2018 Quadrennial Regulatory Review-Review of the Commission's Broadcast Ownership Rules
| Published date | 28 February 2019 |
| Citation | 84 FR 6741 |
| Record Number | 2019-03278 |
| Section | Proposed rules |
| Court | Federal Communications Commission |
Federal Register, Volume 84 Issue 40 (Thursday, February 28, 2019)
[Federal Register Volume 84, Number 40 (Thursday, February 28, 2019)]
[Proposed Rules]
[Pages 6741-6757]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-03278]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 73
[MB Docket No. 18-349; FCC 18-179]
2018 Quadrennial Regulatory Review--Review of the Commission's
Broadcast Ownership Rules
AGENCY: Federal Communications Commission.
ACTION: Proposed rule.
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SUMMARY: In this document, the Commission's Notice of Proposed
Rulemaking (NPRM) initiates the 2018 quadrennial review of its media
ownership rules, launched pursuant to a requirement of the
Telecommunications Act of 1996 (1996 Act) that the Commission review
its media ownership rules every four years to determine whether they
remain ``necessary in the public interest as the result of
competition'' and to ``repeal or modify any determine[d] to be no
longer in the public interest.'' The three rules currently subject to
review are the Local Radio Ownership Rule, the Local Television
Ownership Rule, and the Dual Network Rule. The NPRM seeks comment on
whether, given the current state of the media marketplace, the
Commission should retain, modify, or eliminate any of these rules. The
NPRM also seeks comment on several proposals offered as potential pro-
diversity initiatives.
DATES: Comments due April 29, 2019. Reply comments due May 29, 2019.
ADDRESSES: Interested parties may submit comments and replies,
identified by MB Docket No. 18-349, by any of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Federal Communications Commission's website: http://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, Brendan.Holland@fcc.gov (202) 418-2757.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice
of Proposed Rulemaking (NPRM) in MB Docket No. 18-349; FCC 18-179,
adopted on December 12, 2018, and released on December 13, 2018. 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://docs.fcc.gov/public/attachments/FCC-18-179A1.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 fcc504@fcc.gov or call the
FCC's Consumer and Governmental Affairs Bureau at (202) 418-0530
(voice), (202) 418-0432 (TTY).
Synopsis
1. Background. Last year, the Commission completed its prior
combined 2010/2014 review of its media ownership rules by adopting an
Order on Reconsideration (2010/2014 Quadrennial Review Order on
Reconsideration) of its initial Order (2010/2014 Quadrennial Review
Order), a reconsideration that relaxed or eliminated several rules,
including repeal of the previous bans on newspaper/broadcast and radio/
television cross-ownership in a market. In the 2010/2014 Quadrennial
Review Order on Reconsideration the Commission revised the Local
Television Ownership Rule by eliminating the requirement that, in order
to own two stations in a market, eight independent voices must remain
in the market post-transaction, and concluded that it would consider,
on a case-by-case basis, combinations that would otherwise be barred by
the prohibition on ownership of two top-four ranked stations in a
market. In eliminating and revising its rules, the Commission
recognized the dynamic changes in the media marketplace and the wealth
of information sources now available to consumers. The Commission also
found that, while the record in the 2010/2014 Quadrennial Review
supported adoption of an incubator program to foster the entry of new
and diverse voices in the broadcasting industry, the structure and
implementation of such a program required further exploration.
Accordingly, the Commission sought comment on these issues, and on
August 2, 2018, adopted a Report and Order (Incubator Order)
establishing an incubator program to foster new entry into the
broadcasting industry. Under the program, an established broadcaster
(i.e., incubating entity) will provide a new entrant or small
broadcaster (i.e., incubated entity) with training, financing, and
access to resources that would be otherwise inaccessible to these
entities. In return for this support, the incubating entity can receive
a waiver of the applicable Local Radio Ownership Rule that it can use
either in the incubated market or in a comparable market within three
years of the successful conclusion of a qualifying incubation
relationship.
2. Multiple parties sought reconsideration and judicial review of
the Commission's 2010/2014 Quadrennial Review Order, 2010/2014
Quadrennial Review Order on Reconsideration and Incubator Order. The
Third Circuit U.S. Court of Appeals has consolidated the petitions for
judicial review of these Orders and its review is pending.
3. Local Radio Ownership Rule. The rule allows an entity to own:
(1) Up to eight commercial radio stations in radio markets with at
least 45 radio stations, no more than five of which may be in the same
service (AM or FM); (2) up to seven commercial radio stations in radio
markets with 30-44 radio stations, no more than four of which may be in
the same service (AM or FM); (3) up to six commercial radio stations in
radio markets with 15-29 radio stations, no more than four of which may
be in the same service (AM or FM); and (4) up to five commercial radio
stations in radio markets with 14 or fewer radio stations, no more than
three of which may be in the same service (AM or FM), provided that the
entity does not own more than 50 percent of the radio stations in the
market unless the combination comprises not more than one AM and one FM
station. When determining the total number of radio stations within a
[[Page 6742]]
market, only full-power commercial and noncommercial radio stations are
counted for purposes of the rule. Radio markets are defined by Nielsen
Audio where applicable and, in Puerto Rico, the contour-overlap
methodology used in areas outside of defined and rated Nielsen Audio
Metro markets.
4. In the 2010/2014 Quadrennial Review Order, the Commission
concluded that local radio ownership limits promoted competition, a
public interest benefit providing a sufficient basis for retaining a
local radio ownership rule. The Commission affirmed its previous
finding that competitive local radio markets help promote viewpoint
diversity and localism and are consistent with the Commission's goal of
promoting minority and female broadcast station ownership. In the
subsequent 2010/2014 Quadrennial Review Order on Reconsideration, the
Commission adopted a presumption, to be further considered in this 2018
Quadrennial Review, in favor of waiving the Local Radio Ownership Rule
for qualifying radio stations within embedded markets (i.e., smaller
markets, as defined by Nielsen Audio, that are contained within the
boundaries of a larger, parent Nielsen Audio Metro market) where the
parent market currently has multiple embedded markets (i.e., New York
and Washington, DC). Such a waiver would permit the applicant to comply
with ownership limits determined by examining only the embedded market,
and not both the embedded and parent markets. Stations would qualify
for waivers under two conditions: (1) Compliance with the numerical
ownership limits using the Nielsen Audio Metro methodology in each
embedded market, and (2) compliance with the ownership limits using the
contour-overlap methodology applicable to undefined markets in lieu of
the Commission's current parent market analysis.
5. The Commission seeks comment generally on all aspects of the
Local Radio Ownership Rule, including whether the rule remains
necessary in the public interest to promote competition and
specifically, whether there have been any changes in the marketplace
since the 2010/2014 Quadrennial Review that would affect this
determination. The Commission also seeks comment on whether, in today's
radio marketplace, the rule remains necessary to promote other
Commission policy goals such as viewpoint diversity, localism, and
female and minority broadcast ownership. Commenters are asked to
explain in detail and support with evidence their reasons for any
recommended rule changes. If the rule is retained, the Commission will
analyze relevant parts of the rule to examine whether each part remains
necessary in the public interest due to competition or whether it
should be modified or eliminated. Thus, the Commission seeks comment on
each of the specific aspects of the rule's operation, including the
relevant product market, market size tiers, numerical limits, and AM/FM
subcaps, to assess whether these subparts remain necessary or whether
any of all of them should be modified or eliminated. If the rule is
retained but modified, the Commission seeks comment on whether and how
the rule changes should apply to any pending applications. The
Commission also seeks comment on whether to make permanent the interim
contour-overlap methodology used to determine ownership limits in areas
outside the boundaries of defined Nielsen Audio Metro markets, and on
the issue of embedded market transactions.
6. In anticipation of further consideration of the presumption in
favor of waiving the Local Radio Ownership Rule for radio stations
within embedded markets, the National Association of Broadcasters (NAB)
submitted a proposal to, among other things, allow an entity in the top
75 Nielsen Audio Metro markets to own or control up to eight commercial
FM stations and unlimited AM stations in any of those markets. NAB also
proposed that entities in those markets should be permitted to own up
to two additional FM stations if they participated in the Commission's
incubator program. NAB also proposed eliminating all limits on FM and
AM ownership in all other markets. NAB claimed that these rule
relaxations remove constraints on radio broadcasters' ability to
compete on a level playing field in today's digital audio world where,
NAB claimed the Commission cannot ignore, broadcast radio dominance has
declined relative to streaming services such as Pandora and Spotify,
satellite radio, podcasts, Facebook and You Tube, described as
``multiple major sources of competition for both listeners and
advertisers in the audio marketplace.'' Thus, according to NAB, the
more relevant factor for listeners has become where services can be
accessed, which is now the same for radio and other services, rather
than where services are headquartered. NAB added that allowing radio
owners to achieve economies of scale and scope would enable them to
improve their informational and entertainment programming. Other radio
broadcasters similarly claimed that digital competitors such as Google
and Facebook enjoy perceived advantages in ability to target
advertising, do not need to employ local advertising salesforces, and
had therefore captured significant shares of the local advertising
market to the detriment of local broadcast radio. Other parties argued
in opposition to NAB's proposal that allowing radio broadcasters to buy
more stations would not help them compete against internet services
such as Google and Facebook, the size of station portfolios had little
relevance to dollars allocated to free radio, advertisers did not view
radio and internet services as comparable, and radio remains the
preferred audio medium for entertainment and local news.
