applies. The Commission emphasizes, 
however, that this conclusion could change in a future proceeding with 
a different record.
    55. The Commission's finding does not mean, however, that changes 
outside the local broadcast television market should not factor into 
the Commission's assessment of the rule under Section 202(h) or that 
the Commission is free to retain its existing rule without any 
adjustments that take into account marketplace changes. Indeed, 
television broadcasters' important role makes it critical for the

[[Page 743]]

Commission to ensure that its rules do not unnecessarily restrict their 
ability to serve their local markets in the face of ever-growing video 
programming options. Consumers are increasingly accessing video 
programming delivered via MVPDs, the internet, and mobile devices. 
Moreover, the online video distributor (OVD) industry--which includes 
entities such as Netflix and Hulu--continues to grow and evolve. In 
addition to providing on-demand access to vast content libraries, many 
OVDs are now offering original programming and/or live television 
offerings similar to traditional MVPD offerings. The Second Report and 
Order acknowledged the popularity of these services but failed to 
properly account for this in its analysis. Accordingly, the Commission 
reconsidered the Local Television Ownership Rule and adopt common sense 
modifications that will help local television broadcasters achieve 
economies of scale and improve their ability to serve their local 
markets in the face of an evolving video marketplace.
    56. Eight-Voices Test. Upon reconsideration, the Commission finds 
that the Eight-Voices Test is unsupported by the record or reasoned 
analysis and is no longer necessary in the public interest. 
Accordingly, the Commission grants the NAB Petition and the Nexstar 
Petition with respect to this issue.
    57. Despite the fact that the Commission has spent years seeking 
comment regarding the local ownership rule, the record lacks evidence 
sufficient to support the Commission's decision to retain the Eight-
Voices Test. In the Second Report and Order, the Commission asserted 
that competition among stations affiliated with the Big Four networks 
(often the top-four rated broadcast stations in a local market) and at 
least four independent competitors unaffiliated with a Big Four network 
motivates all of the stations in a market to improve their programming, 
including providing additional local news and public interest 
programming. Yet the Commission did not provide or cite any evidence to 
support this argument, even though the Eight-Voices Test has been 
around since 1999 (more than enough time to observe whether the Eight-
Voices Test has been having the expected impact in local markets).
    58. The Commission also failed to explain adequately why the number 
of independent television stations must be equal to the number of top-
performing stations in a market. The Commission stated that a 
significant gap in audience share persists between the top-four rated 
stations in a market and the remaining stations in most markets, but it 
offered no justification for the notion that the dominance of four top-
performing stations must be balanced by an equal number of independent, 
lower-performing stations. The Commission provided no precedent, record 
evidence, or economic theory to support this notion. Moreover, a 
significant gap in audience share between the top-four stations and the 
other stations in a market could also logically justify permitting the 
common ownership of non-top-four stations to form a stronger competitor 
to the top-four stations and thus promote competition, even if fewer 
than eight independent voices remain.
    59. Instead, the Commission's primary justification for retaining 
the Eight-Voices Test apparently stems from the historical use of the 
number eight as the proper number of voices when the rule was revised 
in 1999 to permit duopoly ownership in certain circumstances. Notably, 
that decision relied on viewpoint diversity grounds to determine the 
appropriate numerical limit. The Commission subsequently determined 
that the rule was no longer necessary to promote viewpoint diversity 
and instead relied on competition to support its adoption of the exact 
same voices limit in the 2006 Quadrennial Review Order. The Commission, 
however, offered no empirical evidence to support this line drawing in 
the 2006 Quadrennial Review Order as necessary to preserve competition, 
and as discussed above, the Commission finds that the rationale set 
forth in the Second Report and Order was flawed. Although the 
Commission's decision to retain the Eight-Voices Test in the 2006 
Quadrennial Review Order was upheld in Prometheus Radio Project v. FCC, 
652 F.3d 431 (3d Cir. 2011) (Prometheus II), the Commission is 
obligated under Section 202(h) to justify its broadcast ownership rules 
based on the existing record and in light of current marketplace 
realities. On reconsideration, the Commission finds no record support 
for retaining the Eight-Voices Test and concludes that retaining it 
does not serve the public interest. Further, as discussed below, the 
Eight-Voices Test prevents the realization of public interest benefits. 
Accordingly, it must be eliminated.
    60. The record fails to support the adoption of a different voice 
test, e.g., six voices, despite specific requests for comment on 
alternative voice tests in this proceeding. One commenter argued for 
lowering the voice count in general, and another proposed changing the 
test to four voices--a proposal the Commission rejects because such a 
restriction would be redundant given its decision, as discussed below, 
to retain the Top-Four Prohibition. Another commenter argued that the 
Eight-Voices Test should be eliminated and not replaced with an 
alternative test. No other commenters offered support for a different 
voice test. The Commission finds no justification for relying on an 
arbitrary voice count to promote competition and concludes that the 
public interest is better served by the revised rule the Commission 
adopts in this Order, which will allow combinations that will help 
lower-rated stations better serve their viewers while preserving the 
restriction that an entity may not own two top-four rated stations in a 
market unless it can demonstrate that such a combination will serve the 
public interest and in no event will allow common ownership of more 
than two stations in a market, subject to the contour overlap 
provision. The Commission finds that this is a more effective way to 
promote competition and still avoid harms associated with significant 
concentration in local markets than an arbitrary remaining voices test.
    61. The Commission not only failed to provide a reasoned basis for 
retaining the Eight-Voices Test; it also ignored evidence in the record 
demonstrating that the Eight-Voices Test lacks any economic support, is 
inconsistent with the realities of the television marketplace, and 
prevents combinations that would likely produce significant public 
interest benefits. Indeed, no commenter has produced evidence of any 
other industry where the government employs an eight-competitor test. 
In multiple instances, the Commission acknowledged the potential public 
interest benefits of common ownership, which potentially allow a local 
broadcast station to invest more resources in news or other public 
interest programming that meets the needs of its local community. The 
Commission finds that the Eight-Voices Test denies the public interest 
benefits produced by common ownership without any evidence of 
countervailing benefits to competition from preserving the requirement. 
Furthermore, these markets--including many small and mid-sized markets 
that have less advertising revenue to fund local programming--are the 
places where the efficiencies of common ownership can often yield the 
greatest benefits. The Commission's action in repealing the Eight-
Voices Test will enable local television broadcasters to realize these 
benefits and better serve their local markets. In particular, the 
record suggests that local news programming is

[[Page 744]]

typically one of the largest operational costs for broadcasters; 
accordingly, stations may find that common ownership enables them to 
provide more high-quality local programming, especially in revenue-
scarce small and mid-sized markets. After the draft order in this 
proceeding was publicly released, DISH Network L.L.C. (DISH) submitted 
an economic study based on viewer ratings data applicable to existing 
combinations of local television stations as compared with ratings data 
from independently owned stations in DMAs deemed comparable to the DMAs 
served by commonly owned stations. DISH claims that the study shows 
that common ownership of local television stations does not produce 
increased ratings for local programming; therefore, common ownership 
does not produce higher-quality local programming. DISH provides no 
reason it could not have submitted this study earlier in response to 
broadcasters' claims that relaxation of the rule would lead to more 
locally responsive and higher quality programming. Thus, it is 
inexcusably late. 47 CFR 1.429(b), (f). Moreover, the study suffers 
from significant methodological issues and fails to provide a 
sufficient basis upon which to draw any conclusions. For example, the 
study employs a simplistic analysis covering a small sample size and 
the results are highly dependent on the selection of data points, such 
as control DMAs, viewing period, and time slot. Furthermore, the 
analysis fails to address issues of statistical significance regarding 
viewership, and the cross-sectional analysis fails to account for other 
variables that may influence viewership in different markets or 
otherwise address the cases in the filing for which viewership is 
higher in duopoly markets. Ultimately, the study does not undermine the 
Commission's finding that efficiencies gained through common ownership 
can allow broadcasters to invest more resources in producing more and 
higher-quality locally responsive programming.
    62. Top-Four Prohibition. In contrast to the Eight-Voices Test, the 
Commission finds that its decision in the Second Report and Order to 
treat combinations of two top-four stations differently from other 
combinations is supported in the record. The Commission therefore 
denies the NAB Petition and the Nexstar Petition to the extent each 
requested complete elimination of the Top-Four Prohibition. As 
discussed below, however, the Commission finds that modification of the 
Top-Four Prohibition to include a case-by-case analysis is appropriate 
in order to address instances in which the application of the Top-Four 
Prohibition may not be warranted based on the circumstances in a 
particular market or with respect to a particular transaction. This 
hybrid approach will allow for a more refined application of the Local 
Television Ownership Rule that will help facilitate the public interest 
benefits associated with common ownership in local markets.
    63. The ratings data in the record generally supported the 
Commission's line drawing, and the potential harms associated with top-
four combinations find support in the record. The Commission has 
repeatedly concluded that the Top-Four Prohibition is necessary to 
promote competition in the local television marketplace. As the 
Commission has consistently found, there is generally a significant 
cushion of audience share percentage points that separates the top four 
stations from the fifth-ranked stations. In the Second Report and 
Order, the Commission found that this pattern has not changed. Thus, 
top-four combinations would generally result in a single firm's 
obtaining a significantly larger market share than other stations and 
reduced incentives for commonly owned local stations to compete for 
programming, advertising, and audience shares. The Commission also 
finds that the data were sufficiently recent and uncontradicted by any 
newer ratings data in the record, such that it was appropriate for the 
Commission to rely on the data in reaching its decision. The Commission 
considered alternative arguments and data in the record and ultimately 
found that the Top-Four Prohibition, last endorsed in the 2006 
Quadrennial Review Order, continued to be supported. In arguing that 
the Top-Four Prohibition should be eliminated, NAB notes that evidence 
in the record demonstrated that the concerns that the Top-Four 
Prohibition is intended to address may not be present in many markets. 
NAB also provides additional information demonstrating that some 
markets do not have a gap between the ratings of the fourth- and fifth-
ranked stations or that the gap is larger between second- and third-
ranked stations in some markets. The Commission has long conceded that 
the justification for the Top-Four Prohibition does not apply in all 
markets. Thus, the rule may prohibit combinations that do not present 
public interest harms or that offer potential public interest benefits 
that outweigh any potential harms. To this extent, the bright-line 
prohibition is over-inclusive. On reconsideration, the Commission 
believes that it is appropriate to modify the rule to allow for more 
flexibility.
    64. In particular, the Commission takes steps to mitigate the 
potentially detrimental impacts of applying the Top-Four Prohibition in 
certain circumstances. In the Second Report and Order, the Commission 
conceded the potential public interest benefits from allowing 
additional common ownership, yet found that the harms associated with 
top-four combinations exceeded these benefits. This logic no doubt 
holds when the rationale for adopting the Top-Four Prohibition applies, 
though the benefits could exceed the harms in certain circumstances 
based on an evaluation of the characteristics of a particular market or 
a particular transaction.
    65. Instead of relying solely on the bright-line application of the 
Top-Four Prohibition, the Commission is adopting a hybrid approach that 
will allow applicants to request a case-by-case examination of a 
proposed combination that would otherwise be prohibited by the Top-Four 
Prohibition. Under a hybrid approach, a rule includes both bright-line 
provisions and a case-by-case element to allow for consideration of 
market-specific factors. Such an approach provides certainty and 
flexibility when determining whether a particular transaction should be 
granted. Though no party commented on this issue, the Commission finds 
that the record supports its approach. As discussed in this Order, 
special scrutiny of combinations of two top-four rated stations is 
still supported by the record, though the record also demonstrates a 
need for flexibility in addressing circumstances in which application 
of the Top-Four Prohibition may not be appropriate due to the 
particular circumstances in a local market. The hybrid approach is well 
suited for such circumstances. Such an approach will help mitigate the 
potential drawbacks associated with strict application of the Top-Four 
Prohibition, while still preserving the ease and efficiency of applying 
the rule. This revised rule will continue to promote robust competition 
in local markets while also facilitating transactions, in appropriate 
circumstances, that will allow broadcast stations to achieve economies 
of scale and better serve their local viewers.
    66. As the Commission has just discussed, the record demonstrates 
the need for flexibility in the application of the Top-Four 
Prohibition. Given the variations in local markets and specific 
transactions, however, the Commission does not believe that applicants 
would be well served by a rigid set of criteria for its case-by-case 
analysis. The record

