National Television Multiple Ownership Rule, 3661-3667 [2018-01404]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 83, Number 18 (Friday, January 26, 2018)]
[Proposed Rules]
[Pages 3661-3667]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-01404]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 73

[MB Docket No. 17-318; FCC 17-169]


National Television Multiple Ownership Rule

AGENCY: Federal Communications Commission.

ACTION: Proposed rule

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SUMMARY: This Notice of Proposed Rulemaking (NPRM) initiates a 
comprehensive review of the national television audience reach cap, 
including the UHF discount used by broadcasters to determine compliance 
with the cap. The national cap limits entities from owning or 
controlling television stations that, together, reach more than 39 
percent of the television households in the country. The NPRM asks 
questions about whether a cap is still needed and what public interest 
goals it would promote, where the cap should be set if still needed, 
and how compliance with the cap should be calculated, including the 
question of whether the UHF discount should be eliminated. The Notice 
also invites comment on the Commission's legal authority to take such 
actions.

DATES: Comments are due on or before February 26, 2018. Reply Comments 
are due on or before March 27, 2018.

ADDRESSES: Interested parties may submit comments and replies, 
identified by MB Docket No. 17-318, by any of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Federal Communications Commission's Website: https://www.fcc.gov/cgb/ecfs/. Follow the instructions for submitting comments.
     Mail: Filings can be sent by hand or messenger delivery, 
by commercial overnight courier, or by first-class or overnight U.S. 
Postal Service mail (although the Commission continues to experience 
delays in receiving U.S. Postal Service mail). All filings must be 
addressed to the Commission's Secretary, Office of the Secretary, 
Federal Communications Commission.
    For more detailed filing instructions, see the Procedural Matters 
section below.

FOR FURTHER INFORMATION CONTACT: Brendan Holland, Industry Analysis 
Division, Media Bureau, [email protected] (202) 418-2757.

SUPPLEMENTARY INFORMATION: This NPRM in MB Docket No. 17-318, was 
adopted December 14, 2017, and released December 18, 2017. The full 
text of this document is available for public inspection during regular 
business hours in the FCC Reference Center, 445 12th Street SW, Room 
CY-A257, Washington, DC 20554, or online at https://apps.fcc.gov/edoc_putlic/attachmatch/FCC-17-169A1.pdf. To request this document in 
accessible formats for people with disabilities (e.g. braille, large 
print, electronic files, audio format, etc.) or to request reasonable 
accommodations (e.g. accessible format documents, sign language 
interpreters, CART, etc.), send an email to [email protected] or call the 
FCC's Consumer and Governmental Affairs Bureau at (202) 418-0530 
(voice), (202) 418-0432 (TTY).

Synopsis

    1. Background. The national television audience reach cap and the 
related UHF discount are an outgrowth of television ownership 
restrictions dating back to the earliest days of broadcast television. 
The Commission first imposed national ownership restrictions for 
television stations in 1941 by limiting the number of stations that 
could be commonly owned, operated, or controlled to three. This limit 
was eventually broadened to seven stations in 1954 and eventually to 12 
stations in 1984. In 1985, the Commission also determined that a 25 
percent nationwide audience reach cap, in addition to the twelve-
station limit, would help prevent a potentially disruptive industry 
restructuring. Along with the national cap, the Commission also adopted 
a 50 percent UHF discount to reflect the fact that, in the analog 
television broadcasting era, UHF signals reached a smaller audience in

[[Page 3662]]