7. The Commission received many additional comments in response to
a request for updated information on the status of competition in the
marketplace for the delivery of audio programming in seeking to prepare
a biennial marketplace report for Congress, comments which are
incorporated into the record of this 2018 Quadrennial Review. NAB
provided information and statistical data purporting to show how
fragmented the listening market has become, and a coalition of radio
broadcasters claimed that radio listening has shrunk as audiences
divide their time among other audio providers not subject to the same
regulatory burdens as radio broadcasters. Other radio station owners
asserted that the Commission's ownership limits prevent them from
achieving the economies of scale and scope they need to compete with
satellite radio and online audio services. On the other hand,
coalitions representing musicians, recording artists, and
representatives of the music industry argued that AM/FM radio continues
to dominate the audio marketplace and that experience shows that
consolidation in the radio industry harms small broadcasters and leads
to the homogenization of programming.
8. Market Definition. The Commission concluded in the 2010/2014
Quadrennial Review Order that the broadcast radio listening market
remains the relevant product market for purposes of the Local Radio
Ownership Rule and declined to expand its definition of the market to
include non-broadcast audio sources, such as satellite radio and online
audio services. The Commission's based this conclusion on the fact that
broadcast radio stations provide ``free, over-the-air programming
tailored to the needs of the stations' local markets,'' while in
[[Page 6743]]
contrast, satellite radio is a subscription service, online audio
requires an internet connection, and neither typically provides
programming responsive to local needs and interests. Similarly, in
evaluating a broadcast radio merger of Entercom Communications and CBS
in November 2017, the Department of Justice (DOJ) also considered the
radio market, concluding that ``[m]any local and national advertisers
consider English-language broadcast radio to be a particularly
effective or important means to reach their desired customers, and do
not consider advertisements on other media, including non-English-
language broadcast radio, digital music streaming services (such as
Pandora), and television, to be reasonable substitutes.''
9. The Commission now seeks comment on these differing perspectives
of the state of the audio marketplace and on whether and how these
perspectives should affect its understanding of the market for purposes
of the Local Radio Ownership Rule. Should the Commission take DOJ's
finding on the radio market into account and if so, how? Should the
Commission continue to consider only local broadcast radio stations for
purposes of the Local Radio Ownership Rule or should it revise its
market definition to include other audio sources? Do local radio
stations face direct competition today from satellite radio and online
audio services? To what extent has radio's ability to attract listeners
and advertisers been affected by satellite radio and online audio? Do
advertisers view satellite radio and audio streaming services as
substitutes for advertising on broadcast radio? How should the impact
of internet services like Google and Facebook on local advertising
markets factor into our consideration of the Local Radio Ownership
Rule? Do consumers view non-broadcast audio services as meaningful
substitutes for local radio stations? Do non-broadcast audio services
provide programming that responds to the needs and interests of local
markets? Does radio's free, over-the-air availability make it unique or
non-substitutable in the audio marketplace? To what extent, if any,
should the Commission consider the deployment of In Band on Channel
digital radio technology and its role in enabling station owners to
expand their program offerings and increase their economies of scale
and scope? If the Commission were to revise its market definition, what
non-broadcast sources should it include, and how should it count them
or otherwise factor them into its rule for purposes of determining
market size tiers and numerical limits? Could or should the Commission
subtract from any consideration of non-broadcast sources the amount of
online audio that listeners in a local market stream from over-the-air
radio broadcasts? How would an expanded definition better serve
Commission policy goals, if at all?
10. Market Size Tiers. In the 2010/2014 Quadrennial Review Order,
the Commission retained the Local Radio Ownership Rule's longstanding
approach of imposing numerical ownership limits based on market size
tiers and determining market size by counting the number of commercial
and noncommercial radio stations within the market. The Commission
declined to change the rule to treat embedded markets as separate
markets. In addition, the Commission kept in place the demarcations of
the four tiers set by Congress in 1996, which draw the lines among
Nielsen Audio Metro markets at 45 plus, 30-44, 15-29, and 14 or fewer
radio stations, including noncommercial stations. The Commission seeks
comment on whether it should retain this approach of using market size
tiers, and if it does so, whether the current demarcations should
remain. Is there any reason to discontinue including noncommercial
radio stations in market counts? How well has the rule's tiered
structure served the rule's purposes, and does it promote the policy
goals of competition, localism, and viewpoint diversity in today's
radio marketplace? NAB's proposal would divide radio markets into only
two tiers--the top 75 Nielsen Audio Metro markets and all other markets
(i.e., Nielsen Audio Metro markets outside of the top 75 and all
undefined markets). What would be the advantages and disadvantages of
creating a different number of tiers, including moving from a four-
tiered to a two-tiered approach? If the Commission were to collapse
four tiers into two, should it draw the line where NAB proposes?
Commenters are invited to offer alternative proposals for a tiered
approach or for a different type of approach altogether. For example,
if the Commission changed from tiers based on station counts, should it
consider tiers based on advertising revenue, or some other factor,
rather than using Nielsen's Audio Metro market rankings as NAB
proposes, which are based on population? Would advertising revenue
provide a sufficiently stable measurement and how would such a
measurement fit with defining the relevant product market as the
broadcast radio listening market? How would the Commission and
potential applicants obtain reliable advertising revenue data for all
radio stations? Should the Commission factor non-broadcast audio
sources in any tiered approach, and if so, how should it do so? For
example: (1) If the Commission modifies its current tiers or creates
new tiers, should it account for variations across markets in broadband
access and adoption rates; (2) should the Commission treat fixed and
mobile or wired and wireless broadband the same; and (3) how granularly
can and should the Commission measure listening rates for satellite
radio and online audio services?
11. In addition, should any modifications to the current tiered
approach affect how the Commission applies the rule to areas outside
the boundaries of defined Nielsen Audio Metro markets, and if so, how?
NAB proposes removing all radio ownership limits for undefined areas.
Would NAB's proposal be consistent with Commission policy goals or
would it lead to excessive consolidation in those outside areas, and
what alternative approach could the Commission take in areas of the
country that are undefined by Nielsen Audio? Further, the contour-
overlap methodology has been successfully applied on an interim basis
to undefined markets for years and the Commission previously rejected
arguments that it permitted too much consolidation in certain markets.
Is this approach the most effective and practical for determining
ownership limits in areas outside defined Nielsen Audio Metro markets
and should the Commission therefore make it permanent? Any commenters
opposed to adopting the contour-overlap methodology on a permanent
basis should explain their reasoning and propose a detailed alternative
supported by evidence.
12. Numerical Limits. In the 2010/2014 Quadrennial Review Order,
the Commission declined to relax or tighten the numerical limits
restricting the number of radio stations an entity may own within a
radio market. The Commission seeks comment on whether it is necessary
as a result of competition to maintain the numerical limits for any or
all of the market size tiers. If the Commission retains existing market
tiers, are existing limits restricting the number of radio stations an
entity may own within a radio market set appropriately for each of the
market size tiers? Do the current limits adequately prevent a radio
broadcaster from amassing excessive local market power? Conversely, do
they permit sufficient growth to enable radio broadcasters to
[[Page 6744]]
obtain the additional assets they may need to improve the quality of
their service? Commenters should provide concrete, actual examples of
markets where the current limits are either too restrictive or too
lenient, explain how those examples typify other markets in that tier,
and specify the benefits to those markets that would be gained by
revising the limits.
13. The Commission also seeks comment on whether it should account
for the different signal strengths of radio stations by weighing
different classes of radio stations differently for purposes of
applying the numerical limits. For example, the Commission could
consider a Class A AM station to be worth two stations, whereas a Class
D AM station could be counted as one half a station. What would be the
costs and benefits of such an approach? What values should be accorded
to the different classes of radio stations if the Commission adopts
such an approach? The Commission previously considered a proposal to
assign different values to radio stations of different classes for
purposes of determining market size tiers and seeks comment on
assigning varying weights to different classes of radio stations when
applying the numerical limits.