[[Page 745]]

does, however, suggest the types of information that applicants could 
provide to help establish that application of the Top-Four Prohibition 
is not in the public interest because the reduction in competition is 
minimal and is outweighed by public interest benefits. Such information 
regarding the impacts on competition in the local market could include 
(but is not limited to): (1) Ratings share data of the stations 
proposed to be combined compared with other stations in the market; (2) 
revenue share data of the stations proposed to be combined compared 
with other stations in the market, including advertising (on-air and 
digital) and retransmission consent fees; (3) market characteristics, 
such as population and the number and types of broadcast television 
stations serving the market (including any strong competitors outside 
the top-four rated broadcast television stations); (4) the likely 
effects on programming meeting the needs and interests of the 
community; and (5) any other circumstances impacting the market, 
particularly any disparities primarily impacting small and mid-sized 
markets. Applicants are encouraged to provide data over a substantial 
period (e.g., the past three years, similar to the requirement in the 
failing/failed station waiver test) to strengthen their request and to 
help avoid circumvention of the Top-Four Prohibition based on anomalous 
data over a short period of time or manipulation of program offerings 
prior to the proposed transaction. In the end, applicants must 
demonstrate that the benefits of the proposed transaction would 
outweigh the harms, and the Commission will undertake a careful review 
of such showings in light of the record with respect to each such 
application.
    67. The Commission disagrees with the contention that affording 
licensees a case-by-case opportunity to seek approval of top-four 
combinations cannot be squared with the bright-line rule adopted in the 
Commission's 2014 Retransmission Consent Report and Order (79 FR 28615, 
May 19, 2014, FCC 14-29, rel. Mar. 31, 2014). There, the Commission 
concluded that the potential competitive harms arising from joint 
negotiation of retransmission consent by non-commonly owned stations 
outweighed the potential benefits and determined that a bright-line 
prohibition would be more administratively efficient than case-by-case 
review because it would provide the bargaining parties with advance 
notice of the appropriate process for such negotiation. Here, however, 
the result of the Commission's case-by-case review of proposed top-four 
combinations will provide bargaining parties with advance notice of 
whether joint retransmission consent negotiations for the two stations 
in question will be allowed. Moreover, common ownership of two top-four 
stations implicates a broader range of potential benefits and harms 
than a narrow agreement between two top-four stations to jointly 
negotiate retransmission consent so there is no inherent inconsistency 
between adopting a bright-line rule in the latter case and a case-by-
case review in the former case. Additionally, the Commission rejects 
the contention that adopting a case-by-case review is inconsistent with 
the statute. To the extent that the existing Top-Four Prohibition is 
overbroad given the current state of competition, as the Commission 
concludes here, then the existing prohibition, absent modification, is 
not necessary in the public interest as a result of competition and 
should be modified. Moreover, in adopting this approach, the Commission 
declines to adopt specific criteria related to the issue of 
retransmission consent, as recently advocated by some commenters. 
Instead, as discussed in this Order, the Commission believes that the 
case-by-case review process will allow parties to advance any relevant 
concerns--including concerns related to retransmission consent issues--
in the context of a specific proposed transaction if such issues are 
relevant to the particular market, stations, or transaction.
    68. Similarly, the Commission rejects the recommendation of 
Independent Television Group (ITG) that the Commission adopt a 
presumption in favor of top-four combinations in small and mid-sized 
markets. ITG provides no evidence sufficient to support such a 
presumption. ITG simply relies on NAB's assertion in its 2014 comments 
that in some markets, there may have been significant disparities in 
audience share among some of the top-four rated stations. The case-by-
case analysis is not weighted in favor of transactions in any 
particular market, and applicants in small and mid-sized markets will 
be able to provide market-specific evidence supporting their requests.
    69. Gray Television, Inc. proposes that, at least in smaller 
markets, two stations be permitted to combine ownership if one of the 
stations has not produced a local newscast in the previous two years. 
The Commission finds, however, that market characteristics and the 
state of local programming, including local news offerings, are better 
considered in its case-by-case analysis at this time. The Commission 
anticipates that any transactions processed under this case-by-case 
approach will help inform any consideration of specific criteria that 
could be included in any future revision of the Local Television 
Ownership Rule, which will be reviewed again in the forthcoming 2018 
Quadrennial Review proceeding.
    70. Minority and Female Ownership. The Commission finds that the 
modifications adopted to the Local Television Ownership Rule are not 
likely to harm minority and female ownership. As noted in the Second 
Report and Order, data in the record demonstrate that relaxation of the 
Local Television Ownership Rule in 1999 did not have a negative impact 
on overall minority ownership levels. In this lengthy proceeding, no 
party has presented contrary evidence or a compelling argument 
demonstrating why relaxing this rule will have a different impact. 
Indeed, consistent with the Second Report and Order, the Commission 
finds that the record does not support a causal connection between 
modifications to the Local Television Ownership Rule and minority and 
female ownership levels.
    71. In the Second Report and Order, the Commission stated that 
ensuring the presence of independently owned broadcast television 
stations in the local market indirectly increases the likelihood of a 
variety of viewpoints and preserving ownership opportunities for new 
entrants. The Commission's comment, however, did not indicate a belief 
that the rule would promote minority and female ownership specifically, 
but rather that the rule would promote ownership diversity generally by 
limiting common ownership of broadcast television stations. This 
statement will continue to be true with respect to the revised rule 
that the Commission adopts in this Order. Under Section 202(h), 
however, the Commission cannot continue to subject broadcast television 
licensees to aspects of the Local Television Ownership Rule that can no 
longer be justified based on the unsubstantiated hope that these 
restrictions will promote minority and female ownership. In addition, 
the Commission disagrees with the general assertion by UCC et al. that 
the Commission cannot modify any of its media ownership rules without 
further study of the impact on minority and female ownership. The 
Commission also disagrees with assertions by the Multicultural Media, 
Telecom and internet Council and the National Association of Black 
Owned

[[Page 746]]

Broadcasters that the rules can be retained based on promoting news 
coverage of specific issues.
    72. Incentive Auction. The Commission reiterates that it remains 
premature to analyze the implications of the incentive auction on the 
Local Television Ownership Rule. Contrary to the position of certain 
parties, the Commission cannot--and did not in the Second Report and 
Order--use the auction as an excuse for delaying action and refusing to 
fulfill its obligations under Section 202(h). While the Commission 
finds fault in its prior decision to retain the existing television 
ownership restrictions without modification, the incentive auction was 
not a factor in that decision. Instead, the Commission properly found 
that it could not delay a decision on its rules because of the auction 
nor could it adopt changes to its rules based on speculation as to the 
final results of the auction. The Commission agrees with its prior 
finding. Section 202(h) compels the Commission to act on the record 
before it and determine whether to retain, repeal, or modify the Local 
Television Ownership Rule based on the realities of the current 
marketplace, which the Commission has done. Though the auction has 
finished, it is still too soon to evaluate its impacts on the 
television marketplace. While there is still time for stations to 
change their post-auction channel sharing elections, the initial 
results of the auction suggest that the auction may not have a 
significant impact in the context of the Local Television Ownership 
Rule, as the overwhelming majority of commercial, full-power winning 
bidders have elected to channel share once they surrender their 
spectrum. The Commission will continue to monitor these elections as 
part of its continuing efforts to assess the impact of the auction on 
the television marketplace. As noted in the Second Report and Order, 
the Commission will evaluate the broadcast marketplace post-auction and 
expects that these issues will be considered in the forthcoming 2018 
Quadrennial Review proceeding.

D. Local Radio Ownership Rule

1. Introduction
    73. The Commission denies in part and grants in part Connoisseur's 
petition for reconsideration of the Commission's decision in the Second 
Report and Order to retain the current methodology for determining 
compliance with the Local Radio Ownership Rule in markets containing 
embedded markets (i.e., smaller markets, as defined by Nielsen Audio, 
that are included in a larger parent market). The Commission grants 
Connoisseur's petition to the extent it seeks a presumption that would 
apply its two-prong test for waiver requests involving existing parent 
markets with multiple embedded markets pending further consideration of 
this issue in the 2018 Quadrennial Review proceeding.
2. Background
    74. Connoisseur seeks reconsideration of the decision in the Second 
Report and Order to retain the existing methodology for embedded 
markets and asks the Commission to adopt a new two-pronged test for a 
station owner that seeks to own stations licensed to home counties 
(i.e., the county in which the station's community of license is 
geographically located) in different embedded markets within a single 
parent market. Consistent with the Commission's current methodology, 
under the first part of Connoisseur's proposed test, a station owner 
would be required to comply with the numerical ownership limits using 
the Nielsen Audio Metro methodology in each embedded market. Under the 
second part, however, the station owner would be required to comply 
with the ownership limits using a contour-overlap methodology in lieu 
of the Commission's current parent market analysis. Connoisseur argues 
that, as a result of the Commission's existing methodology, a 
broadcaster which owns stations in one embedded market may be precluded 
from owning stations in another embedded market, despite the lack of 
competitive overlap between those markets.
3. Discussion
    75. The Commission denies in part and grants in part Connoisseur's 
petition for reconsideration. First, the Commission finds that its 
decision to not adopt a blanket change to the current methodology was 
supported by a reasoned explanation. Second, the Commission finds that 
its decision to adopt a contour-overlap methodology for the Puerto Rico 
market is not at odds with the approach the Commission took regarding 
embedded markets. Finally, the Commission grants Connoisseur's 
alternative request to adopt a presumptive waiver approach for existing 
parent markets with multiple embedded markets.
    76. The Commission finds that it provided a reasoned explanation 
for its decision in the Second Report and Order to not adopt a blanket 
change to the current embedded market methodology. Connoisseur argues 
that the Commission acted arbitrarily in deciding to retain the current 
methodology. In particular, Connoisseur maintains that counting 
stations from multiple embedded markets for purposes of calculating 
compliance with the numerical limits in the parent market is 
unreasonable because stations in embedded markets do not compete in any 
meaningful way with stations in other embedded markets or stations in 
the central city of the parent market. The Commission noted in the 
Second Report and Order, it has long relied on Nielsen Audio's market 
analysis, as reported by BIA, which lists all the stations that are 
deemed to compete in a given market (often referred to as above-the-
line stations), as the basis for multiple ownership calculations for 
embedded and parent markets. The Commission found that the Nielsen-
defined markets are the primary means by which broadcasters and 
advertisers place a value on advertising sold by stations listed as 
participating in the market. Nielsen Audio's market definitions are 
recognized as the industry standard and provide for consistency and 
ease of application in comparison to other possible methods for 
defining local radio markets. The inclusion of an embedded market 
station as an above-the-line station in a parent market therefore has 
long been thought to reflect a determination by Nielsen Audio that, 
absent other information, the station competes in that market. The 
Commission notes that its continued reliance on Nielsen Audio market 
definitions for purposes of applying the Local Radio Ownership Rule 
provides an important level of certainty to radio licensees in all 
markets, including those in embedded markets, and overcomes 
disadvantages associated with the contour-overlap approach. Although 
Nielsen has historically defined what stations compete in a market 
based on geographical market boundaries, and the Commission's rules 
have relied on these determinations in determining compliance with its 
ownership caps, Connoisseur's Oct. 30, 2017 ex parte letter raises 
issues related to embedded markets that should be further explored in 
greater detail in the 2018 Quadrennial Review proceeding. However, the 
arguments in the ex parte letter support adoption of a presumptive 
waiver approach for transactions involving existing parent markets with 
multiple embedded markets.
    77. The Commission also finds that its decision in the Second 
Report and Order to adopt a contour-overlap methodology for the Puerto 
Rico market is not inconsistent with the approach to