comparison with VHF signals. The UHF discount provides that, for 
purposes of determining compliance with the national audience reach 
cap, stations broadcasting in the VHF spectrum are attributed with all 
television households in their Designated Market Areas (DMAs), while 
UHF stations are attributed with only 50 percent of the households in 
their DMAs.
    2. In the Telecommunications Act of 1996 (1996 Act), Congress 
directed the Commission to amend its rules to increase the national 
audience reach cap from 25 percent to 35 percent and eliminate the 
restriction on owning more than 12 broadcast television stations 
nationwide. The Commission reaffirmed the 35 percent cap in its 1998 
Biennial Review Order, but the U.S. Court of Appeals for the District 
of Columbia Circuit (DC Circuit) later remanded that decision, finding 
that the Commission had failed to demonstrate that the 35 percent 
national audience reach cap advanced localism, diversity, or 
competition. In the 2002 Biennial Review Order, the Commission found 
that while a national ownership cap was no longer needed to protect 
diversity and competition, the cap remained necessary to protect 
localism. The Commission further concluded that raising the cap from 35 
percent to 45 percent would strike an appropriate balance between the 
broadcast networks and the local affiliates by permitting some growth 
for the owners of the Big Four networks (ABC, CBS, Fox, and NBC) and 
allowing them to achieve greater economies of scale, while at the same 
time ensuring that the networks could not reach a larger national 
audience than their affiliates collectively.
    3. Following adoption of the 2002 Biennial Review Order, and while 
an appeal of that order was pending, Congress partially rolled back the 
cap increase by including a provision in the 2004 Consolidated 
Appropriations Act (CAA) directing the Commission ``to modify its rules 
to set the national cap at 39 percent of national television 
households.'' The CAA further amended Section 202(h) of the 1996 Act to 
require a quadrennial review of the Commission's broadcast ownership 
rules, rather than the previously mandated biennial review. In doing 
so, however, Congress excluded consideration of ``any rules relating to 
the 39 percent national audience reach limitation'' from the 
quadrennial review requirement. Prior to the enactment of the CAA, 
several parties had appealed the Commission's 2002 Biennial Review 
Order to the U.S. Court of Appeals for the Third Circuit (Third 
Circuit). In June 2004, the Third Circuit found that the challenges to 
the Commission's actions with respect to the national audience reach 
cap and the UHF discount were moot as a result of Congress's action.
    4. In August 2016, the Commission eliminated the UHF discount, 
finding that UHF stations were no longer technically inferior to VHF 
stations following the digital television transition and that the 
competitive disparity between UHF and VHF stations had disappeared. 
Then-Commissioner Pai and Commissioner O'Rielly dissented from this 
decision. In April 2017, in response to a Petition for Reconsideration, 
the Commission reinstated the UHF discount, finding that the 
Commission's elimination of the discount, effectively tightening the 
cap without also determining whether the cap remained in the public 
interest, was arbitrary and capricious and unwise from a public policy 
perspective. Because the UHF discount is used to determine licensees' 
compliance with the national audience reach cap, the Commission 
concluded that the UHF discount and the cap are inextricably linked, 
and eliminating the discount without considering the cap itself was in 
error. In reinstating the UHF discount, the Commission committed to 