14. In addition, the Commission seeks comment on NAB's proposal to
maintain the eight-station limit for the top 75 Nielsen Audio Metro
markets but to apply it only to FM stations, thereby allowing unlimited
AM ownership. NAB further proposes allowing an owner in the top 75
Nielson Audio Metro markets to acquire up to two additional FM stations
if it participates in (and, the Commission assumes, successfully
completes) the incubator program. For all other markets, NAB urges the
elimination of numerical limits for both FM and AM services. The
Commission seeks comment on all aspects of NAB's proposed changes to
the numerical limits and invites alternative proposals. What would be
the likely effects of removing FM limits in most markets? What would be
the likely effects of allowing unlimited AM ownership across all
markets? Would such actions, on balance, promote competition by
enabling owners to increase their assets, or would they harm
competition and/or ownership diversity by driving smaller broadcasters,
including minority and women owners, from the marketplace? How would
viewpoint diversity and localism be affected? The Incubator Order
rewards successful incubation of a radio station with one waiver per
market to exceed the applicable ownership limit by one station and
allows participants to use no more than one reward waiver per market.
NAB submitted its proposal to maintain the eight-station limit for the
top 75 Nielsen Audio Metro markets before the Commission adopted the
Incubator Order, so it is unclear whether NAB is suggesting that
successful incubation of one station should result in a waiver for two
stations or successful incubation of two stations should entitle an
owner to acquire two stations above the limit within the same market.
The Commission seeks comment on both possible interpretations.
15. AM/FM Subcaps. In the 2010/2014 Quadrennial Review Order, the
Commission retained the Local Radio Ownership Rule's AM/FM subcaps,
which prevent a broadcaster from owning more than five AM or five FM
stations in markets in the largest market tier, four AM or four FM
stations in markets in the two middle-sized tiers, or three AM or three
FM stations in markets in the smallest tier. The Commission seeks
comment on whether the AM/FM subcaps remain necessary and whether its
previous reasons for maintaining subcaps are still valid. For example,
have subcaps promoted market entry? Are subcaps still necessary given
the Commission's efforts to revitalize AM radio or has the disparity
between the FM and AM services been narrowed to an extent that the
subcaps could be relaxed or eliminated? Since its 2010/2014 Quadrennial
Review, the Commission has granted over 1,000 applications to acquire
and relocate FM translators to rebroadcast AM stations. Should the
expanded and improved coverage of those AM stations affect the analysis
of subcaps? Conversely, data from the 2010/2014 Quadrennial Review
indicated that the transition to digital radio actually exacerbated the
divide between the services because AM stations have been slower to
adopt digital radio technology. What is the import of the current
status of the digital radio transition for evaluating the subcaps? If
subcaps continue to promote competition or ownership diversity, or
otherwise serve the public interest, are they currently set at the
appropriate levels?
16. If the Commission revises the Local Radio Ownership Rule,
should the modified rule include AM or FM subcaps, and if so, how
should they be applied? NAB's proposal essentially would eliminate AM
subcaps in all markets and retain FM subcaps in only the top 75
markets. NAB does not explain why it would distinguish the FM service
for restricted ownership in the top markets rather than limit the total
number of radio stations in those markets regardless of service, and
the Commission seeks comment on whether the proposal is supported by
technical or marketplace differences between the services. In a letter
filed shortly after NAB submitted its proposal, the owner of a network
of AM stations argued that removing and/or relaxing FM subcaps would
harm the AM service by facilitating the migration of content to the FM
service. Concurring with that view, iHeartMedia urges the Commission to
loosen restrictions on AM ownership while retaining the existing FM
subcaps, arguing that doing so would be consistent with the
Commission's efforts to revitalize AM radio. Considering these
competing positions, the Commission seeks comment on what limits, if
any, should apply to AM and FM ownership, whether to retain the current
market size tiers and numerical limits, and on whether and how any
proposed revisions to the Local Radio Ownership Rule should include
such limits.
17. Embedded Markets. Owners of radio stations in embedded markets
within a parent market, which currently exist only in New York and
Washington, DC, must comply with the Local Radio Ownership Rule's
numerical limits for both the embedded market and the parent market. In
response to the 2010/2014 Quadrennial Review Further Notice of Proposed
Rulemaking (FNPRM), Connoisseur Media argued that because radio
stations within different embedded markets within a parent market have
little or no contour overlap and may reach different populations, the
Commission's analysis of a proposed acquisition in one embedded market
should not include stations owned in the other embedded markets within
the same parent market. In the 2010/2014 Quadrennial Review Order on
Reconsideration, the Commission declined to adopt an across-the-board
change to its embedded market methodology, but adopted a waiver
standard whereby embedded market transactions in markets with multiple
embedded markets would be presumed to be in the public interest if they
met a two-prong test proposed by Connoisseur: (1) As with the
Commission's current methodology for embedded markets, a radio station
owner seeking a rule waiver must comply with the applicable numerical
ownership limit in each embedded market using the Nielsen Audio Metro
methodology; and (2) instead of then also demonstrating compliance with
the applicable numerical ownership limit based on the Commission's
parent
[[Page 6745]]
market analysis, the applicant must show that it also complies with the
ownership limits as determined by the contour-overlap methodology
ordinarily applicable in undefined markets. The Commission adopted this
presumptive waiver standard on an interim basis pending the outcome of
this 2018 Quadrennial Review proceeding.
18. Accordingly, the Commission seeks comment on how to address the
issue of embedded market transactions. If the Commission retains a
Local Radio Ownership Rule, how should it apply going forward to radios
station in markets that contain multiple embedded markets, currently
New York and Washington, DC? Should the presumptive waiver standard
become permanent? Should it be modified in any way? Should it apply to
all current and future markets that contain multiple embedded markets,
or should its application be limited to the two existing parent markets
with multiple embedded markets? How do competition, diversity, and
localism considerations affect the question? Embedded market
designations can be updated and modified by Nielsen Audio as market
conditions change, and Nielsen Audio's radio station customers can
request the designation of a new embedded market. How could the
Commission guard against purchasers taking advantage of an anticipated
designation of a new embedded market in a manner that would thwart the
purpose of the current ownership limits? For example, in the event that
Nielsen Audio creates new, additional situations with multiple embedded
markets within a larger parent market, should there be a waiting period
before applicants can take advantage of that change in circumstance,
similar to the waiting period applicable to changes in the stations
reported as ``home'' to a Nielsen Audio Metro market? If the Commission
adopts any change to its approach to embedded markets, should the
change also apply to markets with a single embedded market? Is there a
distinction between markets with one embedded market and markets with
multiple embedded markets such that the Commission should vary its
approach between those situations?
19. In the 2010/2014 Quadrennial Review Order on Reconsideration,
the Commission expressed its intent to consider in this 2018
Quadrennial Review an alternate NAB proposal that stations licensed in
embedded markets with signal coverage of less than 50 percent of the
parent market's population not be considered part of the parent market
for purposes of local ownership limit compliance calculations. The
Commission seeks comment on whether it should adopt such an approach or
any other across-the-board rule changes regarding embedded markets. Is
there a need to implement a rule change that carves out a blanket
exception to the current methodology given that there are only two
parent markets containing multiple embedded markets? Or is a permanent
presumptive waiver standard an adequate solution given how narrow its
use is likely to be? The Commission seeks comment on the potential
advantages and disadvantages of these various approaches and invites
proposals for other ways to address embedded market transactions.
20. Minority and Female Ownership. In the 2010/2014 Quadrennial
Review Order, the Commission found the current Local Radio Ownership
Rule to be consistent with its goal of promoting minority and female
ownership of broadcast radio stations, observing that the rule, while
competition-based, indirectly promotes viewpoint diversity by
facilitating ``the presence of independently owned broadcast radio
stations in the local market, thereby increasing the likelihood of a
variety of viewpoints and preserving ownership opportunities for new
entrants.'' It pointed to AM subcaps in particular as elements of the
rule that foster new entry. Because available data did not show that
stricter limits would increase minority and female radio ownership,
however, the Commission chose not to tighten the rule. Similarly, the
Commission found no indication of a causal link between Congress'
loosening of local radio limits in 1996 and the increase in ownership
diversity since then that would justify loosening the rules. The
Commission seeks comment on whether any new information has become
available that would cause us to reevaluate these conclusions. The
Commission also seeks comment on how retaining or modifying the Local
Radio Ownership Rule might affect broadcast radio ownership and entry
by small business owners, if at all.