[[Page 747]]

embedded markets. Connoisseur argues that parent markets containing 
multiple embedded markets are analogous to the Puerto Rico market where 
mountainous topography, as opposed to a central city, separates smaller 
centers of economic activity within the larger parent market. 
Accordingly, Connoisseur asserts that the contour-overlap methodology 
the Commission applies to the Puerto Rico market likewise should be 
applied in the context of embedded markets in lieu of the Commission's 
current parent market analysis. The Commission finds that differences 
between the Puerto Rico market and a parent market that includes 
embedded markets make the comparison between the two circumstances 
inappropriate. As one example, the core location of a station's 
listenership has the potential to shift geographically over time in a 
parent/embedded market scenario in a way that would be unlikely, or 
even impossible, where, as in Puerto Rico, the physical terrain 
prevents a station from reaching other geographic areas. Indeed, the 
Commission has long stated that the Puerto Rico market is unique, even 
as compared to other large metro areas. The Commission has a long 
history--dating back to 2003--of applying the contour-overlap 
methodology to Puerto Rico on a case-by-case basis due to the unique 
characteristics of that market. The Commission therefore finds that its 
decision to retain the existing methodology for embedded markets is not 
undermined by its decision to adopt a contour-overlap methodology in 
Puerto Rico.
    78. For these reasons, the Commission continues to find that, 
rather than adopting Connoisseur's proposal for an across-the-board 
change to the Commission's embedded market methodology, entertaining a 
market-specific waiver is the appropriate approach at this time. In the 
Second Report and Order, the Commission acknowledged Connoisseur's 
concerns with respect to the particular characteristics of the current 
New York market and indicated its willingness to entertain a waiver 
specific to that market, a willingness the Commission reiterates in 
this Order. Ultimately, the issue continues to appear narrow in scope--
largely specific to a small number of parties' concerns with at most 
two markets. The circumstances Connoisseur describes could apply 
currently to, at most, two markets--New York City and Washington, DC. 
The Commission notes, however, that embedded market designations are 
subject to change, with the potential for embedded markets to be 
created, modified, or eliminated in the future. For instance, in 
addition to New York and Washington, DC, Connoisseur previously had 
identified San Francisco as an example of a parent market with two 
embedded markets. One of those embedded markets, however, is no longer 
rated by Nielsen. Accordingly, the San Francisco market now includes 
only one embedded market and is therefore no longer relevant to the 
issues discussed in Connoisseur's petition, which pertain solely to 
parent markets containing multiple embedded markets. As such, the 
potential impact of a proposed transaction involving embedded market 
stations may vary based on the specific markets, stations, and 
ownership interests involved.
    79. Accordingly, the Commission finds Connoisseur's argument 
regarding a presumptive waiver approach to be persuasive. While a 
bright-line rule codifying Connoisseur's preferred approach to embedded 
markets would no doubt provide greater certainty, as discussed in this 
Order, the Commission does not believe that such an approach is 
supported by the record at this time. Instead, the Commission intends 
to fully examine its existing methodology regarding embedded market 
transactions in the forthcoming 2018 Quadrennial Review proceeding. 
Pending the outcome of this review, however, the Commission adopts a 
presumption in favor of applying Connoisseur's two-prong test proposed 
on reconsideration to waiver requests involving existing parent markets 
with multiple embedded markets (i.e., New York and Washington, DC). The 
Commission finds that there is sufficient evidence on the record to 
support a presumption that a waiver of the Local Radio Ownership Rule 
as to stations in these markets serves the public interest if the 
transaction at issue satisfies the two-prong test. Pursuant to section 
310(d) of the Communications Act, the Commission must make a public 
interest determination with respect to any future applications based on 
the entire record with respect to that application. Throughout the 
proceeding, Connoisseur has provided information demonstrating that, 
due to the particular circumstances in these markets, applying the 
existing market methodology may not be warranted. These showings 
provide the Commission with sufficient confidence that transactions 
consistent with this presumption likely will not unduly impact 
competition in these markets, subject to the Commission's review under 
section 310(d). The Commission finds, however, that it is appropriate 
to limit the presumption to these markets (New York and Washington, 
DC), pending review in the 2018 Quadrennial Review proceeding, to avoid 
any potential manipulation of embedded markets in other Nielsen Audio 
markets.
    80. Adoption of this presumption will give Connoisseur--and other 
parties--sufficient confidence with which to assess possible future 
actions. Further, the Commission anticipates that any such transactions 
will help inform its subsequent review of the Local Radio Ownership 
Rule--and, in particular, the treatment of embedded market 
transactions.

E. Television JSA Attribution

1. Introduction
    81. On reconsideration, the Commission finds that it erred in its 
decision to adopt the Television JSA Attribution Rule and eliminates 
the Television JSA Attribution Rule. The petitioners also argue that 
the attribution decision must be reversed on the grounds that (1) the 
decision had the effect of tightening the media ownership rules, and 
that the Commission failed to properly analyze the impact of the 
attribution decision as required under Section 202(h) of the 1996 
Telecommunications Act; and (2) the decision was inconsistent with the 
Commission's repeal of the wireless attributable material relationship 
(AMR) rule. Because the Commission is reversing its decision to adopt 
the Television JSA Attribution Rule on other grounds, it does not need 
to reach these arguments.
2. Background
    82. The Commission first considered whether to attribute television 
JSAs in 1999. It declined to do so, finding that JSAs did not convey a 
sufficient degree of influence or control over station programming or 
core operations to warrant attribution and that JSAs helped produce 
public interest benefits. The Commission sought additional comment on 
this conclusion in a 2004 notice of proposed rulemaking after 
attributing radio JSAs in the 2002 Biennial Review Order. Then in 2014, 
nearly a decade after initially seeking comment on the issue, the 
Commission changed course and adopted the Television JSA Attribution 
Rule, despite a lack of evidence suggesting that its prior 
determination that television JSAs do not convey sufficient influence 
or control to warrant attribution was wrong. Specifically, the rule 
established that JSAs that involve the sale of more than 15 percent of 
the weekly advertising time of a station (brokered

[[Page 748]]

station) by another in-market station (brokering station) are 
attributable under the Commission's ownership rules. As a result, the 
brokering station was deemed to have an attributable interest in the 
brokered station, and the brokered station would count toward the 
brokering station's permissible ownership totals.
    83. In the Second Report and Order, the Commission concluded that 
the Local Television Ownership Rule (with a minor modification) still 
served the public interest and it re-adopted the Television JSA 
Attribution Rule based on the same rationale articulated in the Report 
and Order (79 FR 28996, May 20, 2014, FCC 14-28, rel. Apr. 15, 2014). 
By their Petitions, NAB and Nexstar now seek reconsideration of the 
decision to re-adopt the Television JSA Attribution Rule, arguing that 
the Commission, in adopting the rule, ignored the evidence before it 
and reached a decision unsupported by the record.
3. Discussion
    84. The Commission finds that Petitioners provide valid reasons to 
reconsider the Commission's decision to adopt the Television JSA 
Attribution Rule. The Commission's attribution analysis was deficient 
and failed to adequately consider the record, which does not support 
the Commission's conclusion that television JSAs confer on the 
brokering station a sufficient degree of influence or control over the 
core operating functions of the brokered station to warrant 
attribution. In addition, the record contains ample evidence of the 
public interest benefits that these JSAs provide. Even if the 
Commission had correctly determined that television JSAs involving more 
than 15 percent of the brokered station's weekly advertising time 
confer sufficient influence to warrant attribution, the Commission 
concludes that the potential benefits of television JSAs outweigh the 
public interest in attributing such JSAs. Accordingly, the Commission 
grants the NAB Petition and the Nexstar Petition with respect to this 
issue. As a result of the Commission's decision, 47 CFR 73.3613(d)(2) 
and the notes to 47 CFR 73.3555 will be amended to reflect the fact 
that television JSAs are no longer attributable. Additionally, various 
Commission rules will need to be revised to reflect the other rule 
changes and decisions adopted in this Order, as set forth in the final 
rules. The Commission directs the Media Bureau to make all form 
modifications and to take any other steps necessary to implement all 
the rule changes and other relevant decisions adopted in this Order. 
Though television JSAs will no longer be attributable as a result of 
the amount of advertising time brokered, the Commission reminds 
licensees that they must retain ultimate control over their programming 
and core operations so as to avoid the potential for an unauthorized 
transfer of control or the existence of an undisclosed or unauthorized 
real party in interest.
    85. The Commission failed to demonstrate that television JSAs 
confer a sufficient degree of influence or control so as to be 
considered an attributable ownership interest under the Commission's 
ownership rules. While the Commission pointed out that the attribution 
analysis traditionally seeks to identify interests that provide the 
holder with the incentive and ability to influence or control the 
programming or other core operational decisions of the licensees--an 
inquiry that often relies on the Commission's predictive judgement--the 
Commission may not ignore the record or the realities of the 
marketplace when making this determination.
    86. Here, the Commission's theory of attribution--a reversal of its 
earlier decision that television JSAs should not be attributable--was 
belied by its own extensive experience reviewing and approving 
television JSAs. Between 2008 and the decision to attribute television 
JSAs in 2014, the Commission's Media Bureau reviewed and approved 85 
television JSAs in the context of transaction reviews. Given the 
Commission's extensive history reviewing specific television JSAs, it 
is telling that the record was devoid of any evidence that any JSA 
allowed a brokering station to influence even a single programming 
decision of a brokered station.
    87. As Nexstar points out, the Commission's only citation in 
support of the theory that television JSAs might provide some measure 
of influence or control was inapposite. In Ackerley Group, Inc., 17 FCC 
Rcd 10828 (2002), the Commission found that a combination of 
agreements, which included a flat-fee television JSA, were 
substantively equivalent to an attributable local marketing agreement 
(LMA). Yet the Commission's attribution analysis in the Report and 
Order relied solely on the sale of advertising time and not a 
combination of other agreements that may justify attribution under the 
Commission's rules and precedent. As such, this isolated incident 
failed to provide support for the Commission's theory of attribution.
    88. The Commission attempted to sidestep the lack of evidence to 
support its theory of attribution by relying on the decision in the 
2002 Biennial Review Order to attribute radio JSAs. The Commission now 
agrees with Nexstar that this reliance was not appropriate. First, the 
Commission failed to explain why differences in fee structure 
(typically fixed fees for radio JSAs versus a percentage of advertising 
revenue for television JSAs) did not mitigate the Commission's earlier 
concerns that a fixed fee structure--which the Commission found to be 
common in radio JSAs--effectively transferred the market risk to the 
brokering station. In a percentage fee structure, the broker and 
brokering stations split revenues based on agreed upon percentages. By 
contrast, a flat fee structure provides a payment to the brokered 
station regardless of performance or revenues. The Third Circuit relied 
on this finding when upholding the decision to attribute radio JSAs, 
and the Commission also emphasized the fixed fee structure when it 
proposed to attribute television JSAs in 2004. The record shows, 
however, that television JSAs generally rely on percentage fee 
arrangements in which the brokered station retains a substantial 
portion of the advertising revenue, which makes it substantially less 
likely that the brokered station's programming decisions would be 
significantly influenced by the brokering station. This critical 
difference, however, was simply glossed over without an explanation as 
to how a percentage fee structure transferred market risk to the 
brokering station in the same way as a fixed fee structure. Indeed, it 
appears that the typical revenue split gives the licensee of the 
brokered station a significant interest in the operation and success of 
the station that is not present in a fixed fee arrangement. While the 
Commission declines to attribute television JSAs for the reasons set 
forth in this Order, it notes that, under Ackerley, the Commission 
could still find that the terms of an individual television JSA (either 
alone or in conjunction with other agreements) rise to the level of 
attribution.
    89. The Commission also failed to consider sufficiently other 
distinctions between the television market and the radio market that 
undermined its reliance on the radio JSA attribution precedent. For 
example, unlike radio stations, television stations typically have 
network affiliations, which limits the amount of programming that a 
brokering station could potentially influence and the amount of 
available advertising time for sale. In the Commission's experience 
reviewing