undertake this comprehensive rulemaking to determine whether to modify 
or eliminate the national cap, including the UHF discount.
    5. Commission Authority To Modify or Eliminate the National Cap. As 
an initial matter, the Commission seeks comment on its authority to 
modify or eliminate the national cap, including authority to modify or 
eliminate the UHF discount. The Commission previously concluded in the 
UHF Discount Elimination Order that the Commission has authority to 
modify or eliminate the 39 percent national audience reach cap, 
including the UHF discount (although it refrained from adjusting the 
cap). The Commission found that it had such authority based on its 
broad authority to adopt--and revise or eliminate--all necessary rules 
under the Communications Act. In contrast, parties opposing 
reinstatement of the UHF discount on reconsideration argued variously 
that the Commission lacked authority to modify or eliminate the 
national cap, the UHF discount, or both.
    6. In previously concluding that it has authority to modify or 
eliminate the national cap, the Commission rejected arguments that, 
when Congress established the 39 percent national audience reach cap, 
it precluded the Commission from any adjustment of the cap or the 
discount. The Commission reasoned that the 2004 CAA ``simply directed 
the Commission to revise its rules to reflect a 39 percent national 
audience reach cap and removed the requirement to review the national 
ownership cap from the Commission's quadrennial review requirement.'' 
The Commission concluded that the CAA did not impose a statutory 
national audience reach cap or prohibit the Commission from evaluating 
the elements of this rule. In addition, although the Third Circuit 
ultimately concluded in its review of the Commission's 2002 Biennial 
Review Order that questions related to the UHF discount were moot as a 
result of the CAA, it did not foreclose the Commission's consideration 
of its regulation defining the UHF discount in a rulemaking outside the 
context of section 202(h). Further, Congress elected to use the same 
language in the 2004 CAA, instructing the Commission to ``modify its 
rules,'' as it did when it instructed the Commission to change the cap 
from 25 to 35 percent as part of the 1996 Act. Both the DC Circuit (in 
finding it was arbitrary and capricious for the Commission to retain 
that cap as part of the 1998 biennial review) and the Commission itself 
(in subsequently raising the cap from 35 to 45 percent) interpreted the 
identical language in the 1996 Act as preserving the Commission's 
authority to modify the cap in the future.
    7. The Commission further based its finding of authority to modify 
the cap and discount on its broad authority to adopt rules necessary to 
carry out the provisions of the Communications Act, and its authority 
to revisit its rules and revise or eliminate them as appropriate. Given 
continued questions regarding authority in this area, the Commission 
seeks further comment on its prior conclusion that it has authority to 
modify or eliminate the national audience reach cap and the UHF 
discount. The Commission asks whether Congress's exclusion of the 
national cap from the quadrennial review provision merely meant to 
relieve the Commission of the obligation to reconsider the cap every 
four years (as the Third Circuit concluded), or was it designed to 
withhold the Commission's authority to change the cap as set by 
Congress. The Commission also asks whether Congress's instruction to 
the Commission to ``modify its rules'' in 1996 and 2004, rather than 
simply mandating a specific national audience reach cap, preserves the 
Commission's traditional statutory authority to alter or eliminate the 
cap in a future rulemaking.