21. Local Television Ownership Rule. The Local Television Ownership
Rule allows an entity to own up to two television stations in the same
Nielsen Designated Market Area (DMA) (a group of counties forming an
exclusive geographic area to which the Nielsen Company assigns each
broadcast television station) if: (1) The digital noise limited service
contours (NLSCs) of the stations (as determined by Sec. 73.622(e) of
the Commission's rules) do not overlap; or (2) 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. With respect to the
latter provision--the Top-Four Prohibition--an applicant may request
that the Commission examine the facts and circumstances in a market
regarding a particular transaction and, based on the showing made by
the applicant in a particular case, make a finding that permitting an
entity to directly or indirectly own, operate, or control two top-four
television stations licensed in the same DMA would serve the public
interest, convenience, and necessity. The Commission considers 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.
22. The Commission found in the 2018 Quadrennial Review Order on
Reconsideration that local television ownership limits remained
necessary to promote competition among broadcast stations in local
television markets, finding that such competition leads stations to
invest in better and more locally tailored programming and to compete
for advertising revenue and retransmission consent fees. The Commission
also determined, however, that the existing rule required modification
to ensure that television broadcasters could achieve efficiencies to
make such improvements in an evolving video marketplace. The Commission
therefore repealed the provision of the previous rule requiring at
least eight independently owned television stations to remain in a DMA
after any station acquisition in the DMA, finding that this Eight-
Voices test was unsupported by the record or reasoned analysis and was
no longer necessary in the public interest. The Commission also added
flexibility to the application of the Top-Four Prohibition by adopting
the case-by-case analysis mentioned above.
23. First, the Commission seeks comment on whether the current
version of the Local Television Ownership Rule is necessary in the
public interest as a result of competition. In earlier media ownership
reviews, broadcasters argued that local television ownership
restrictions prevent them from competing effectively, while other
commenters supported retention of limits based on the need to prevent
excessive consolidation of television stations due to the unique nature
of their free, over-
[[Page 6746]]
the-air programming provided on spectrum licensed for public benefit.
The Commission seeks comment on how developments in the video
programming industry since the last quadrennial review have affected
whether the Local Television Ownership Rule is necessary as a result of
competition and to promote localism and viewpoint diversity among local
broadcast television stations. The Commission seeks comment on whether
promoting competition among television stations in local viewing
markets continues to be the proper framework within which to consider
the rule, and if so, what forms of competition it should take into
account under such a framework. For instance, how, if at all, should
the Commission consider competition among television stations for
viewers, advertisers, retransmission consent fees, network affiliation,
the provision of local news or other programming, the production or
acquisition of programming, innovation, or any other form of
competition?
24. The Commission also seeks comment on whether the Local
Television Ownership Rule is necessary to promote localism or viewpoint
diversity. The Commission has previously stated that a competition-
based rule, while not designed specifically to promote localism or
viewpoint diversity, may still have such an effect. Has the prior
reliance on competition as the primary policy goal of the Local
Television Ownership Rule also served as a proxy for preserving a
certain level of localism or viewpoint diversity in local television
markets that might otherwise be lost were we to find the rule no longer
necessary for competition purposes?
25. The Commission seeks comment on whether a competition-based
Local Television Ownership Rule promotes the production or provision of
local programming. Localism has been a cornerstone of the Commission's
broadcast regulation for decades, with the Commission finding that
broadcast licensees have an obligation to air programming that is
responsive to the needs and interests of their communities of license.
Does promoting competition among broadcast stations incentivize
stations to produce and improve local programming? Could or does
competition from non-broadcast video sources, which have no local
programming requirements, create the same incentives to produce and
improve local programming?
26. If the Commission decides to retain the Local Television
Ownership Rule, it will analyze the relevant parts of the rule to
examine whether each particular provision similarly remains necessary
in the public interest as a result of competition or whether it should
be modified or eliminated. Thus, the Commission seeks comment on
specific aspects of the rule's operation, including the relevant
product market, numerical limits, and the Top-Four Prohibition, to
assess whether these subparts remain necessary or whether any or all of
them should be modified or eliminated. The Commission also asks whether
developments in the video programming industry involving multicasting,
satellite stations, low power stations, and the next generation
transmission standard have any implications on the Local Television
Ownership Rule or its subparts.
27. Market Definition. In the 2010/2014 Quadrennial Review Order on
Reconsideration, the Commission found that a rule to preserve
competition among local broadcast television stations was still
warranted, but also noted that it was not free to retain the rule
without adjustments to account for marketplace changes outside the
local broadcast television market. The Commission also found that non-
broadcast video offerings do not serve as meaningful substitutes for
local broadcast television, and noted that video programming delivered
by multichannel video programming distributors (MVPDs) is generally
uniform across all markets, as is programming provided by online video
distributors (OVDs). The Commission stated that unlike local broadcast
stations, MVPDs and OVDs were not likely to make programming decisions
based on conditions or preferences in local markets, but indicated that
this conclusion could change in a future proceeding with a different
record.
28. The Commission now seeks comment on relevant marketplace
changes and whether and how it should take such changes into account.
The Commission seeks comment on the appropriate product market for
reviewing the Local Television Ownership Rule, including whether to
include more than broadcast video programming and what market
participants to consider. In light of the evolving video marketplace,
the Commission also seeks comment on its prior findings in the 2010/
2014 Quadrennial Review Order, and whether and to what extent non-
broadcast sources of video programming should be considered competitors
to broadcast television stations. Do consumers consider broadcast
television to be interchangeable with other sources of programming? If
so, what other sources of video programming should be included in the
analysis of a local product market? What factors should the Commission
consider in analyzing non-broadcast sources of video programming?
Should the Commission distinguish between linear (scheduled) and non-
linear (i.e., video-on-demand) distributors of video? In which product
markets, if any, do non-broadcast video programmers compete with
broadcast television programmers? Does broadcast television offer any
programming for which there is no substitute available from non-
broadcast video programmers? Based on Nielsen and NAB data, the
Commission noted in the Eighteenth Video Competition Report the
increasing number of households relying on broadcast rather than MVPD
service. To what extent do consumers rely on broadcast television as
their primary, or only, source of video programming? The Commission
previously noted that broadband penetration is relevant when
considering whether on-line platforms are meaningful substitutes for
local broadcast. Is the availability of non-broadcast video comparable
to that of broadcast television? Do viewers rely on or consume
programming from local broadcast stations in a manner different from
other sources of, potentially, non-local video programming? In
addition, do any non-broadcast video programmers make programming
decisions based on local markets or the actions of individual local
television stations (i.e., a cable operator deciding to carry local
sporting events not covered by the local broadcaster)?
29. The Commission also found in the 2010/2014 Quadrennial Review
Order that arguments by broadcasters that advertisers no longer
distinguish between local broadcast television and non-broadcast video
programming when deciding how to spend on local advertising were not
supported by the record. Thus, the Commission seeks comment on whether
and to what extent non-broadcast sources of video programming should be
considered competitors to broadcast television stations. The Commission
also asks how advertisers select between local broadcast and non-
broadcast sources of programming and seeks studies and data that it can
use to assess substitutability in local advertising among all sources
of video in a DMA. The Commission seeks comment and new data about
whether and how various video programming providers compete for local
advertising revenue.
30. Given the Commission's prior findings in the 2010/2014 Biennial
Review Order that competition within local markets can produce better
[[Page 6747]]
programming and programming tailored to local needs and interests from
which viewers benefit, the Commission seeks comment on whether, in
evaluating the Local Television Ownership Rule, it should consider
sources of local news and other local programming as a relevant product
market. What are the most prominent sources of local news and local
programming beyond broadcast television? Should non-video providers of
news and information--such as radio, newspapers, internet websites, and
social media platforms--be examined in the product market analysis? To
what extent do potential viewers rely for local news on these
alternative sources? Given Knight Foundation reports that online-only
local news websites have limited impact, are these sources originators
of local programming, or do they simply aggregate or utilize content
generated by traditional local news sources? Are non-broadcast sources
of local programming available in all DMAs or are they just in major
markets? Is the depth of any coverage of local issues by non-broadcast
platforms consistent across DMAs? The Commission seeks comment on the
availability and variety of local video programming in each Nielsen DMA
and on how the Commission would, and if it should, evaluate local
programming for purposes of any programming-based analysis. The
Commission seeks comment on whether defining the local product market
for our television ownership rules to include specific types of
programming would raise First Amendment concerns.
31. What measures could the Commission use to assess competition
among sources of local video programming or other local content? What
data sources might the Commission use to determine which sources
consumers consider substitutes? Given the lack of a single, accepted,
industry-wide standard for measuring online viewership, how should the
Commission account for various providers of news, information, and
video programming to the extent that some entities, such as OVDs and
websites, may lack an industry standard for measuring viewership and
engagement?