[[Page 749]]

television JSAs in transaction reviews, most of the television JSAs 
approved by the Commission involved the brokering of stations with 
network affiliations. To be sure, the Commission disagreed that this is 
a meaningful distinction, but once again, it failed to provide any 
record evidence to support its theory. The Commission claimed that, 
even with a network affiliation in place, the broker could potentially 
influence the selection of non-network programming, whether to preempt 
network programming, and/or the choice of network affiliation. This 
claim, however, was not supported with any evidence of such influence 
being exerted, neither over individual programming decisions nor the 
selection of a network affiliation.
    90. The Commission similarly brushed aside evidence that television 
stations rely less on local advertising revenue than radio stations, 
which would reduce the amount of advertising time sold by the broker. 
Accordingly, the broker would control less of the television station's 
advertising revenue, which would limit the ability and incentive of the 
broker to exert significant influence or control over the brokered 
station's core operating procedures. The Commission summarily concluded 
that because both radio JSAs and television JSAs involve the sale of 
advertising time, both must be treated the same for attribution 
purposes. But this one-size-fits-all attribution analysis is not 
supported by the record and cannot be sustained.
    91. The lack of evidence supporting the Commission's determination 
that television JSAs confer a significant degree of influence or 
control over the core operating functions of the brokered station 
provides sufficient reason for the Commission to eliminate the 
Television JSA Attribution Rule. But even if the Commission had 
appropriately determined that television JSAs meet the attribution 
criteria, it still should have evaluated whether the public interest 
would be served by making the agreements attributable. While the 
Commission did acknowledge the potential for benefits flowing from the 
use of television JSAs in the Report and Order, the Commission 
expressly refused to consider these public interest benefits in the 
context of its attribution decision, claiming that the public interest 
benefits should be considered in the context of its analysis of the 
local ownership rules. While declining to evaluate the significant 
record evidence of the public interest benefits produced by television 
JSAs, the Commission claimed that it would preserve beneficial 
television JSAs through a waiver process. That process, however, proved 
to be illusory, as the Commission did not grant a single waiver request 
while the Television JSA Attribution Rule was initially in effect, 
which ultimately led to Congressional action to protect existing 
television JSAs. As discussed in this Order, the Commission finds that 
the record does not support attribution of television JSAs in the first 
instance, so there is no need to consider whether to adopt a waiver 
process
    92. The Commission was correct that the potential public interest 
benefits of television JSAs are not relevant to whether these 
agreements satisfy the Commission's general attribution criteria (i.e., 
whether they confer the potential for significant influence), but that 
does not excuse the Commission from assessing the record to determine 
whether, if the attribution criteria are satisfied, attribution would 
serve the public interest. Notably, when the Commission attributed 
radio JSAs in the 2002 Biennial Review Order, it did undertake such an 
assessment and found that the balance of interests, in those particular 
circumstances, supported the decision to attribute radio JSAs. That 
finding was based on the record in that proceeding, which did not 
contain significant or detailed evidence of the claimed public interest 
benefits of radio JSAs, and does not control the Commission's analysis 
of the potential benefits of television JSAs.
    93. Additionally, in the Second Report and Order, which reinstated 
the Television JSA Attribution Rule, the Commission included only a 
brief, general discussion of the rationale for attributing television 
JSAs, largely ignoring the benefits of television JSAs. The Commission 
failed to discuss the voluminous record regarding the benefits produced 
by JSAs, instead citing anecdotal evidence that attribution of 
television JSAs--prior to being vacated by the Third Circuit--had 
produced opportunities for minority and female ownership. Its sole 
citation for this proposition, however, was a blog post authored by 
then-Chairman Tom Wheeler and Commissioner Mignon Clyburn. This claimed 
benefit is not supported by the record and, in fact, there is record 
evidence that refutes this assertion. This cursory treatment does not 
constitute an assessment of the record regarding the potential public 
interest benefits of television JSAs. As such, the Commission is not 
persuaded by the arguments that it properly weighed the public interest 
benefits before implementing this new rule. The American Cable 
Association (ACA) argues that eliminating the Television JSA 
Attribution Rule will allow broadcasters to covertly coordinate their 
retransmission consent negotiations in contravention of the joint 
negotiation prohibition. This argument is not persuasive. Broadcasters 
are prohibited from jointly negotiating retransmission consent for 
stations in the same local market that are not under common de jure 
control permitted by the Commission. Licensees are expected to comply 
with the Communications Act and Commission rules and policies, and the 
Commission has authority to take enforcement action where it finds a 
licensee has violated any relevant statutes, rules, or policies. The 
Commission will not assume that licensees will violate its rules, but 
entities can file a complaint if they believe that any broadcaster is 
violating the joint negotiation prohibition, and the Commission will 
take appropriate action.
    94. On reconsideration, the Commission concludes that the record 
demonstrates that television JSAs can promote the public interest, and 
that this provides an independent reason for eliminating the Television 
JSA Attribution Rule. Indeed, the record demonstrates that television 
JSAs have created efficiencies that benefit local broadcasters--
particularly in small- and medium-sized markets--and have enabled these 
stations to better serve their communities. The video marketplace is 
changing rapidly, and television JSAs can help reduce costs and attract 
vital revenue at a time of increasing competition for viewership. 
Broadcasters can turn these efficiencies into increased services for 
local communities. For example, a JSA between two stations in Kansas 
helped create cost savings that, in turn, allowed the stations to fund 
weather emergency-related crawls in Spanish, a service vital to the 
tornado-prone area. Other stations have been able to increase their 
local news programming and further invest in investigative reporting 
due to their JSAs. Additionally, certain JSAs have helped spur minority 
ownership. As noted in the record, a station owned by Tougaloo College, 
a historically African-American college, has credited its JSA for 
providing the resources necessary to upgrade to HD, to produce content 
relevant to its community, and to cover local sporting events. This is 
just a sampling of the many examples in the record in which JSAs have 
benefited local stations and communities.
    95. Furthermore, the Commission failed to cite any evidence of 
actual harm associated with television JSAs. The Commission's analysis 
here under the public interest standard does not

[[Page 750]]