[[Page 3663]]

    8. Modification of Elimination of the National Audience Reach Cap. 
The Commission seeks comment on whether there is still a need for a 
national cap that prevents ownership of stations that collectively 
reach more than a certain percentage of the television households in 
the country. The Commission asks whether such a cap serves the public 
interest. The Commission notes at the outset that the video marketplace 
has changed considerably since it last considered the national cap in 
the 2002 Biennial Review Order, and since Congress instructed the 
Commission to set a 39 percent cap in 2004. The Commission's most 
recent annual Video Competition Report describes, among other 
developments, the growth of video programming options available to 
consumers, including online alternatives to traditional video 
distribution, reverse compensation fees paid by affiliates to broadcast 
networks, common ownership of broadcast and cable networks, 
consolidation among both Multichannel Video Programming Distributors 
(MVPDs) and non-network owned station groups, and continuing MVPD video 
subscriber losses. The Commission concluded in the UHF Order on 
Reconsideration that the failure to consider these changes compounded 
the error of eliminating the UHF discount. Accordingly, the Commission 
now seeks comment on how these marketplace changes, as well as any 
other changes not previously mentioned, should be considered in the 
context of the possible modification or elimination of the national 
audience reach cap. For instance, the Commission previously found in 
its 2002 Biennial Review Order that a national audience reach cap set 
at some level is necessary in the public interest to promote localism. 
Specifically, the Commission found that a percentage cap maintains the 
appropriate balance of power between broadcast networks and their local 
affiliate groups, in part by preventing the excessive accumulation of 
audience reach by network-owned groups, which are more likely to hold 
stations in multiple geographic markets with large populations. The 
Commission reasoned that a national audience reach cap preserves the 
leverage necessary for local affiliates to collectively negotiate to 
influence network programming decisions and exercise their rights to 
preempt network programming in favor of programming the affiliates feel 
is better suited to local community needs. In setting a 45 percent cap, 
the Commission found that a national audience reach cap set at that 
level would ensure that network-owned station groups could not achieve 
a level of direct audience reach that exceeds that of their local 
affiliates, while at the same time allowing for limited growth by each 
of the Big Four network owners, allowing them to achieve better 
economies of scale and scope and remain competitive.
    9. The Commission now seeks comment on whether the existing cap is 
still necessary to promote localism. The Commission asks whether its 
previously articulated justifications--related to collective influence 
and preemption by local affiliates--still hold true, and whether 
localism has increased, decreased, or remained roughly the same over 
time. The Commission asks whether there are recent examples where local 
affiliates have influenced network programming to better serve local 
needs, and how recent affiliate preemption rates compare to those the 
Commission cited in the 2002 Biennial Review Order. The Commission asks 
whether there are other metrics by which it can assess the effect of 
the national audience reach cap on localism and whether, even if 
preserving a national audience reach cap at some level would promote 
localism, would modifying or eliminating the cap nevertheless have 
offsetting benefits (for example, in promoting competition or 
diversity).
    10. The Commission also asks whether other changes in the 
marketplace have affected the network/affiliate relationship, such that 
it would need to adjust assumptions made in previous reviews of the 
cap. The Commission asks how the growth of independent station groups 
over the last two decades has changed the dynamic between network-owned 
station groups and their affiliates. The Commission notes that its 
interest in preserving a national/local balance between networks and 
affiliates is predicated upon the Commission's prior conclusion that 
networks and their affiliates have different economic incentives when 
it comes to serving local interests. The Commission previously has 
found that broadcast networks primarily seek to air programming that 
will appeal to large national audiences, while local affiliates are 
more attuned to the needs of their local communities. The Commission 
seeks comment on these prior conclusions, including whether the 
conclusion that local affiliates are more attuned to local needs is 
still valid and whether it continues to apply equally to all local 
affiliates. The Commission also asks whether the size of the station 
group affects this conclusion.
    11. The Commission also seeks comment on whether there are other 
justifications for a national audience reach cap besides localism. In 
the 2002 Biennial Review Order, for example, the Commission noted in 
its competition discussion that the national cap appeared to encourage 
innovation in broadcast television by preserving a number of 
separately-owned station groups and then concluded that a variety of 
owners had led to innovative programming formats and technical 
advances. The Commission pointed to new programming formats developed 
by non-network owned affiliates, such as all-news channels and local 
news magazines, and the potential for experimentation in the use of 
digital spectrum as part of the digital television transition. The 
Commission now seeks comment on whether these prior conclusions have 
proven true over time and whether they remain true today. The 
Commission asks whether the variety of owners on a national level 
produced by the national audience reach cap continues to promote 
innovation in the marketplace, or whether there are ways in which the 
national audience reach cap hinders innovation.
    12. The Commission previously has found that a national television 
ownership restriction is not necessary to promote the goals of 
competition or diversity. The Commission first reached this conclusion 
in 1984 when, regarding competition, it recognized the relevance of 
advertising to measuring competition in national and local television 
markets, and concluded that, for the local spot advertising market, the 
local television ownership rule rather than a national ownership rule 
would best address any risk of competitive harm. Regarding diversity, 
the Commission concluded that national broadcast ownership limits, as 
opposed to local ownership limits, ordinarily are not pertinent to 
assuring a diversity of views. The Commission nonetheless set a 
national audience reach cap to avoid any rapid restructuring of the 
industry that might be caused by its decision the previous year to 
raise the numerical cap from seven to twelve stations. The Commission 
now asks whether these previous conclusions are still valid, and 
whether any other goals supporting national ownership limits should be 
considered in this proceeding.
    13. In addition, the Commission seeks comment on whether changes in 
the marketplace warrant a fresh look at the national television 
ownership rule's impact on competition or diversity at either the local 
or national level. The Commission asks how marketplace