32. The Commission also seeks comment on the relationship between
its local television ownership market definition and any changes
thereto, and the market definition and analysis used by DOJ, which
examines local television broadcasters competing in the spot
advertising market. The Commission stated in the 2010/2014 Quadrennial
Review Order that its market definition when evaluating broadcast
television mergers is like DOJ's in that the scope of the Commission's
rule is similarly limited to local television broadcast stations. DOJ's
analysis, however, has historically focused on competition for
advertising, whereas the Commission's analysis focuses on multiple
factors, including audience share. Recently in evaluating the
combination of Nexstar and Media General, DOJ also looked at
competition for retransmission consent licensing fees in local
television markets. The Commission seeks comment on whether and how
DOJ's analytical framework should inform its own, and vice versa. Are
there ways in which the Commission's current rule is either consistent
or inconsistent with antitrust principles? Do other public interest
considerations support the rule?
33. Numerical Limit. Currently, a broadcast licensee can own up to
two television stations (a duopoly) in a DMA, subject to the
requirements of the Local Television Ownership Rule. In the 2010/2014
Quadrennial Review Order, the Commission concluded that changes in the
local television market demonstrated by the record were insufficient to
justify either tightening or loosening this numerical limit. The
Commission therefore seeks comment on whether subsequent changes in the
video programming industry now support changes to the numerical limit.
If the Commission finds that retaining a local television rule remains
in the public interest, should it change the numerical limit on how
many stations may be owned in a DMA?
34. Top-Four Prohibition. The Commission found in the 2010/2014
Quadrennial Review Order that ratings data supported the Local
Television Ownership Rule's focus on the top-four rated full power
television stations in a market, that there typically remained a
significant ``cushion'' of audience share points that separated the
top-four stations in a market from the fifth-ranked station and below,
and that the record supported potential harms associated with top-four
combinations. The Commission seeks comment on the applicability of
these previous conclusions based on new, updated ratings data and/or
examples of existing commonly owned top-four station combinations. If
the Commission retains a local television ownership rule, should the
top four prohibition be retained or modified?
35. In the 2010/2014 Quadrennial Review Order on Reconsideration,
the Commission recognized that rigid application of the Top-Four
Prohibition in all DMAs may not be supported by the unique conditions
present in certain DMAs or with respect to certain transactions, and
accordingly adopted a hybrid approach to allow applicants to seek a
case-by-case examination of a proposed combination that would otherwise
be prohibited by the Top-Four Prohibition. The Commission stated that
the types of information applicants could provide on competition in the
local market in such examinations included: (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.
36. The Commission asks whether flexibility in applying the Top-
Four prohibition remains necessary and, if so, whether the case-by-case
approach is the most effective way to achieve it. If the Commission
finds that a case-by-case analysis is the best approach, do the types
of information listed in the 2010/2014 Quadrennial Review Order on
Reconsideration serve as reliable factors in determining whether a top-
four combination would serve the public interest? If so, should some
factors be weighed more heavily than others in the analysis? Are there
factors in addition to the examples provided in the 2010/2014
Quadrennial Review Order on Reconsideration that the Commission should
consider? What kinds of data should licensees provide to support their
showings? Should the Commission adopt a more rigid set of criteria for
its case-by-case determination?
37. Alternatively, should the Commission avoid a case-by-case or
hybrid approach and establish a bright-line test that would permit
common ownership of two top-four stations in all cases, or in
particular markets or circumstances? For example, should the Commission
permit common ownership of the fourth-ranked station in a market and
either the second-ranked station or third-ranked station in that same
market? Should the Commission allow combinations between the second-
ranked station or third-ranked station in the same market? Should such
combinations only be permitted in
[[Page 6748]]
smaller markets where there is less advertising revenue available to
support programming and station operations? The Commission also seeks
comment on whether it should create a presumption for permitting common
ownership of two top-four stations if certain conditions are met. What
conditions should the Commission consider in determining if a
combination would not negatively impact competition? For example,
should the Commission presume that a combination is permissible if the
combined stations' share of the audience and/or advertising market
share does not exceed a certain threshold?
38. If the Commission either retains the case-by-case approach or
adopts a bright-line test, it seeks comment on how to analyze
competition in local television markets. In considering the effect of
top-four combinations on local advertising markets, the Commission
seeks studies that estimate the elasticity of demand for local
advertising. In the absence of such studies, what data sources or types
of data might the Commission use to assess substitutability in local
advertising across dayparts, program types, and stations? What
measures, in addition to viewership share, could be used to assess
competition between stations in local programming? What data sources
might we use to determine which programs or stations viewers consider
substitutes?
39. A top-four combination may have different effects on
competition among broadcast stations for viewers of different types of
programming, for instance, local programming, network programming, and
syndicated programming. Should the Commission weigh each competitive
effect and, if so, how? If the Commission considers specific categories
of programming, should it look at the viewership of each type of
programming, the amount of revenue generated for the local station by
each type of programming, both, or something else? Top-four
combinations may also affect the quantity or quality of local
programming available in the market. Although intended primarily to
promote competition, does the Top-Four Prohibition also preserve, as a
byproduct, a sufficient level of localism or viewpoint diversity in
local markets? The Commission seeks comment on whether and how it
should consider elimination of an independent local news operation or a
reduction in local news programming.
40. The Commission also seeks comment on whether and how it should
weigh any effect on retransmission consent negotiations in evaluating
competitive effects under the Commission's case-by-case approach to
evaluating top-four station combinations. Commenters in proceedings
involving potential top-four station combinations consistently have
raised the issue of potential retransmission consent fee increases
because of reduced competition between stations and undue bargaining
leverage for stations if commonly owned top-four stations are able to
negotiate such fees jointly as a result of the combination. In its
Nexstar-Media General review, DOJ also recognized that common ownership
of two major broadcast network affiliates can lead to diminished
competition in the negotiation of retransmission agreements with MVPDs
in local television markets. The Commission therefore seeks comment on
whether and how it should weigh the effect on retransmission consent
negotiations in evaluating top-four station combinations under its
case-by-case approach. Should the Commission maintain the Top-Four
Prohibition for purposes of preventing any potential competitive harms
caused by joint negotiation of retransmission consent fees by two
commonly owned top-four stations in a DMA, and would such an approach
be inconsistent with congressional intent in prohibiting joint
negotiation only when conducted by non-commonly owned stations in the
STELA Reauthorization Act of 2014?
41. If the Commission keeps the Top-Four Prohibition or a similar
rule that relies on the ranking of stations by audience share or
viewership, should any specific provisions of the rule be modified? The
rule currently determines a station's in-market ranking based on the
most recent all-day (9 a.m.-midnight) audience share, as measured by
Nielsen Media Research. The Commission seeks comment on whether this
data point is still the most useful for accurately determining a
station's ranking for purposes of the Top-Four Prohibition. Have there
been changes in the industry that necessitate examining different data?
The Commission also seeks comment on whether and how it should account
for instances where a station makes use of multicast streams, satellite
stations, or translators. Should the ratings of these stations or
streams be combined with the ratings of the primary station or stream
to determine the station's ratings in the DMA? Why or why not? Lastly,
based on Commission staff review of Nielsen data, there are instances
where noncommercial television stations have audience shares comparable
to those of commercial stations. Should the Commission distinguish
between commercial and noncommercial stations for purposes of the Top-
Four Prohibition? Why or why not?
42. The Commission seeks comment on whether to provide
clarification of the phrase ``at the time the application to acquire or
construct the station(s) is filed.'' Should entities filing an
application submit as support audience share data for the most recent
month, week, or sweeps period in relation to the date when the
application was submitted to the Commission? Should the time frame for
the submitted data be required to show a longer period? For example,
should the Commission require applicants to submit ratings data over a
three-year period to demonstrate that a station truly is or is not
ranked among the top-four stations in the DMA ``at the time the
application to acquire or construct the station(s) is filed'' as
suggested in the 2010/2014 Quadrennial Review Order on Reconsideration?
If not, should the Commission take another approach to prevent
circumvention of the Top-Four Prohibition's requirements based on
anomalous data? Should it rely on the most recent period solely as a
presumption, which might be rebutted by interested parties?
43. Given the longstanding nature of the Top-Four Prohibition, much
of the discussion in this section focuses on the continued
applicability of that rule and ways that it might be adjusted or
clarified to apply in the current video marketplace. The Commission
also seeks comment on alternatives to the Top-Four Prohibition. Should
common ownership of two stations in a market be permitted when at least
one of the stations is not ranked among the top-three stations in the
market, or among the top-two? What economic data support establishing
such a top-three approach, considering the significant differences in
national audience share between the top-four national networks and
others? Should the Commission distinguish between stations located in
larger Nielsen DMAs and those in mid- to small-sized DMAs by adopting a
tiered approach to application of any ranking-based prohibition? Should
common ownership be permitted when there is a certain number of non-
broadcast local video programing sources in a DMA? The Commission seeks
comment on how these and any other proposals supported by the record
would promote and protect competition in local television markets.