supersede any antitrust analysis performed by the Department of Justice 
Antitrust Division (DOJ) on a case-by-case basis regarding JSAs or 
other agreements among broadcasters that are similar in function. 
Indeed, the Commission's public interest analysis differs from DOJ's 
antitrust review, reflecting a broader evaluation of the potential 
harms and benefits of ownership combinations in light of the 
requirements of the Communications Act and Commission rules and the 
objectives of the Act and rules. Consequently, nothing in this Order, 
or any amendment made by this Order, should be construed to modify, 
impair, or supersede the operation or applicability of any state or 
federal antitrust laws.
    96. The Commission stated that JSAs could, possibly, allow the 
stations to raise their advertising rates above what could be achieved 
if the ad time were sold independently. The Commission, however, failed 
to engage in any actual analysis of the impact of television JSAs on 
advertisers, and the record in this proceeding contained no evidence of 
stations charging higher rates for advertising sold pursuant to a JSA 
and no support from advertisers for the Television JSA Attribution 
Rule. On the contrary, there was evidence in the record that 
advertisers have benefitted from JSAs, which make their ad buys more 
efficient. Similarly, as discussed above, the Commission did not 
identify a single instance of harm to viewers or competition in local 
markets resulting from a broker's exercise of influence over the 
programming or other core operations of a brokered station--indeed, as 
discussed above, the Commission did not cite a single instance of such 
influence even being exerted.
    97. The Commission finds that, on balance, the public interest is 
best served by not attributing television JSAs, regardless of whether 
they technically satisfy the attribution criteria. As discussed above, 
the Commission's attribution analysis was not supported by the record, 
and this failure provides an independent reason for eliminating the 
Television JSA Attribution Rule. It is well within the Commission's 
authority to decline to attribute an agreement or relationship that 
might otherwise satisfy the attribution criteria in order to help 
foster public interest benefits. For example, in the EDP Attribution 
Modification Order (73 FR 28361, May 16, 2008, FCC 07-217, rel. Mar. 5, 
2008), the Commission modified the Equity/Debt Plus Attribution Rule 
(EDP Rule) by carving out an exemption in certain circumstances to 
encourage investment in eligible entities. There, the record 
demonstrated that small businesses, including those owned by minorities 
and women, were having difficulty obtaining financing. The Commission 
acknowledged the potential role that the EDP Rule had in hindering 
investment in eligible entities and found that it was justified in 
relaxing the EDP Rule to help address this issue. This decision 
demonstrates the need to balance the purpose of the attribution rules--
that is, to identify potentially influential interest holders--with the 
Commission's public interest goals.
    98. Similarly, even if some television JSAs were to provide the 
brokering station some ability to influence the operations of the 
brokered station, the Commission finds that attribution is not 
warranted here in light of the significant public interest benefits 
produced by these agreements. Television JSAs can help promote diverse 
ownership and improve program offerings, including local news and 
public interest programming, in local markets. While the Commission 
agrees that it is important that its attribution rules reflect 
accurately the competitive conditions of local markets, particularly in 
the context of the Commission's local broadcast ownership rules, the 
analysis cannot end there. The Commission must ensure that its 
attribution decisions do not harm the very markets that the attribution 
rules are designed to protect by preventing the accrual of significant 
public interest benefits. As discussed in this Order, the tangible 
benefits of television JSAs far outweigh the benefits that may accrue 
from a rote application of the attribution criteria in these 
circumstances.
    99. The Commission also finds that its decision to eliminate the 
Television JSA Attribution Rule is appropriate, even in light of its 
decision to relax the Local Television Ownership Rule. As discussed 
above, the Commission finds that it failed to establish that television 
JSAs confer significant influence warranting treating JSAs as 
attributable ownership interests, so the existence of television JSAs 
in the marketplace does not have an impact on the Commission's public 
interest analysis in the Local Television Ownership Rule context. 
Indeed, television JSAs have been utilized by many broadcasters with 
increasing prevalence for well over a decade. The record in this 
proceeding lacks any evidence of public interest harm, and there is 
evidence that these agreements have produced and can produce meaningful 
public interest benefits. As such, the Commission does not believe that 
the Local Television Ownership Rule should be made more restrictive due 
to the presence of television JSAs.
    100. And while there may be fewer television JSAs executed moving 
forward because of the Commission's relaxation of the Local Television 
Ownership Rule, that does not diminish the public interest benefits 
associated with these agreements in the television context. The 
television ownership limits are still much more restrictive than the 
radio ownership limits, so there may be a continuing need for JSAs to 
help create economies of scale and improve program offerings, 
particularly for small or independent station owners. By preserving the 
ability to enter into a JSA, some station owners may be able to 
maintain independent operations instead of exiting the marketplace, and 
these agreements will continue to be available to help new entrants and 
small businesses acquire and operate new stations. Thus, the Commission 
is not persuaded that repeal of the eight-voices requirement and the 
Television JSA Attribution Rule will deter new entry based on 
consolidation of advertising sales.

F. Shared Service Agreements

1. Introduction
    101. The Commission upholds its decision in the Second Report and 
Order to adopt a comprehensive definition of SSAs and a requirement 
that commercial television stations disclose SSAs by placing them in 
their online public inspection files.
2. Background
    102. SSAs allow stations in a local market to combine certain 
operations, personnel, and/or facilities, with one station effectively 
performing functions for multiple, independently owned stations. The 
FNPRM proposed a comprehensive definition of SSAs and sought comment on 
the scope of the definition, including any potential refinements to the 
definition to help ensure that it was not overbroad. While certain 
commenters expressed concerns with the scope of the definition, none 
provided an alternative definition or suggested any specific changes to 
the definition proposed in the FNPRM. The FNPRM also sought comment on 
potential disclosure options for these agreements. In the Second Report 
and Order, the Commission adopted a definition of SSAs substantially 
similar to the definition proposed in the FNPRM and a requirement that 
commercial television stations disclose SSAs by placing them in their 
online public inspection files. In its Petition for

[[Page 751]]

Reconsideration, NAB asks the Commission either to eliminate the SSA 
disclosure requirement or rationally define the SSAs subject to it, 
asserting that the SSA disclosure requirement is overbroad and 
unnecessary.
3. Discussion
    103. The Commission declines to reconsider the SSA definition and 
disclosure requirements adopted in the Second Report and Order. The 
Commission finds that both the definition and the disclosure 
requirement were supported by the record and that NAB has failed to 
provide sufficient reasons to reconsider the Commission's decision at 
this time; therefore, the Commission denies the NAB Petition in this 
regard.
    104. Contrary to NAB's claim, the Second Report and Order 
rationally defines SSAs. In the Second Report and Order, the Commission 
adopted a clear definition of SSAs and addressed commenters' concerns 
regarding the types of agreements covered by the definition. As the 
Commission discussed, the definition of SSAs is appropriately limited 
in scope, applying only to those agreements that involve station-
related services. Moreover, the Commission sufficiently illustrated 
this scope by providing guidance in the definition of SSAs with non-
exhaustive examples. The Second Report and Order also addressed 
specific concerns in the record, clarifying that certain agreements, 
such as ad hoc or on-the-fly arrangements during breaking news 
coverage, fall outside the SSA definition. Ultimately, the definition 
is appropriately tailored to include only those agreements that involve 
station operations relevant to the public. NAB expresses concern that 
the SSA definition would apply to agreements encompassing everything 
from janitorial to catering to maintenance to security services. An 
agreement to share facilities and station personnel meeting the 
definition of an SSA may include provisions allocating costs or 
responsibilities related to the operation and upkeep of the shared 
facilities. Consistent with the Second Report and Order, however, 
agreements that relate only to such incidental services, even those 
involving shared facilities, are not encompassed by the SSA definition 
and are not, therefore, subject to disclosure. Accordingly, the 
Commission finds NAB's concerns to be misplaced and sufficiently 
addressed in the Second Report and Order. In light of the Commission's 
analysis and the lack of any alternative definitions or specific 
refinements proposed in the record, including on reconsideration, the 
Commission finds no reason to reconsider the definition of SSAs adopted 
in the Second Report and Order.
    105. The Commission also finds that the Second Report and Order 
provided a sufficient justification for requiring the disclosure of 
SSAs. The Commission is not required to first determine the regulatory 
status of SSAs before requiring disclosure. The Second Report and Order 
addressed the various objections in the record and effectively 
demonstrated that the Commission has the authority to require 
disclosure of SSAs in order help the Commission obtain information 
relevant to its statutory responsibilities. Any efforts to ascertain 
the potential impact of these agreements on the Commission's policy 
goals should not be read to imply only a negative impact. SSAs may help 
facilitate improved service in local communities, and disclosure of 
these agreements may provide greater insight into such potential 
benefits. The Second Report and Order set forth a sufficient 
justification for requiring disclosure in these circumstances, and 
NAB's brief argument to the contrary in its request for reconsideration 
gives the Commission no cause to disturb the underlying decision at 
this time.
    106. While the Commission is upholding the decision in the Second 
Report and Order to require disclosure, the Commission emphasizes that 
its action is not a pretext for future regulation of SSAs. As the Third 
Circuit recognized, the Commission acted appropriately in declining to 
attribute these agreements in this proceeding, as some commenters had 
requested. Among other things, the Commission has admitted that it 
lacks an understanding of the potential impact of SSAs on a station's 
core operating functions, and evidence in the record suggests that 
these agreements help produce significant public interest benefits. 
Accordingly, any consideration of the regulatory status of these 
agreements by a future Commission must reflect significant study and 
understanding of the impact of these agreements on station operations 
and a complete account of the public interest benefits these agreements 
help facilitate. Furthermore, while the record compiled in this 
proceeding does not demonstrate that the disclosure requirement will 
unduly burden commercial television broadcasters, the Commission 
retains the authority to revisit this disclosure requirement should 
evidence of such burdens arise after the disclosure requirement is 
implemented or experience demonstrate that the benefits of this 
requirement are outweighed by its costs.

G. Diversity/Incubator Program

1. Introduction
    107. The Commission grants in part and denies in part NAB's request 
for reconsideration regarding the Commission's decision in the Second 
Report and Order not to adopt an incubator program on the current 
record. The Commission agrees that it should adopt such a program and 
decides in this Order that it will do so. However, the Commission also 
finds that the underlying record fails to provide sufficient guidance 
on how best to structure such a program. Accordingly, the Commission 
adopts in this Order a Notice of Proposed Rulemaking seeking comment on 
how the Commission should structure the incubator program.
2. Background
    108. As explained in greater detail in the accompanying Notice of 
Proposed Rulemaking, an incubator program would provide an ownership 
rule waiver or similar benefits to a company that establishes a program 
to help facilitate station ownership for a certain class of new owners. 
The concept of an incubator program has been discussed since at least 
the early 1990s. Yet, despite general support for the concept, the 
Commission has never undertaken the creation of a comprehensive 
incubator program. The Commission has adopted a limited program that 
provides a duopoly preference to parties that agree to incubate or 
finance an eligible entity. In adopting this general policy preference, 
however, the Commission did not provide details regarding the structure 
and operation of the incubation activities. As such, the Commission 
does not believe that this limited policy preference serves as an 
effective basis upon which to design a comprehensive incubator program.
    109. Most recently, the Commission sought comment in the NPRM and 
FNPRM on whether to adopt an incubator program and, if so, how to 
structure such a program. In the FNPRM, in particular, the Commission 
highlighted administrative concerns and structural issues that needed 
to be addressed before such a program could be adopted. While there was 
general support for an incubator program, and some suggestions on how 
to structure certain aspects of such a program, the Commission found in 
the Second Report and Order that the record failed to address the 
specific concerns detailed in the FNPRM; accordingly, the

[[Page 752]]

Commission declined to adopt an incubator program. NAB sought 
reconsideration of the Commission's rejection of NAB's recommendation 
for an incubator program. According to NAB, the Commission could create 
an incubator program based on the overcoming disadvantages preference 
(ODP) standard, which the Commission rejected in the Second Report and 
Order, or the new entrant criteria in the broadcast services' auction 
rules. The petition otherwise fails to address the many other issues of 
concern highlighted by the Commission in this proceeding.
3. Discussion
    110. On reconsideration, the Commission agrees with NAB that it 
should adopt an incubator program and decides here that it will do so. 
There is support for an incubator program from many industry 
participants and advocacy groups. And the Commission agrees with 
supporters that adopting an incubator program would promote new entry 
and ownership diversity in the broadcast industry by helping address 
barriers to station ownership, such as lack of access to capital and 
the need for technical/operational experience. In this proceeding, 
however, the Commission has identified various, specific concerns 
regarding how to structure and monitor such a program. The Commission 
finds that the comments and recommendations in the record fail to 
adequately address all of these issues. While certain suggestions may 
have merit in regards to specific aspects of the program, the 
Commission is not yet at the point where it can finalize the overall 
structure and method for implementation of the program. Therefore, the 
Commission requires additional comment on how to structure the 
incubator program.
    111. The Commission is initiating a new proceeding in the 
accompanying Notice of Proposed Rulemaking that will seek additional 
comment on how best to implement the Commission's incubator program. 
Initiating a dedicated proceeding will allow the Commission to focus 
its efforts on getting this program up and running, and the Commission 
anticipates that its consideration of this issue will be assisted by 
the newly established Advisory Committee on Diversity and Digital 
Empowerment.