[[Page 3664]]

changes have affected competition in the local broadcast television 
market or any other relevant markets. The Commission notes that other 
video distributors, including direct broadcast satellite providers and 
online video programmers, are not restricted by ownership limits. The 
Commission asks whether the cap, or the current level of the cap, have 
any negative impact on competition or diversity, and how any 
modification of the cap might affect these goals. The Commission asks 
whether marketplace changes have affected the relationships and 
business dealings between local broadcasters and other video 
distributors in ways that would justify retention, modification, or 
elimination of the national audience reach cap. The Commission notes 
that it has rules in place related to the distribution of video 
programming and carriage negotiations between broadcast stations and 
MVPDs (local exclusivity and retransmission consent negotiation rules) 
and asks whether the existence of these rules in any way informs the 
consideration of whether to retain, modify, or eliminate the cap. The 
Commission asks, for example, whether the rules have affected the 
relationships and business dealings between local broadcasters and 
other video distributors in ways that might affect the need for and 
operation of any national audience reach cap. The Commission also asks 
whether the cap serves any competition or diversity purpose related to 
the production or purchase of programming (e.g., syndicated 
programming).
    14. If the Commission concludes that a national audience reach cap 
remains in the public interest, it asks at what level it should be set. 
The Commission asks whether a 39 percent cap still makes sense, or 
whether the cap should be set at a different level. The Commission has 
not articulated a justification for the cap in well over a decade, and 
the last time it did, it concluded that the cap should be raised from 
35 to 45 percent. Congress subsequently scaled back the Commission's 45 
percent cap to the current 39 percent level in 2004. Commenters urging 
the Commission to retain the 39 percent cap or to adjust it either 
upward or downward should provide a reasoned basis for any proposed 
line-drawing. The Commission also seeks comment on whether the national 
audience reach cap should apply equally to all ownership groups (e.g., 
groups that are network-owned or affiliated with cable networks versus 
those that are not). The Commission asks whether audience reach is the 
proper measurement to use for the cap (as opposed to some other 
measurement of a station group's size or influence, such as actual 
viewership, market share, or amount of advertising revenue). The 
Commission asks whether it should consider alternatives with some 
built-in flexibility; for instance, alternatives that might employ the 
use of a threshold screen that would trigger a more detailed analysis, 
such as an automatic presumption or a safe harbor, either in lieu of or 
in addition to a bright line cap. If the Commission were to modify the 
national audience reach cap, it asks whether this action would affect 
any barriers to entry (either positively or negatively), including 
entry by women, minority, or small business owners.
    15. Determining Compliance With a National Cap. Assuming the 
Commission retains a national audience reach cap at some level, it 
seeks comment on how to calculate compliance, including possible 
modification or elimination of the UHF discount. If the Commission 
determines that it has authority to adjust the national cap and that a 
national cap remains necessary in the public interest, it asks what, if 
any, changes it should make to the rules for determining licensees' 
compliance with that cap.
    16. Initially, the Commission seeks comment on whether to eliminate 
the UHF discount. Notably, no commenter in the prior UHF discount 
proceedings presented evidence that the original technical 
justification for the discount is still valid, and the Commission in 
the UHF Discount Order on Reconsideration did not disturb its earlier 
conclusion that the UHF discount no longer has a sound technical basis 
following the digital television transition. The Commission seeks 
further comment on this prior conclusion, as well as on the importance 
of any non-technical justifications for the UHF discount that remain 
relevant. For example, the Commission noted in the UHF Discount Order 
on Reconsideration the industry's reliance on the UHF discount to 
develop long-term business strategies. Parties seeking reinstatement of 
the UHF discount described how they used the UHF discount to build new 
networks that provide innovative, competitive programming. The 
Commission seeks comment on whether eliminating the UHF discount would, 
on balance, serve the public interest and whether the current UHF 
discount causes harm to consumers or presents other drawbacks to 
retaining it.
    17. The Commission also seeks comment on whether the UHF discount 
should be modified or whether it should be supplemented or replaced 
with some other weighting method for determining compliance with any 
national limit on ownership of broadcast stations. The Commission asks 
whether there are other station or market characteristics that would 
warrant discounting or weighting a station's audience reach when 
determining compliance with a national cap. The Commission previously 
sought comment on and declined to adopt a VHF discount, acknowledging 
that UHF spectrum is now generally considered more desirable than VHF 
spectrum for digital television broadcasting, but finding insufficient 
evidence to conclude that VHF operations are universally inferior to 
UHF operations or that VHF stations' economic viability was 
sufficiently in jeopardy to warrant a VHF discount. The Commission 
seeks comment on these previous conclusions as well as whether there 
are other discounts or weights it should consider as part of a national 
ownership rule. The Commission asks how, if at all, it should account 
for the fact that many consumers today receive local broadcast stations 
via an MVPD, rather than over the air, in considering any discount or 
weight premised on a disparity in over-the-air coverage.
    18. The Commission seeks comment on the impact that elimination of 
the UHF discount would have on the operation or effectiveness of a 
national audience reach cap. In the UHF Discount Order on 
Reconsideration, the Commission concluded that the elimination of the 
UHF discount effectively tightened the national cap. Therefore, if the 
Commission eliminates the UHF discount, the Commission asks whether it 
should simultaneously raise the national cap and by how much, assuming 
it finds that it has authority to do so. The Commission asks whether 
the UHF discount serves the underlying purposes of the national cap, 
namely, the preservation of a balance of power between broadcast 
networks and local affiliates, and how, if at all, elimination of the 
discount would alter that network/affiliate dynamic. The Commission 
asks whether the UHF discount benefits certain types of station group 
owners more than others (e.g., non-Big Four networks versus Big Four 
networks), and how its elimination would affect such owners. The 
Commission also seeks comment on how eliminating the UHF discount would 
affect not only the local television market, but the broader video 
marketplace as a whole.
    19. Benefit-Cost Analysis. In addition, the Commission seeks 
comment on how to compare the benefits and costs associated with 
modifying or