44. Multicasting. As a result of the digital television transition,
all full-power television stations have the ability to use their
available spectrum to
[[Page 6749]]
broadcast not only their main program stream but also, if they choose,
additional program streams--an activity commonly referred to as
multicasting. In the 2010/2014 Quadrennial Review Order the Commission
distinguished between the ability to multicast and ownership of a
separate broadcast station and declined to impose restrictions on local
television station ownership based on the ability to multicast. Because
the record indicated that dual affiliations involving two Big Four
networks (ABC, CBS, Fox, and NBC) via multicasting were generally
limited to smaller markets where there was an insufficient number of
full-power commercial television stations to accommodate each Big Four
network or where other unique marketplace factors led to creating the
dual affiliation, the Commission declined to regulate dual affiliations
through multicasting, even in instances where a licensee is affiliated
with more than one of the Big Four networks. The Commission stated,
however, that it would continue to monitor this issue and act in the
future, if appropriate.
45. The Commission now seeks comment on how technical and other
developments in the broadcast industry have affected multicasting. Are
some multicast streams functioning as the equivalent of separate
broadcast stations? Multicasting has enabled broadcasters to bring more
programming to consumers, particularly in smaller, rural markets, by
expanding the availability of the four major networks and newer
networks. Based on Commission staff review of Nielsen data, there are
at least several dozen DMAs where a single entity holds affiliations
with two Big Four networks by using a multicast stream to carry the
second signal. Thus, the Commission seeks comment on the
characteristics of DMAs where major network affiliations are carried on
multicast streams. Are there certain markets where this practice is
more commonplace? Do dual affiliations with major networks remains
limited to smaller markets or has the practice become more widespread?
The Commission asks whether and how it should evaluate multicast
streams for purposes of the Local Television Ownership Rule.
46. Satellite Stations. Television satellite stations are full-
power broadcast stations authorized under Part 73 of the Commission's
rules that generally retransmit some or all of the programming of
another television station, known as the parent station, which
typically is commonly owned or operated with the satellite station.
Satellite stations are exempt from the Local Television Ownership Rule,
and the Commission seeks comment on their use to carry two Big Four
networks in a market. For instance, how should the Commission treat a
situation in which a licensee utilizes multicasting to air two Big Four
networks on a parent station (e.g., one on the primary stream and one
on a multicast stream), and airs the same two Big Four networks on a
satellite station? How prevalent is this practice, and is it consistent
with the purposes behind allowing satellite stations in the first
place, which are generally intended to bring over-the-air television
service to unserved areas? Are there benefits to allowing this practice
that outweigh any potential harms? The Commission seeks comment on
whether this issue should be addressed through modification of the
satellite exemption to the Local Television Ownership Rule or,
alternatively, in the context of the satellite authorization process.
47. Low Power Television Stations. Changes in industry practice and
technological advances may have extended the reach and enhanced the
capabilities of low power and translator television broadcast stations
that are currently exempt from local television ownership limits. Based
on a review of Nielsen data by Commission staff, there are a
significant number of low power stations affiliated with a Big Four
network. Because of this affiliation, MVPDs are likely willing to carry
the low power stations, which qualify for must-carry on cable systems
under very limited circumstances, despite their status. If low power
stations can in this way become the functional equivalent of full power
stations in certain instances, should the Commission account for the
number of low power television stations as part of its Local Television
Ownership Rule in some way, and if so, how? For instance, should a low
power station that is ranked among the top four stations in audience
share in a DMA be counted as a top-four station for purposes of the
Top-Four Prohibition?
48. Next Generation Broadcast Television Transmission Standard.
Currently, the broadcast television industry is developing a new
transmission standard called Advanced Television Systems Committee
(ATSC) 3.0 with the intent of merging the capabilities of over-the-air
broadcasting with the broadband viewing and information delivery
methods of the internet, using the same 6 MHz channels presently
allocated for DTV service. According to ATSC 3.0 advocates, the new
standard has the potential to improve broadcast signal reception
greatly, particularly on mobile devices and television receivers
without outdoor antennas. ATSC 3.0 will enable broadcasters to offer
enhanced and innovative new features to consumers, including Ultra High
Definition (UHD) picture and immersive audio, more localized
programming content, an advanced emergency alert system (EAS) capable
of waking up sleeping devices to warn consumers of imminent
emergencies, better accessibility options, and interactive services.
49. The Commission seeks comment on the implications, if any, of
the new broadcast television transmission standard on the Local
Television Ownership Rule. The Commission also seeks comment on whether
any provisions of the Local Television Ownership Rule potentially could
affect adoption and deployment of the new transmission standard. How,
if at all, should the Commission in the context of local television
ownership consider the decisions of television broadcasters to adopt
voluntarily the ATSC 3.0 transmission standard?
50. Broadcast Spectrum Auction. In the 2010/2014 Quadrennial Review
Order, the Commission stated that it could not yet determine how the
incentive auction would affect the Local Television Ownership Rule. On
April 13, 2017, the Commission released a public notice announcing the
results of the reverse and forward auctions and the repacking of the
broadcast television spectrum. Pursuant to the statute authorizing the
incentive auction, that public notice marked the auction's completion
and the start of the 39-month post-auction transition period. Given
completion of the auction and the subsequent surrender of spectrum and/
or initiation of channel-sharing agreements, the Commission seeks
comment on whether the auction's effects on local television ownership
have any implication on retention or modification of the Local
Television Ownership Rule.
51. Shared Service Agreements. In the 2010/2014 Quadrennial Review
Order, the Commission adopted a definition of shared service agreements
(SSAs) and, despite opposition from broadcasters, a requirement that
commercial television stations disclose SSAs by placing them in their
online public inspection files. The Commission also found it lacked
knowledge about the content, scope, and prevalence of SSAs that kept it
from evaluating the impact of these agreements, if any, on its policy
goals with respect to broadcast ownership. The 2010/2014 Quadrennial
Review Order on Reconsideration upheld the disclosure requirement,
which took effect on March 23, 2018. The Commission now seeks comment
on
[[Page 6750]]
what action, if any, it should take on SSAs in the context of this 2018
review of the Local Television Ownership Rule. Should the Commission
retain or eliminate the SSA filing requirement? What, if anything, have
commenters learned from filing the agreements so far?
52. Minority and Female Ownership. The Commission stated in the
2010/2014 Quadrennial Order that, while the Local Television Ownership
Rule promotes competition among broadcast television stations in local
markets and is not meant to preserve or create specific amounts of
minority and female ownership, the rule nevertheless promotes
opportunities for diversity in local television ownership. The
Commission concluded that the competition-based rule helps to ensure
the presence of independently owned broadcast television stations in
the local market, thereby indirectly increasing the likelihood of a
variety of viewpoints and preserving ownership opportunities for new
entrants. The record held no data indicating that the duopoly rule has
reduced minority ownership or suggested that a return to the single
station per licensee rule would increase ownership opportunities for
minorities and women. While the data did indicate an increase in
minority ownership following relaxation of the Local Television
Ownership Rule, there was no evidence in the record that established a
causal connection. The Commission now asks how retaining, modifying, or
eliminating the local television rule would affect broadcast television
ownership and entry by minority and female owners, if at all. The
Commission seeks data and an updated record on the effects of the Local
Television Ownership Rule on minority and female broadcast ownership
and entry. Finally, the Commission seeks comment on how retaining or
modifying the rule might affect broadcast television ownership and
entry by small business owners, if at all.
53. Dual Network Rule. The Dual Network Rule permits common
ownership of multiple broadcast networks, but effectively prohibits a
merger between or among the Big Four networks. In the 2010/2014
Quadrennial Review Order, the Commission concluded that the Dual
Network Rule continues to be necessary in the public interest to
promote competition and localism. With respect to competition, the
Commission found the rule necessary to promote both competition in the
provision of primetime entertainment programming and the sale of
national advertising. With respect to localism, the Commission found
that the rule was necessary to preserve the balance of power between
the Big Four networks and their local affiliates.
54. In conducting its analysis of whether the Dual Network Rule
remains necessary, the Commission traditionally has considered
broadcast networks as participating in the video marketplace in two
ways: (1) Assembling and distributing a collection of programming
suitable for large, national audiences, and (2) selling advertising
based on this programming to large, national advertisers. Does the Dual
Network Rule continue to be relevant to competition or network behavior
in either or both of these segments? The Commission concluded in the
2010/2014 Quadrennial Review Order that ``the primetime entertainment
programming provided by the Big Four broadcast networks and national
television advertising time are each a distinct product--the
availability, price, and quality of which could be restricted, to the
detriment of consumers, if two [Big Four broadcast networks] were
permitted to merge.'' Does this conclusion remain valid? The Commission
also generally seeks comment on whether the Dual Network Rule remains
necessary to promote its goals of competition, viewpoint diversity and
localism, and on whether the benefits of the rule outweigh any costs.