IV. Procedural Matters

A. Supplemental Final Regulatory Flexibility Analysis

    112. In compliance with the Regulatory Flexibility Act (RFA), this 
Supplemental Final Regulatory Flexibility Analysis (Supplemental FRFA) 
supplements the Final Regulatory Flexibility Analysis (FRFA) included 
in the Second Report and Order, to the extent that changes adopted on 
reconsideration require changes to the information included and 
conclusions reached in the FRFA. As required by the Regulatory 
Flexibility Act of 1980, as amended (RFA), an Initial Regulatory 
Flexibility Analysis (IRFA) was incorporated in the NPRM that initiated 
this proceeding. The Commission sought written public comment on the 
proposals in the NPRM, including comment on the IRFA. The Commission 
also incorporated a Supplemental Initial Regulatory Flexibility 
Analysis (Supplemental IRFA) in the FNPRM in this proceeding. The 
Commission sought written public comment on the proposals in the FNPRM, 
including comment on the Supplemental IRFA. The Commission received no 
comments in response to the IRFA or the Supplemental IRFA. This present 
Supplemental FRFA conforms to the RFA.
    113. Response to Public Comments and Comments by the Chief Counsel 
for Advocacy of the Small Business Administration. Pursuant to the 
Small Business Jobs Act of 2010, which amended the RFA, the Commission 
is required to respond to any comments filed by the Chief Counsel for 
Advocacy of the Small Business Administration (SBA) and to provide a 
detailed statement of any change made to the proposed rules as a result 
of those comments. The Chief Counsel did not file any comments in 
response to the proposed rules in this proceeding.
    114. Description and Estimate of the Number of Small Entities to 
Which Rules Will Apply. The RFA directs the Commission to provide a 
description of and, where feasible, an estimate of the number of small 
entities that will be affected by the rules adopted. 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. The final 
rules adopted in this Order affect small television and radio broadcast 
stations and small entities that operate daily newspapers. A 
description of these small entities, as well as an estimate of the 
number of such small entities, is provided below.
    115. Television Broadcasting. This Economic Census category 
comprises establishments primarily engaged in broadcasting images 
together with sound. These establishments operate television 
broadcasting studios and facilities for the programming and 
transmission of programs to the public. 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 SBA 
has created the following small business size standard for such 
businesses: Those having $38.5 million or less in annual receipts. The 
2012 Economic Census data reports that 751 such firms in this category 
operated in that year. Of that number, 656 had annual receipts of 
$25,000,000 or less, 25 had annual receipts between $25,000,000 and 
$49,999,999 and 70 had annual receipts of $50,000,000 or more. Based on 
this data, the Commission therefore estimates that the majority of 
commercial television broadcasters are small entities under the 
applicable SBA size standard.
    116. The Commission has estimated the number of licensed commercial 
television stations to be 1,382. Of this total, 1,262 stations (or 
about 91 percent) had revenues of $38.5 million or less, according to 
Commission staff review of the BIA Kelsey Inc. Media Access Pro 
Television Database (BIA) on May 9, 2017, and therefore these licensees 
qualify as small entities under the SBA definition. In addition, the 
Commission has estimated the number of licensed noncommercial 
educational television stations to be 393. Notwithstanding, the 
Commission does not compile and otherwise does not have access to 
information on the revenue of NCE stations that would permit it to 
determine how many such stations would qualify as small entities.
    117. The Commission notes, however, that, in assessing whether a 
business concern qualifies as small under the above definition, 
business (control) affiliations must be included. The Commission's 
estimate, therefore, likely overstates the number of small entities 
that might be affected by its action, because the revenue figure on 
which it is based does not include or aggregate revenues from 
affiliated companies. In addition, another element of the definition of 
small business is that the entity not be dominant in its field of 
operation. The Commission is unable at

[[Page 753]]

this time to define or quantify the criteria that would establish 
whether a specific television broadcast station is dominant in its 
field of operation. Accordingly, the estimate of small businesses to 
which rules may apply do not exclude any television broadcast station 
from the definition of a small business on this basis and are therefore 
possibly over-inclusive. There are also 2,385 LPTV stations, including 
Class A stations, and 3,776 TV translator stations. Given the nature of 
these services, the Commission will presume that all of these entities 
qualify as small entities under the above SBA small business size 
standard. Also, as noted above, an additional element of the definition 
of small business is that the entity must be independently owned and 
operated. The Commission notes that it is difficult at times to assess 
these criteria in the context of media entities and its estimates of 
small businesses to which they apply may be over-inclusive to this 
extent.
    118. Radio Stations. This Economic Census category comprises 
establishments primarily engaged in broadcasting aural programs by 
radio to the public. Programming may originate in their own studio, 
from an affiliated network, or from external sources. The SBA has 
established a small business size standard for this category as firms 
having $38.5 million or less in annual receipts. Economic Census data 
for 2012 shows that 2,849 radio station firms operated during that 
year. Of that number, 2,806 operated with annual receipts of less than 
$25 million per year, 17 with annual receipts between $25 million and 
$49,999,999 million and 26 with annual receipts of $50 million or more. 
Therefore, based on the SBA's size standard the majority of such 
entities are small entities.
    119. According to Commission staff review of the BIA/Kelsey, LLC's 
Media Access Pro Radio Database on May 9, 2017, about 11,392 (or about 
99.9 percent) of 11,401 of commercial radio stations had revenues of 
$38.5 million or less and thus qualify as small entities under the SBA 
definition. The Commission has estimated the number of licensed 
commercial radio stations to be 11,401. The Commission notes it has 
also estimated the number of licensed noncommercial radio stations to 
be 4,111. Nevertheless, the Commission does not compile and otherwise 
does not have access to information on the revenue of NCE stations that 
would permit it to determine how many such stations would qualify as 
small entities.
    120. The Commission also notes, that in assessing whether a 
business concern qualifies as small under the above definition, 
business (control) affiliations must be included. The Commission's 
estimate, therefore, likely overstates the number of small entities 
that might be affected by its action, because the revenue figure on 
which it is based does not include or aggregate revenues from 
affiliated companies. In addition, an element of the definition of 
small business is that the entity not be dominant in its field of 
operation. The Commission further notes, that it is difficult at times 
to assess these criteria in the context of media entities, and the 
estimate of small businesses to which these rules may apply does not 
exclude any radio station from the definition of a small business on 
these basis, thus the Commission's estimate of small businesses may 
therefore be over-inclusive. Also, as noted above, an additional 
element of the definition of small business is that the entity must be 
independently owned and operated. The Commission notes that it is 
difficult at times to assess these criteria in the context of media 
entities and the estimates of small businesses to which they apply may 
be over-inclusive to this extent.
    121. Daily Newspapers. The SBA has developed a small business size 
standard for the census category of Newspaper Publishers; that size 
standard is 1,000 or fewer employees. Business concerns included in 
this category are those that carry out operations necessary for 
producing and distributing newspapers, including gathering news; 
writing news columns, feature stories, and editorials; and selling and 
preparing advertisements. Census Bureau data for 2012 show that there 
were 4,168 firms in this category that operated for the entire year. Of 
this total, 4,107 firms had employment of 499 or fewer employees, and 
an additional 22 firms had employment of 500 to 999 employees. 
Therefore, the Commission estimates that the majority of Newspaper 
Publishers are small entities that might be affected by its action.
    122. Description of Reporting, Record Keeping, and other Compliance 
Requirements for Small Entities. The Order on Reconsideration 
eliminates the Newspaper/Broadcast Cross-Ownership Rule and the Radio/
Television Cross-Ownership Rule, modifies the Local Television 
Ownership Rule and, and eliminates the Television JSA Attribution Rule. 
The Order on Reconsideration does not adopt any new reporting, 
recordkeeping, or compliance requirements for small entities. The Order 
on Reconsideration thus will not impose additional obligations or 
expenditure of resources on small businesses. In addition, to conform 
to the elimination of the Television JSA Attribution Rule, parties to 
JSAs that were attributable under the previous rule will no longer be 
required to file the agreements with the Commission pursuant to section 
73.3613 of the Commission's rules.
    123. Steps Taken to Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered. The RFA requires an 
agency to describe any significant alternatives that it has considered 
in reaching its approach, which may include the following four 
alternatives (among others): (1) The establishment of differing 
compliance or reporting requirements or timetables that take into 
account the resources available to small entities; (2) the 
clarification, consolidation, or simplification of compliance or 
reporting requirements under the rule for such 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 such small 
entities.
    124. In conducting the quadrennial review, the Commission has three 
chief alternatives available for each of the Commission's media 
ownership rules--eliminate the rule, modify it, or, if the Commission 
determines that the rule is necessary in the public interest, retain 
it. The Commission finds that the modification and elimination of the 
rules in the Order on Reconsideration, which are intended to achieve 
the policy goals of competition, localism, and viewpoint diversity, 
will continue to benefit small entities by fostering a media 
marketplace in which they are better able to compete and by promoting 
additional broadcast ownership opportunities, as described below, among 
a diverse group of owners, including small entities. The Commission 
discusses below several ways in which the rules may benefit small 
entities as well as steps taken, and significant alternatives 
considered, to minimize any potential burdens on small entities.
    125. Newspaper/Broadcast Cross-Ownership (NBCO) Rule. In the Order 
on Reconsideration, the Commission considered whether to retain, 
modify, or eliminate the NBCO Rule. The Commission determined that the 
NBCO Rule is no longer in the public interest and should be repealed. 
As an alternative to the action taken, the Commission considered 
whether to adopt a modified NBCO Rule, but rejected that approach as 
unsupported by the record. As a result, newspapers will be able to 
combine with television and radio stations within the same local