[[Page 3665]]

eliminating the national cap, including the UHF discount. The 
Commission asks commenters supporting modification or elimination of 
the current 39 percent audience reach cap or the UHF discount to 
explain the anticipated economic impact of any proposed action and, 
where possible, to quantify benefits and costs of proposed actions and 
alternatives. The Commission asks whether the current national audience 
reach cap creates benefits or costs for any segment of consumers. The 
Commission asks whether the cap creates benefits or costs for any 
segment of the industry that should be counted as social benefits or 
costs rather than transfers from one segment of the industry to 
another. The Commission asks how the cap creates these benefits and 
costs, and what evidence supports this explanation. The Commission asks 
how the value of these benefits and costs can be measured for parties 
receiving them, what factors create uncertainty about the existence or 
size of these benefits and costs, and how its economic analysis should 
take these uncertainties into account.
    20. The Commission asks how elimination of the national audience 
reach cap would alter these benefits and costs, and the comparative 
benefits and costs of modifying the cap upward rather than eliminating 
it entirely. The Commission asks whether allowing station groups to 
exceed the current 39 percent cap leads to any consumer benefits, such 
as increased competition, choice, innovation, or investment in 
programming, and what amount of additional scale above the current 
ownership limit would be required to realize such benefits. The 
Commission asks the comparative benefits and costs of lowering the cap. 
Commenters making claims about benefits and costs should support their 
claims with relevant economic theory and evidence, including empirical 
analysis and data.
    21. Comparison of benefits and costs allows the Commission to 
identify the most economically efficient policy--that is, the policy 
that maximizes the value of resources from the perspective of 
consumers. The Commission asks whether it should seek to preserve a 
level of localism or other policy outcomes that do not maximize 
economic efficiency or consumer welfare, what public interest reasons 
support such actions, and what evidence justifies the elevation of 
these other public interest considerations over consumer welfare. The 
Commission asks what limiting principle the Commission should employ to 
determine when these alternative public interest considerations are 
satisfied, and what evidence demonstrates that the commenter's 
preferred policy alternative is likely to achieve the appropriate level 
of localism or other desired outcome, as determined by these other 
public interest considerations.
    22. Relationship to Other Commission Rules. Prior to 2004, when 
Congress expressly excluded review of the national audience reach cap 
from the Commission's quadrennial review process, the national cap 
typically had been considered in conjunction with the Commission's 
other media ownership rules. For example, when the Commission raised 
the limit on the number of stations a broadcaster could own to twelve, 
it also adopted a limit on the total national audience reach of station 
groups. To ensure a comprehensive review, the Commission seeks comment 
on the interplay between the national audience reach cap and other 
Commission ownership rules affecting television broadcasters. First, 
the Commission seeks comment on how, if at all, its local television 
ownership rule, which limits consolidation within local markets, should 
be taken into account in analyzing whether to modify or eliminate the 
national cap, which limits consolidation on a national level. Second, 
the Commission invites comment on how, if at all, it should consider 
the future decisions of television broadcasters to adopt the ``Next 
Generation'' transmission standard (or ATSC 3.0) on a voluntary basis. 
Finally, the Commission seeks comment on whether it should consider the 
potential impact on any other Commission rule or action in analyzing 
whether to modify or eliminate the national cap or UHF discount.
    23. Grandfathering. To the extent that any rule the Commission 
adopts as a result of this proceeding causes a station owner to no 
longer be in compliance with the national audience reach cap or to 
violate any new limit, the Commission seeks comment on whether it 
should grandfather such ownership combinations as it has in the past. 
The Commission further seeks comment as to whether there should be any 
restrictions on the further transferability of any grandfathered 
stations. The Commission notes that, in the UHF Discount Elimination 
Order, it grandfathered station combinations that would exceed the 39 
percent cap as a result of elimination of the UHF discount, but would 
have required any grandfathered ownership combination subsequently sold 
or transferred to comply with the national ownership cap in existence 
at the time of transfer. Subsequently, the UHF Discount Order on 
Reconsideration reinstated the UHF discount and dismissed as moot 
requests to reconsider and modify grandfathering provisions.
    24. Given this history, and recognizing broadcaster interest in 
maintaining the economies of scale and scope achieved through station 
combinations, if the Commission modifies the cap and/or the UHF 
discount, the Commission seeks comment on whether it should allow full, 
intact transferability without divestitures of grandfathered station 
groups. If the Commission adopts a rule change as a result of this 
proceeding that necessitates the grandfathering of existing, 
noncompliant station groups, it seeks comment on the appropriate date 
for triggering such grandfathering. The Commission also seeks comment 
on any other alternatives to grandfathering and transferability of non-
compliant station groups. Finally, the Commission seeks comment on any 
new grandfathering issues arising from the questions posed in this NPRM 
or presented in initial comments filed in response.

Procedral Matters

    25. Ex Parte Presentations. This proceeding shall be treated as a 
``permit-but-disclose'' proceeding in accordance with the Commission's 
ex parte rules. Persons making ex parte presentations must file a copy 
of any written presentation or a memorandum summarizing any oral 
presentation within two business days after the presentation (unless a 
different deadline applicable to the Sunshine period applies). Persons 
making oral ex parte presentations are reminded that memoranda 
summarizing the presentation must (1) list all persons attending or 
otherwise participating in the meeting at which the ex parte 
presentation was made, and (2) summarize all data presented and 
arguments made during the presentation. If the presentation consisted 
in whole or in part of the presentation of data or arguments already 
reflected in the presenter's written comments, memoranda or other 
filings in the proceeding, the presenter may provide citations to such 
data or arguments in his or her prior comments, memoranda, or other 
filings (specifying the relevant page and/or paragraph numbers where 
such data or arguments can be found) in lieu of summarizing them in the 
memorandum. Documents shown or given to Commission staff during ex 
parte meetings are deemed to be written ex parte presentations and must 
be filed consistent with rule 1.1206(b). In proceedings governed by

[[Page 3666]]