55. Regarding viewership, in the 2010/2014 Quadrennial Review Order
the Commission found, based on Nielsen data, that no cable programming
could deliver primetime audiences on par with, let alone greater than,
the primetime audiences delivered by the Big Four networks. The
Commission's Eighteenth Video Competition Report, based on 2015 data,
showed that broadcast affiliates still draw the largest share of total
day and prime time viewing audiences in relation to independent
stations and non-commercial and cable networks. The 2010/2014
Quadrennial Review Order also found a continued wide disparity in the
advertising rates and revenue earned by the Big Four networks and other
broadcast and cable networks. The Commission seeks more current data on
these topics. Do these or other recent developments have any
implications for the Commission's competition rationale underlying the
Dual Network Rule?
56. The Commission also found in the 2010/2014 Quadrennial Review
Order and in previous reviews of the Dual Network Rule that the Big
Four networks operate as a ``strategic group'' in the national
advertising market and that they largely compete among themselves for
the most significant portion of the national advertising market, namely
advertisers that seek to reach national mass audiences. The Commission
further found that the programming provided by the Big Four networks
was a distinct product that, when compared to other broadcast and cable
programming, had a unique ability to regularly attract large prime-time
audiences and thus command higher advertising rates. Does the
Commission's ``strategic group'' finding still hold true? Given the
increasing number of video programmers in today's market, as well as
the increasing popularity of their programming, is network broadcast
programming still a distinct product? Does nightly network news
programming, or any other programming, distinguish the broadcast
networks, or are consumers now turning to other news or programming
sources that remove this distinction? Are there other producers of mass
audience programming such that a merger between two of the Big Four
networks would no longer harm competition for national advertising? In
the past, the Commission reviewed programming audience shares and the
advertising rates and revenues of various programmers in making this
determination. Should the Commission continue to rely on these data, or
are there other data or metrics it should consider? Are there better
sources of relevant data than the Commission has considered in the
past?
57. One of the biggest changes in the video programming market has
been online distribution of programming from a variety of sources.
Today, OVDs--including linear multichannel streaming services, both
those from social media companies and other online platforms, and
direct-to-consumer offerings by broadcast networks themselves--reach
millions of consumers. Digital advertising on these or other online
platforms is steadily increasing in market and revenue share. How, if
at all, have these changes affected competition for national broadcast
television advertising? The Commission seeks comment on whether and how
any such changes should affect our Dual Network Rule.
58. The Commission also seeks comment on whether recent
developments in the video programming and national advertising markets
suggest that the Dual Network Rule should be modified to promote
competition or eliminated. If the rule is modified, what changes should
we make? Should networks be removed from or added to the rule? If so,
which networks? What would be the basis for eliminating the
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rule? If the rule were eliminated, would antitrust statutes or any
other statutes, rules, or policies serve as a sufficient backstop to
prevent undue consolidation between or among the Big Four networks? Why
or why not?
59. The Commission also seeks comment on whether The Dual Network
Rule remains necessary to promote localism, in particular by
maintaining a balance of power between the Big Four networks and their
local affiliates. To reach the largest possible national audience, the
Big Four networks acquire their own broadcast stations, usually in the
largest television markets, and enter into affiliation agreements with
station owners throughout the rest of the country. Through affiliation,
a model which has existed for more than fifty years, networks benefit
through wide delivery of their programming, and network affiliates
benefit by gaining access to high-quality programming. The Commission
has found in previous media ownership rule reviews that the network-
affiliate model balances competing interests: Networks have an economic
incentive to ensure that programming appeals to a mass, nationwide
audience while affiliates have an economic incentive to tailor
programming to their local audiences and influence network programming
choices to ensure that the programming serves local needs and
interests. Affiliates also may decide individually to preempt network
programming for other programming better serving the local audience.
The Commission now seeks comment on whether these specific conclusions,
and the Commission's general conclusion that the Dual Network Rule is
needed to keep the balance of bargaining power between the Big Four
networks and their affiliates, remain true in today's video
marketplace.
60. Evidence submitted in the Commission's review of the Comcast-
NBCU merger suggested that broadcast network affiliation remains sought
after and critical to many local stations' success. Also, while
advertising revenue remains essential to broadcast stations, the
Eighteenth Video Competition Report showed that retransmission consent
revenues now represent a much greater proportion of total revenue for
many broadcast stations than previously, and stations with Big Four
network affiliations often receive the lion's share of retransmission
consent dollars from MVPDs in a local market. The Eighteenth Video
Competition Report also showed that, whereas local affiliates were once
paid by networks to distribute network programming, today networks seek
and receive compensation from their affiliates in the form of reverse
compensation payments. According to one estimate by SNL Kagan, total
industrywide reverse compensation payments paid by affiliates to
broadcast networks have increased from roughly $300 million in 2010 to
$2.9 billion in 2017. There is some evidence too that networks now
exert leverage through oversight or approval of affiliate
retransmission consent negotiations, and although not common, in some
instances in recent years a network dropped or threatened to drop a
local affiliate to launch a network O&O station in the same market. To
what extent do networks extract a share of retransmission consent
payments received by their affiliates? How, if at all, should the Dual
Network Rule account for these or other recent changes to the network/
affiliate relationship?
61. In addition, the rise of online video options in recent years
also may have altered the network-affiliate dynamic. As stated above,
OVDs now reach millions of consumers, creating new opportunities for
networks to achieve widespread distribution without the direct
involvement of network affiliates. In the broadcast-MVPD world of
retransmission consent, local affiliates may have some recourse against
broadcast networks bypassing their affiliates in this manner by
negotiating for, and if necessary enforcing via Commission rules,
contractual network non-duplication rights, which protect a broadcast
station's right to be the exclusive distributor of network programming
within a specified geographic zone. By contrast, in the world of online
video distribution, local affiliates lack a comparable regulatory
backstop. The ability of networks to achieve online distribution of
network programming in a local market, without the need for local
affiliates to consent, may give networks some additional leverage in
the network-affiliate relationship that did not exist in the pre-online
video world. What implications, if any, do developments related to the
growth of online video distribution have for the Dual Network Rule and
its underlying localism rationale?
62. As the Commission has previously noted, the Dual Network Rule
is intended to preserve the ability of local affiliates to advocate for
local interests in programming decisions. Would a Big Four network
merger reduce the ability of a network affiliate to use the
availability of other top, independently-owned networks as a bargaining
tool to influence programming decisions of its network, including the
affiliate's ability to engage in a dialogue with its network over the
suitability for local audiences of either the content or scheduling of
network programming? Have changes discussed above, including the growth
of online video or increased reverse compensation and retransmission
consent fees, affected bargaining between networks and affiliates on
programming and scheduling?
63. Considering the longstanding existence of the Dual Network
Rule, has localism increased, decreased, or remained roughly the same
over time? Are there recent examples where local affiliates have
influenced network programming to better serve local needs? Are there
other metrics by which we can assess the effect of the Dual Network
Rule on localism? Have other changes affected the network/affiliate
relationship, such that the Commission would need to adjust assumptions
made in previous reviews of the Dual Network Rule? For instance, has
the growth over the last two decades of station groups not owned and
operated by networks changed the dynamic between networks and their
affiliates? Do recent changes affecting the network-affiliate
relationship suggest that the Dual Network Rule should be modified,
rather than being retained or eliminated, to promote localism? If so,
what modifications should we make that would better promote localism?
64. Minority and Female Ownership. The Commission concluded in the
2010/2014 Quadrennial Review Order that, given the Dual Network Rule's
unique focus on mergers involving the Big Four networks rather than
ownership limits in local markets, the rule would not be expected to
have any meaningful impact on minority and female ownership levels. The
Commission seeks comment on whether and how market or other changes
since its last media ownership review may have affected this
conclusion. The Commission also seeks comment on how retaining,
modifying or eliminating the Dual Network Rule would affect broadcast
television ownership and entry by minority and female owners, if at
all. Finally, the Commission seeks comment on how retaining or
modifying the Dual Network Rule might affect broadcast television
ownership and entry by small business owners, if at all.
65. Diversity Related Proposals. The NPRM also seeks comment on
three proposals for increasing media diversity advanced by MMTC in
prior proceedings. These three proposals were distilled from a larger
list based on guidance from the Third Circuit in its decisions and
Commission staff, and the Commission already has adopted two
[[Page 6752]]
additional proposals from this list. The three proposals the Commission
now considers are: (1) Extending cable procurement requirements to
broadcasters; (2) developing a model for market based tradable
``diversity credits'' to serve as an alternative method for adopting
ownership limits; and (3) adopting formulas aimed at creating media
ownership limits that promote diversity.