[[Page 754]]

market, subject only to the Local Television and Local Radio Ownership 
Rules. Repeal of the NBCO Rule in its entirety eliminates the economic 
burden of compliance with the rule on small entities. Furthermore, 
repeal of the rule will allow broadcasters and local newspapers to seek 
out new sources of investment and operational expertise, potentially 
increasing the quantity and quality of local news and information they 
provide to consumers. Small broadcasters may find that merging with a 
newspaper could boost their ability to serve their local markets. The 
Order on Reconsideration finds that the NBCO Rule created considerable 
harm in small markets where the benefits of cross-ownership could have 
helped to sustain the local news outlets, many of which are likely to 
be small entities. Elimination of the rule will help promote additional 
investment opportunities for small entities in many local markets. The 
Order on Reconsideration also concludes that repeal of the NBCO Rule is 
unlikely to have a material effect on minority and female ownership of 
newspapers and broadcast stations.
    126. Radio/Television Cross-Ownership Rule. In the Order on 
Reconsideration, the Commission considers whether to retain, modify, or 
eliminate the Radio/Television Cross-Ownership Rule. The Commission 
finds that the Radio/Television Cross-Ownership Rule no longer serves 
the public interest and should be repealed. The Commission considers 
whether to adopt a modified rule, but rejects that approach as 
unsupported by the record. Eliminating the rule allows television 
stations and radio stations in the same market to be commonly owned 
provided that such ownership arrangements otherwise comply with the 
Local Television and Local Radio Ownership Rules. As with the NBCO 
Rule, repeal of the Radio/Television Cross-Ownership Rule in its 
entirety eliminates the economic impact of the rule on small entities. 
Small entities in particular may benefit from the aforementioned 
efficiencies and benefits of common ownership enabled by the rule's 
repeal. The Commission also finds that repeal of the Radio/Television 
Cross-Ownership rule is unlikely to have an effect on minority and 
female ownership of broadcast television and radio stations.
    127. Local Television Ownership Rule. In the Order on 
Reconsideration, the Commission finds that the existing Local 
Television Ownership Rule is no longer necessary in the public interest 
but should be modified further to enable television stations to compete 
more effectively. Accordingly, the Commission repeals the Eight-Voices 
Test that had required at least eight independently owned television 
stations to remain in a market after combining ownership of two 
stations in the market. The Commission considers whether to adopt a 
different voice test, but rejects that approach as unsupported by the 
record. In addition, the Commission considers whether to retain, 
modify, or eliminate the Top-Four Prohibition, a prohibition against 
common ownership of two top-four ranked stations in all markets. The 
Commission finds that the record generally supported the Commission's 
decision in the Second Report and Order to treat combinations involving 
two top-four rated stations differently than other combinations, but on 
reconsideration the Commission modifies the rule to include a case-by-
case approach to account for circumstances in which strict application 
of the prohibition is not in the public interest. Under the new 
modified television ownership rule an entity may own two television 
stations in the same DMA if (1) the digital noise limited service 
contours (NLSCs) of the stations (as determined by section 73.622(e)) 
do not overlap; or (2) at least one of the stations is not ranked among 
the top four stations in the market. The Commission will consider 
combinations otherwise barred by the Top-Four Prohibition on a case-by-
case basis.
    128. The modifications to the Local Television Ownership Rule are 
not expected to create additional burdens for small entities. 
Conversely, the economic impact of the rule modification may benefit 
small entities by enabling them to achieve operational efficiencies 
through common ownership. The Order on Reconsideration also concludes 
that the modifications to the Local Television Ownership Rule are 
unlikely to have an effect on minority and female ownership of 
broadcast television stations.
    129. Television JSA Attribution Rule. On reconsideration, the 
Commission considers whether to retain or eliminate the Television JSA 
Attribution Rule. The Commission finds that the rule was unsupported by 
the record and does not serve the public interest and therefore should 
be repealed. The repeal of the Television JSA Attribution Rule 
eliminates the economic burden of the rule on small entities. In the 
rapidly changing video marketplace, television JSAs help reduce costs 
and attract vital revenue at a time of increasing competition for 
advertising and viewership. Efficiencies provided by JSAs also enable 
broadcasters to improve or increase services for local communities, 
thus fostering significant public interest benefits. Local television 
broadcasters--particularly in small- and medium-sized markets--stand to 
benefit from these efficiencies that television JSAs create. The repeal 
of the attribution rule will remove a regulatory disincentive for 
stations to enter into JSAs and enable these stations to better serve 
their communities. In addition, because of the elimination of the 
Television JSA Attribution Rule, parties to JSAs that were attributable 
under the previous rule will no longer be required to file the 
agreements with the Commission, thus eliminating that economic burden.

B. Paperwork Reduction Act Analysis

    130. This Order on Reconsideration contains information collection 
requirements subject to the Paperwork Reduction Act of 1995 (PRA), 
Public Law 104-13. The requirements will be submitted to the Office of 
Management and Budget (OMB) for review under section 3507(d) of the 
PRA. OMB, the general public, and other Federal agencies will be 
invited to comment on the information collection requirements contained 
in this proceeding. The Commission will publish a separate document in 
the Federal Register at a later date seeking these comments. In 
addition, the Commission notes that, pursuant to the Small Business 
Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 
3506(c)(4), the Commission previously sought specific comment on how it 
might further reduce the information collection burden for small 
business concerns with fewer than 25 employees.

C. Congressional Review Act

    131. The Commission will send a copy of this Order on 
Reconsideration to Congress and the Government Accountability Office 
pursuant to the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A).

V. Ordering Clauses

    132. Accordingly, it is ordered that, pursuant to the authority 
contained in sections 1, 2(a), 4(i), 257, 303, 307, 309, 310, and 403 
of the Communications Act of 1934, as amended, 47 U.S.C. 151, 152(a), 
154(i), 257, 303, 307, 309, 310, and 403, and Section 202(h) of the 
Telecommunications Act of 1996, this Order on Reconsideration is 
adopted.
    133. It is further ordered that, pursuant to section 405 of the 
Communications Act of 1934, as amended, 47 U.S.C. 405, and section 
1.429 of the Commission's rules, 47 CFR

[[Page 755]]

1.429, that the petitions for reconsideration filed by (1) Connoisseur 
Media, LLC is granted, in part, and otherwise denied as set forth 
herein; (2) the National Association of Broadcasters is granted, in 
part, and otherwise denied as set forth herein; and (3) Nexstar 
Broadcasting, Inc. is granted, in part, and otherwise denied as set 
forth herein.
    134. It is further ordered that UCC et al.'s Motion to Strike and 
Dismiss is denied as set forth herein.
    135. It is further ordered that the Order on Reconsideration and 
the rule modifications attached hereto shall be effective February 7, 
2018, except for those rules and requirements involving Paperwork 
Reduction Act burdens, which shall become effective on the effective 
date announced in the Federal Register notice announcing OMB approval.
    136. It is further ordered, that the proceedings MB Docket No. 04-
256, MB Docket No. 09-182, and MB Docket No. 14-50 are terminated.

List of Subjects in 47 CFR Part 73

    Radio, Reporting and recordkeeping requirements, Television.

Federal Communications Commission.
Katura Jackson,
Federal Register Liaison Officer, Office of the Secretary.

Final Rules

    For the reasons discussed in the preamble, the Federal 
Communications 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, 309, 310, 334, 336 and 339.


0
2. Amend Sec.  73.3555 as follows:
0
a. Revise paragraph (b);
0
b. Remove and reserve paragraphs (c) and (d);
0
c. Revise the introductory text, paragraphs a. through d., and 
paragraphs g. through k. of Note 2 to Sec.  73.3555;
0
d. Revise Notes 4 through 7 to Sec.  73.3555;
0
e. Revise Note 9 to Sec.  73.3555; and
0
f. Remove Note 12 to Sec.  73.3555.
    The revisions read as follows:


Sec.  73.3555   Multiple ownership.

* * * * *
    (b) Local television multiple ownership rule. (1) An entity may 
directly or indirectly own, operate, or control two television stations 
licensed in the same Designated Market Area (DMA) (as determined by 
Nielsen Media Research or any successor entity) if:
    (i) The digital noise limited service contours of the stations 
(computed in accordance with Sec.  73.622(e)) do not overlap; or
    (ii) At the time the application to acquire or construct the 
station(s) is filed, at least one of the stations is not ranked among 
the top four stations in the DMA, based on the most recent all-day (9 
a.m.-midnight) audience share, as measured by Nielsen Media Research or 
by any comparable professional, accepted audience ratings service.
    (2) Paragraph (b)(1)(ii) (Top-Four Prohibition) of this section 
shall not apply in cases where, at the request of the applicant, the 
Commission makes a finding that permitting an entity to directly or 
indirectly own, operate, or control two television stations licensed in 
the same DMA would serve the public interest, convenience, and 
necessity. The Commission will consider showings that the Top-Four 
Prohibition should not apply due to specific circumstances in a local 
market or with respect to a specific transaction on a case-by-case 
basis.
(c)-(d) [Reserved]
* * * * *
    Note 2 to Sec.  73.3555:
    In applying the provisions of this section, ownership and other 
interests in broadcast licensees will be attributed to their holders 
and deemed cognizable pursuant to the following criteria:
    a. Except as otherwise provided herein, partnership and direct 
ownership interests and any voting stock interest amounting to 5% or 
more of the outstanding voting stock of a corporate broadcast licensee 
will be cognizable;
    b. Investment companies, as defined in 15 U.S.C. 80a-3, insurance 
companies and banks holding stock through their trust departments in 
trust accounts will be considered to have a cognizable interest only if 
they hold 20% or more of the outstanding voting stock of a corporate 
broadcast licensee, or if any of the officers or directors of the 
broadcast licensee are representatives of the investment company, 
insurance company or bank concerned. Holdings by a bank or insurance 
company will be aggregated if the bank or insurance company has any 
right to determine how the stock will be voted. Holdings by investment 
companies will be aggregated if under common management.
    c. Attribution of ownership interests in a broadcast licensee that 
are held indirectly by any party through one or more intervening 
corporations will be determined by successive multiplication of the 
ownership percentages for each link in the vertical ownership chain and 
application of the relevant attribution benchmark to the resulting 
product, except that wherever the ownership percentage for any link in 
the chain exceeds 50%, it shall not be included for purposes of this 
multiplication. For purposes of paragraph i. of this note, attribution 
of ownership interests in a broadcast licensee that are held indirectly 
by any party through one or more intervening organizations will be 
determined by successive multiplication of the ownership percentages 
for each link in the vertical ownership chain and application of the 
relevant attribution benchmark to the resulting product, and the 
ownership percentage for any link in the chain that exceeds 50% shall 
be included for purposes of this multiplication. [For example, except 
for purposes of paragraph i. of this note, if A owns 10% of company X, 
which owns 60% of company Y, which owns 25% of ``Licensee,'' then X's 
interest in ``Licensee'' would be 25% (the same as Y's interest because 
X's interest in Y exceeds 50%), and A's interest in ``Licensee'' would 
be 2.5% (0.1 x 0.25). Under the 5% attribution benchmark, X's interest 
in ``Licensee'' would be cognizable, while A's interest would not be 
cognizable. For purposes of paragraph i. of this note, X's interest in 
``Licensee'' would be 15% (0.6 x 0.25) and A's interest in ``Licensee'' 
would be 1.5% (0.1 x 0.6 x 0.25). Neither interest would be attributed 
under paragraph i. of this note.]
    d. Voting stock interests held in trust shall be attributed to any 
person who holds or shares the power to vote such stock, to any person 
who has the sole power to sell such stock, and to any person who has 
the right to revoke the trust at will or to replace the trustee at 
will. If the trustee has a familial, personal or extra-trust business 
relationship to the grantor or the beneficiary, the grantor or 
beneficiary, as appropriate, will be attributed with the stock 
interests held in trust. An otherwise qualified trust will be 
ineffective to insulate the grantor or beneficiary from attribution 
with the trust's assets unless all voting stock interests held by the 
grantor or beneficiary in the relevant broadcast licensee are subject 
to said trust.
* * * * *
    g. Officers and directors of a broadcast licensee are considered to 
have a cognizable interest in the entity with which they are so 
associated. If any such entity engages in businesses in