rule 1.49(f) or for which the Commission has made available a method of 
electronic filing, written ex parte presentations and memoranda 
summarizing oral ex parte presentations, and all attachments thereto, 
must be filed through the Electronic Comment Filing System available 
for that proceeding, and must be filed in their native format (e.g., 
.doc, .xml, .ppt, searchable .pdf). Participants in this proceeding 
should familiarize themselves with the Commission's ex parte rules.
    26. Filing Procedures. Pursuant to Sections 1.415 and 1.419 of the 
Commission's rules, interested parties may file comments and reply 
comments on or before the dates indicated on the first page of this 
document. Comments may be filed using the Commission's Electronic 
Comment Filing System (ECFS). See Electronic Filing of Documents in 
Rulemaking Proceedings, 63 FR 24121 (1998).
    [ssquf] Electronic Filers: Comments may be filed electronically 
using the internet by accessing the ECFS: https://apps.fcc.gov/ecfs/.
    [ssquf] Paper Filers: Parties who choose to file by paper must file 
an original and one copy of each filing. Filings can be sent by hand or 
messenger delivery, by commercial overnight courier, or by first-class 
or overnight U.S. Postal Service mail. All filings must be addressed to 
the Commission's Secretary, Office of the Secretary, Federal 
Communications Commission.
    [ssquf] All hand-delivered or messenger-delivered paper filings for 
the Commission's Secretary must be delivered to FCC Headquarters at 445 
12th St. SW, Room TW-A325, Washington, DC 20554. The filing hours are 
8:00 a.m. to 7:00 p.m. All hand deliveries must be held together with 
rubber bands or fasteners. Any envelopes and boxes must be disposed of 
before entering the building.
    [ssquf] Commercial overnight mail (other than U.S. Postal Service 
Express Mail and Priority Mail) must be sent to 9050 Junction Drive, 
Annapolis Junction, MD 20701.
    [ssquf] U.S. Postal Service first-class, Express, and Priority mail 
must be addressed to 445 12th Street SW, Washington, DC 20554.
    27. Availability of Documents. Comments, reply comments, and ex 
parte submissions will be available for public inspection during 
regular business hours in the FCC Reference Information Center, Federal 
Communications Commission, 445 12th Street SW, CY-A257, Washington, DC 
20554. These documents will also be available via ECFS. Documents will 
be available electronically in ASCII, Microsoft Word, and/or Adobe 
Acrobat.
    28. Additional Information. For additional information on this 
proceeding, please contact Brendan Holland of the Media Bureau, 
Industry Analysis Division, [email protected], (202) 418-2757.
    29. Paperwork Reduction Act Notice. The Commission seeks comment on 
whether, based on this NPRM, it should adopt any new or modified 
information collection requirements. The Commission, as part of its 
continuing effort to reduce paperwork burdens and pursuant to the 
Paperwork Reduction Act of 1995 invites the general public and the 
Office of Management and Budget to comment on any such information 
collection requirements. In addition, pursuant to the Small Business 
Paperwork Relief Act of 2002, the Commission seeks specific comment on 
how it might further reduce the information collection burden for small 
business concerns with fewer than 25 employees.
    30. Initial Regulatory Flexibility Analysis. As required by the 
Regulatory Flexibility Act of 1980, as amended (RFA), the Commission 
has prepared this Initial Regulatory Flexibility Act Analysis (IRFA) of 
the possible significant economic impact on small entities of the 
policies and rules proposed in this NPRM. The Commission requests 
written public comments on this IRFA. Comments must be identified as 
responses to the IRFA and must be filed by the deadlines for comments 
specified above. The Commission will send a copy of this NPRM, 
including this IRFA, to the Chief Counsel for Advocacy of the Small 
Business Administration.
    31. Need for, and Objectives of, the Proposed Rules. This NPRM 
seeks comment on the Commission's national television audience reach 
cap, including the discount afforded to UHF stations. Earlier this 
year, the Commission reinstated the UHF discount, which provides a 50 
percent discount to UHF stations for purposes of calculating compliance 
with the 39 percent audience reach cap. In reinstating the discount, 
the Commission found that the earlier decision to eliminate the 
discount had effectively tightened the cap without considering whether 
the overall cap remained in the public interest, particularly in light 
of changes to the video marketplace. The Commission found this action 
to be arbitrary and capricious and unwise from a public policy 
perspective. This NPRM seeks to rectify the Commission's prior error 
and undertake a broader assessment of the national audience cap, 
including the UHF discount. This NPRM asks whether the Commission 
should modify or eliminate the current 39 percent national audience 
reach cap, and whether to grandfather any newly non-compliant 
combinations and if so, how.
    32. Legal Basis. The legal basis for any action that may be taken 
pursuant to this NPRM is contained in Sections 1, 2(a), 4(i), 303(r), 
307, 309, and 310 of the Communications Act of 1934, as amended.
    33. Description and Estimate of the Number of Small Entities to 
Which the Proposed Rules Apply. The RFA directs agencies to provide a 
description of, and where feasible, an estimate of the number of small 
entities that may be affected by the proposed rule revisions, if 
adopted. The RFA generally defines the term ``small entity'' as having 
the same meaning as the terms ``small business,'' ``small 
organization,'' and ``small governmental jurisdiction.'' In addition, 
the term ``small business'' has the same meaning as the term ``small 
business concern'' under the Small Business Act (SBA). A small business 
concern is one which: (1) Is independently owned and operated; (2) is 
not dominant in its field of operation; and (3) satisfies any 
additional criteria established by the SBA. Below, we provide a 
description of such small entities, as well as an estimate of the 
number of such small entities, where feasible.
    34. Television Broadcasting. This Economic Census category 
``comprises establishments primarily engaged in broadcasting images 
together with sound.'' These establishments operate television 
broadcast 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 Small 
Business Administration 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 reports that 751 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 estimates that the majority 
of commercial television broadcasters are small entities under the 
applicable size.