[[Page 756]]

addition to its primary business of broadcasting, it may request the 
Commission to waive attribution for any officer or director whose 
duties and responsibilities are wholly unrelated to its primary 
business. The officers and directors of a parent company of a broadcast 
licensee, with an attributable interest in any such subsidiary entity, 
shall be deemed to have a cognizable interest in the subsidiary unless 
the duties and responsibilities of the officer or director involved are 
wholly unrelated to the broadcast licensee, and a statement properly 
documenting this fact is submitted to the Commission. [This statement 
may be included on the appropriate Ownership Report.] The officers and 
directors of a sister corporation of a broadcast licensee shall not be 
attributed with ownership of that licensee by virtue of such status.
    h. Discrete ownership interests will be aggregated in determining 
whether or not an interest is cognizable under this section. An 
individual or entity will be deemed to have a cognizable investment if:
    1. The sum of the interests held by or through ``passive 
investors'' is equal to or exceeds 20 percent; or
    2. The sum of the interests other than those held by or through 
``passive investors'' is equal to or exceeds 5 percent; or
    3. The sum of the interests computed under paragraph h. 1. of this 
note plus the sum of the interests computed under paragraph h. 2. of 
this note is equal to or exceeds 20 percent.
    i.1. Notwithstanding paragraphs e. and f. of this Note, the holder 
of an equity or debt interest or interests in a broadcast licensee 
subject to the broadcast multiple ownership rules (``interest holder'') 
shall have that interest attributed if:
    A. The equity (including all stockholdings, whether voting or 
nonvoting, common or preferred) and debt interest or interests, in the 
aggregate, exceed 33 percent of the total asset value, defined as the 
aggregate of all equity plus all debt, of that broadcast licensee; and
    B.(i) The interest holder also holds an interest in a broadcast 
licensee in the same market that is subject to the broadcast multiple 
ownership rules and is attributable under paragraphs of this note other 
than this paragraph i.; or
    (ii) The interest holder supplies over fifteen percent of the total 
weekly broadcast programming hours of the station in which the interest 
is held. For purposes of applying this paragraph, the term, ``market,'' 
will be defined as it is defined under the specific multiple ownership 
rule that is being applied, except that for television stations, the 
term ``market'' will be defined by reference to the definition 
contained in the local television multiple ownership rule contained in 
paragraph (b) of this section.
    2. Notwithstanding paragraph i.1. of this Note, the interest holder 
may exceed the 33 percent threshold therein without triggering 
attribution where holding such interest would enable an eligible entity 
to acquire a broadcast station, provided that:
    i. The combined equity and debt of the interest holder in the 
eligible entity is less than 50 percent, or
    ii. The total debt of the interest holder in the eligible entity 
does not exceed 80 percent of the asset value of the station being 
acquired by the eligible entity and the interest holder does not hold 
any equity interest, option, or promise to acquire an equity interest 
in the eligible entity or any related entity. For purposes of this 
paragraph i.2, an ``eligible entity'' shall include any entity that 
qualifies as a small business under the Small Business Administration's 
size standards for its industry grouping, as set forth in 13 CFR 
121.201, at the time the transaction is approved by the FCC, and holds:
    A. 30 percent or more of the stock or partnership interests and 
more than 50 percent of the voting power of the corporation or 
partnership that will own the media outlet; or
    B. 15 percent or more of the stock or partnership interests and 
more than 50 percent of the voting power of the corporation or 
partnership that will own the media outlet, provided that no other 
person or entity owns or controls more than 25 percent of the 
outstanding stock or partnership interests; or
    C. More than 50 percent of the voting power of the corporation that 
will own the media outlet if such corporation is a publicly traded 
company.
    j. ``Time brokerage'' (also known as ``local marketing'') is the 
sale by a licensee of discrete blocks of time to a ``broker'' that 
supplies the programming to fill that time and sells the commercial 
spot announcements in it.
    1. Where two radio stations are both located in the same market, as 
defined for purposes of the local radio ownership rule contained in 
paragraph (a) of this section, and a party (including all parties under 
common control) with a cognizable interest in one such station brokers 
more than 15 percent of the broadcast time per week of the other such 
station, that party shall be treated as if it has an interest in the 
brokered station subject to the limitations set forth in paragraph (a) 
of this section. This limitation shall apply regardless of the source 
of the brokered programming supplied by the party to the brokered 
station.
    2. Where two television stations are both located in the same 
market, as defined in the local television ownership rule contained in 
paragraph (b) of this section, and a party (including all parties under 
common control) with a cognizable interest in one such station brokers 
more than 15 percent of the broadcast time per week of the other such 
station, that party shall be treated as if it has an interest in the 
brokered station subject to the limitations set forth in paragraphs (b) 
and (e) of this section. This limitation shall apply regardless of the 
source of the brokered programming supplied by the party to the 
brokered station.
    3. Every time brokerage agreement of the type described in this 
Note shall be undertaken only pursuant to a signed written agreement 
that shall contain a certification by the licensee or permittee of the 
brokered station verifying that it maintains ultimate control over the 
station's facilities including, specifically, control over station 
finances, personnel and programming, and by the brokering station that 
the agreement complies with the provisions of paragraph (b) of this 
section if the brokering station is a television station or with 
paragraph (a) of this section if the brokering station is a radio 
station.
    k. ``Joint Sales Agreement'' is an agreement with a licensee of a 
``brokered station'' that authorizes a ``broker'' to sell advertising 
time for the ``brokered station.''
    1. Where two radio stations are both located in the same market, as 
defined for purposes of the local radio ownership rule contained in 
paragraph (a) of this section, and a party (including all parties under 
common control) with a cognizable interest in one such station sells 
more than 15 percent of the advertising time per week of the other such 
station, that party shall be treated as if it has an interest in the 
brokered station subject to the limitations set forth in paragraph (a) 
of this section.
    2. Every joint sales agreement of the type described in this Note 
shall be undertaken only pursuant to a signed written agreement that 
shall contain a certification by the licensee or permittee of the 
brokered station verifying that it maintains ultimate control over the 
station's facilities, including, specifically, control over station 
finances, personnel and programming, and by the brokering station that 
the agreement complies with the limitations set forth in paragraph (a) 
of this section if the brokering station is a radio station.
* * * * *

[[Page 757]]

    Note 4 to Sec.  73.3555:
    Paragraphs (a) and (b) of this section will not be applied so as to 
require divestiture, by any licensee, of existing facilities, and will 
not apply to applications for assignment of license or transfer of 
control filed in accordance with Sec.  73.3540(f) or Sec.  73.3541(b), 
or to applications for assignment of license or transfer of control to 
heirs or legatees by will or intestacy, or to FM or AM broadcast minor 
modification applications for intra-market community of license 
changes, if no new or increased concentration of ownership would be 
created among commonly owned, operated or controlled broadcast 
stations. Paragraphs (a) and (b) of this section will apply to all 
applications for new stations, to all other applications for assignment 
or transfer, to all applications for major changes to existing 
stations, and to all other applications for minor changes to existing 
stations that seek a change in an FM or AM radio station's community of 
license or create new or increased concentration of ownership among 
commonly owned, operated or controlled broadcast stations. Commonly 
owned, operated or controlled broadcast stations that do not comply 
with paragraphs (a) and (b) of this section may not be assigned or 
transferred to a single person, group or entity, except as provided in 
this Note, the Report and Order in Docket No. 02-277, released July 2, 
2003 (FCC 02-127), or the Second Report and Order in MB Docket No. 14-
50, FCC 16-107 (released August 25, 2016).
    Note 5 to Sec.  73.3555:
    Paragraphs (b) and (e) of this section will not be applied to cases 
involving television stations that are ``satellite'' operations. Such 
cases will be considered in accordance with the analysis set forth in 
the Report and Order in MM Docket No. 87-8, FCC 91-182 (released July 
8, 1991), in order to determine whether common ownership, operation, or 
control of the stations in question would be in the public interest. An 
authorized and operating ``satellite'' television station, the digital 
noise limited service contour of which overlaps that of a commonly 
owned, operated, or controlled ``non-satellite'' parent television 
broadcast station may subsequently become a ``non-satellite'' station 
under the circumstances described in the aforementioned Report and 
Order in MM Docket No. 87-8. However, such commonly owned, operated, or 
controlled ``non-satellite'' television stations may not be transferred 
or assigned to a single person, group, or entity except as provided in 
Note 4 of this section.
    Note 6 to Sec.  73.3555:
    Requests submitted pursuant to paragraph (b)(2) of this section 
will be considered in accordance with the analysis set forth in the 
Order on Reconsideration in MB Docket Nos. 14-50, et al. (FCC 17-156).
    Note 7 to Sec.  73.3555:
    The Commission will entertain applications to waive the 
restrictions in paragraph (b) of this section (the local television 
ownership rule) on a case-by-case basis. In each case, we will require 
a showing that the in-market buyer is the only entity ready, willing, 
and able to operate the station, that sale to an out-of-market 
applicant would result in an artificially depressed price, and that the 
waiver applicant does not already directly or indirectly own, operate, 
or control interest in two television stations within the relevant DMA. 
One way to satisfy these criteria would be to provide an affidavit from 
an independent broker affirming that active and serious efforts have 
been made to sell the permit, and that no reasonable offer from an 
entity outside the market has been received.
    We will entertain waiver requests as follows:
    1. If one of the broadcast stations involved is a ``failed'' 
station that has not been in operation due to financial distress for at 
least four consecutive months immediately prior to the application, or 
is a debtor in an involuntary bankruptcy or insolvency proceeding at 
the time of the application.
    2. If one of the television stations involved is a ``failing'' 
station that has an all-day audience share of no more than four per 
cent; the station has had negative cash flow for three consecutive 
years immediately prior to the application; and consolidation of the 
two stations would result in tangible and verifiable public interest 
benefits that outweigh any harm to competition and diversity.
    3. If the combination will result in the construction of an unbuilt 
station. The permittee of the unbuilt station must demonstrate that it 
has made reasonable efforts to construct but has been unable to do so.
* * * * *
    Note 9 to Sec.  73.3555
    Paragraph (a)(1) of this section will not apply to an application 
for an AM station license in the 1605-1705 kHz band where grant of such 
application will result in the overlap of the 5 mV/m groundwave 
contours of the proposed station and that of another AM station in the 
535-1605 kHz band that is commonly owned, operated or controlled.
* * * * *

0
3. Amend Sec.  73.3613 by revising paragraph (d)(2) to read as follows:


Sec.  73.3613   Filing of contracts.

* * * * *
    (d) * * *
    (2) Joint sales agreements: Joint sales agreements involving radio 
stations where the licensee (including all parties under common 
control) is the brokering entity, the brokering and brokered stations 
are both in the same market as defined in the local radio multiple 
ownership rule contained in Sec.  73.3555(a), and more than 15 percent 
of the advertising time of the brokered station on a weekly basis is 
brokered by that licensee. Confidential or proprietary information may 
be redacted where appropriate but such information shall be made 
available for inspection upon request by the FCC.
* * * * *
[FR Doc. 2017-28329 Filed 1-5-18; 8:45 am]
 BILLING CODE 6712-01-P