[[Page 3667]]

    35. Additionally, the Commission has estimated the number of 
licensed commercial television stations to be 1,378. Of this total, 
1,263 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.
    36. We note, however, that in assessing whether a business concern 
qualifies as small under the above definition, business (control) 
affiliations must be included. Our estimate, therefore, likely 
overstates the number of small entities that might be affected by our 
action because the revenue figure on which it is based does not include 
or aggregate revenues from affiliated companies. In addition, an 
element of the definition of ``small business'' is that the entity not 
be dominant in its field of operation. We are unable at this time to 
define or quantify the criteria that would establish whether a specific 
television station is dominant in its field of operation. Accordingly, 
the estimate of small businesses to which rules may apply does not 
exclude any television station from the definition of a small business 
on this basis and is therefore possibly over-inclusive.
    37. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements. If the Commission determines that it should 
modify or eliminate the current 39 percent national audience reach cap 
or permanently eliminate or modify the UHF discount, this action could 
require modification of certain FCC forms and their instructions, 
possibly including: (1) FCC Form 301, Application for Construction 
Permit for Commercial Broadcast Station; (2) FCC Form 314, Application 
for Consent to Assignment of Broadcast Station Construction Permit or 
License; and (3) FCC Form 315, Application for Consent to Transfer 
Control of Corporation Holding Broadcast Station Construction Permit or 
License. The Commission may also have to modify other forms that 
include in their instructions the media ownership rules or citations to 
media ownership proceedings, including Form 303-S, Application for 
Renewal License for AM, FM, TV, Translator, or LPTV Station and Form 
323, Ownership Report for Commercial Broadcast Station. The impact of 
these changes will be the same on all entities, and the Commission does 
not anticipate that compliance will require the expenditure of any 
additional resources or place additional burdens on small businesses.
    38. Steps Taken To Minimize Significant Impact on Small Entities 
and Significant Alternatives Considered. The RFA requires an agency to 
describe any significant alternatives that it has considered in 
reaching its proposed approach, which may include the following four 
alternatives (among others): (1) The establishment of differing 
compliance or reporting requirements or timetables that take into 
account the resources available to small entities; (2) the 
clarification, consolidation, or simplification of compliance or 
reporting requirements under the rule for small entities; (3) the use 
of performance, rather than design, standards; and (4) an exemption 
from coverage of the rule, or any part thereof, for small entities.
    39. The Commission has previously concluded that the national 
audience reach cap is intended to promote its public interest goal of 
localism. We seek comment on whether this rule or any modified rule is 
necessary at this time to serve localism and, if not, whether any rule 
is necessary to serve our goals of viewpoint diversity and competition 
in the video marketplace or other goals such as innovation. The NPRM 
seeks comment on the need for, and efficacy of, a national audience 
reach cap and UHF discount or other type of limit in light of 
significant changes in the video marketplace since the Commission last 
reviewed the cap and discount together. Assuming some limit is 
necessary, the NPRM seeks comment on whether the Commission should 
retain or modify the existing audience reach cap and UHF discount; 
retain the audience reach cap but adopt a different weighting 
methodology; adopt a limit based on some other measurement of a station 
group's size or influence, such as actual viewership, market share, or 
advertising revenue; or adopt a more flexible alternative such as a 
threshold screen that would trigger a more detailed analysis, an 
automatic presumption or safe harbor, either in lieu of or in addition 
to a bright line cap. The NPRM invites comment on the effects of any 
proposed rule changes on different types of broadcasters (e.g., 
independent or network-affiliated), the costs and benefits associated 
with any proposals, and any potential to have significant impact on 
small entities. The Commission expects to further consider the economic 
impact on small entities following its review of comments filed in 
response to the NPRM and this IRFA.
    40. Federal Rules that May Duplicate, Overlap, or Conflict With the 
Proposed Rule. None.
    41. Ordering Clauses. Accordingly, it is ordered that, pursuant to 
the authority contained in Sections 1, 2(a), 4(i), 303(r), 307, 309, 
and 310 of the Communications Act of 1934, as amended the NPRM is 
adopted.
    42. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this NPRM, including the Initial Regulatory Flexibility 
Analysis, to the Chief Counsel for Advocacy of the Small Business 
Administration.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 2018-01404 Filed 1-25-18; 8:45 am]
 BILLING CODE 6712-01-P