66. Extending Cable Procurement Regulation. The 1992 Cable Act
states that a cable system must: ``[e]ncourage minority and female
entrepreneurs to conduct business with all parts of its operation.''
Sec. 76.75(e) of the Commission's rules explains that this requirement
may be met by, for example, recruiting as wide as possible a pool of
qualified entrepreneurs from sources such as employee referrals,
community groups, contractors, associations, and other sources likely
to be representative of minority and female interests. To help
determine whether this requirement can be applied to broadcasters, the
Commission seeks comment on the threshold issue of whether, because
Commission cable procurement authority flows directly from the 1992
Cable Act, it has authority to adopt a procurement requirement for
broadcasters. The Communications Act imposes equal employment
opportunity obligations on broadcasters, but no procurement
requirements. Does this difference between the two statutes reflect any
limitation on the Commission's otherwise extensive Communications Act
Title III authority over broadcasters? The Commission seeks comment on
potential sources of Commission authority, including any ancillary
authority, to extend procurement regulations to the broadcast industry.
The Commission also seeks comment on whether, by specifically
identifying minority/female entrepreneurs, the proposal would classify
these entrepreneurs differently from others such as to trigger
heightened judicial scrutiny. If heightened scrutiny is triggered, how
would such a rule comport with the Commission's previous finding in the
2010/2014 Quadrennial Review Order that it lacked the evidence to
satisfy the heightened scrutiny needed to justify race- or gender-based
broadcast regulation? Would inclusion of any type of audit, review, or
enforcement mechanism pursuant to which the Commission considered
broadcasters' compliance with the requirement be problematic or
interpreted as tacitly encouraging broadcasters to favor certain
entrepreneurs to the detriment of others in a way that would trigger
heightened scrutiny?
67. If a broadcast procurement rule as proposed by MMTC would
trigger heightened judicial scrutiny, can any proposed rule be modified
to be race- and gender-neutral to avoid the potential legal impediments
raised by a race- and gender-conscious broadcast procurement rule? In
such a case, how would the requirement be stated? Would a race- and
gender-neutral broadcast procurement rule be as effective as a race-
and gender-conscious broadcast procurement rule?
68. The Commission also seeks comment on MMTC's assertion in the
2010/2014 Quadrennial Review that Sec. 76.75(e) ``has been a
springboard for the migration of minority and women entrepreneurs into
operating and ownership positions in the cable and satellite
industries[,]'' and has ``contributed mightily to the economic success
of scores of minority and women owned businesses engaged in banking,
broker/dealer services, construction, fiber and satellite dish
installation, programming, legal services, accounting, and much more.''
In deciding whether to adopt additional regulations or extend a
regulation to additional industries, it is important to assess the
likelihood that the regulation would have the desired effect of
increasing minority and female participation in the broadcast industry.
Consequently, the Commission seeks data on the degree to which Sec.
76.75(e) has promoted minority and women businesses and whether any
broader trends in the intervening two decades since enactment of the
cable procurement requirement have played a role in fostering greater
minority and female participation in the cable industry. In this
regard, we also seek comment on the relative benefits and costs of
extending Sec. 76.75(e) to the broadcast industry. How can the value
of these benefits and costs be measured?
69. The Commission also notes the significant differences between
the cable and broadcast industries and seeks comment on the
feasibility--and utility--of imposing a Sec. 76.75(e)-type requirement
on the broadcast industry. For example, unlike broadcasters, cable
providers must construct and continuously maintain and upgrade a
significant physical plant and therefore purchase goods and services on
a much larger scale than broadcasters. Over-the-air delivery of
broadcast radio and television does not require laying fiber or coaxial
cable to every home and, in most instances, deploying customer premise
equipment, necessitating regular purchase of equipment and material at
significant volume. Constructing and maintaining extensive cable
networks also requires employing and contracting for far more labor
than is required in the broadcast sector. Unlike broadcasters, cable
operators maintain a direct billing relationship with their customers,
offering more contracting opportunities--in the form of outsourced
billing or customer service functions--than the broadcast industry.
Accordingly, the Commission seeks input on the feasibility and utility
of imposing a cable procurement regulation on broadcasters.
70. Develop a Model for Market-Based Tradeable Diversity Credits.
In reply comments submitted in the 2002 Biennial Review, a group called
the Diversity and Competition Supporters (DCS) advanced several
initiatives that it asserted would foster diversity, including
tradeable ``diversity credits'' for the broadcast industry. While
diversity credits weren't well defined, the idea appears to involve
creating a system of credits tradable in a market-based system and
redeemable by a broadcaster buying additional stations to offset any
increased concentration resulting from a proposed transaction. DCS
offered diversity credits as a potential alternative to the test then
in use by the Commission requiring that, for a broadcaster to own two
stations in a market, eight independent voices must have remained in
the market post-transaction. DCS suggested that economists (presumably
both at the Commission and beyond) could explore the concept and stated
its hope ``that other parties will attempt to design a market-based
Diversity Credit program.'' In 2004, a member of the Transactional
Transparency Subcommittee of the FCC Advisory Committee on Diversity in
the Digital Age further developed the diversity credits concept,
suggesting credits linked to each broadcast license based on the extent
to which the licensee was ``socially and economically disadvantaged''
and that, if a transaction promoted diversity (e.g., the breakup of a
local ownership cluster or the sale of a station to a socially and
economically disadvantaged business), the Commission would award the
seller additional diversity credits ``commensurate with the extent to
which the transaction promotes diversity.'' Similarly, according to
this 2004 proposal, if a transaction reduced diversity (e.g., by
creating an ownership combination or growing an ownership cluster), the
Commission would require diversity credits from the buyer, commensurate
with the extent to the which the transaction reduced diversity.
[[Page 6753]]
Finally, according to the 2004 proposal, if a company seeking approval
of a transaction held insufficient diversity credits to gain approval,
the company would need to purchase diversity credits on a secondary
market from third-party companies. The proposal did not define either
``promoting'' or ``reducing'' diversity, or how the impact of a
transaction would be measured or quantified. MMTC continued to advocate
for tradable diversity credits in the 2010/2014 Quadrennial Review,
asking the Commission to explore their feasibility by issuing a Notice
of Inquiry. Therefore, the Commission now seeks comment on whether and
how it should create a system of tradable diversity credits that would
foster ownership diversity in broadcasting.
71. The Commission first seeks comment on its authority to adopt a
tradeable diversity credit system within its structural broadcast
ownership rules or otherwise. While the Communications Act contains no
explicit authority to create or rely on such a program, when presenting
the idea, DCS asserted that the sections 303(f), (g), and (r) of the
Communications Act provided authority to implement tradable diversity
credits. Are the sections cited by DCS applicable to such credits?
72. Assuming it has the required authority, the Commission seeks
comment on the feasibility of relying on determinations about social
and economic disadvantage given its concerns, expressed in the 2010/
2014 Quadrennial Review Order, about relying on such determinations. As
proposed, the allocation of diversity credits was based on the extent
to which the licensee could be considered ``socially and economically
disadvantaged.'' How should the term ``socially and economically
disadvantaged'' business (SDB) be defined? The 2004 proposal stated
that, ``[m]inority status could be a factor in qualifying as an SDB if
the Commission finds through rulemaking that minorities, under certain
conditions, are socially and economically disadvantaged in the
broadcasting industry because of their race[,]'' but did not provide
any guidance about when an individual might or might not qualify on the
basis of race. In the 2010/2014 Quadrennial Review Order, the
Commission found that the record did not establish a basis for race-
conscious remedies and concluded that such measures were unlikely to
withstand review under the equal protection component of the
Constitution's due process clause. Thus, the Commission, unlike the
Small Business Administration (SBA), declined to adopt an SDB
eligibility standard that would have recognized the race and ethnicity
of applicants, or any other race- or gender-conscious measure. Given
the Commission's previous findings and conclusions, can it adopt a
diversity credit program that considers race or gender, or other
protected classes, in a manner that could withstand equal protection
review? Commenters advocating for such a program should explain in
detail, based on relevant judicial precedent and existing empirical
data, how circumstances have changed such that the Commission could now
overcome the significant evidentiary issues that it previously found
would need to be resolved to adopt race- or gender-based policies that
could withstand heightened judicial scrutiny.
73. If the socially and economically disadvantaged concept in the
2004 proposal was a precursor to the Overcoming Disadvantages
Preference (ODP) concept that MMTC has advanced in subsequent
Commission rulemaking proceedings, the Commission in the 2010/2014
Quadrennial Review FNPRM assessed the ODP concept and stated concerns
that the Commission lacks the resources needed to conduct the
individualized reviews central to ODP. The Commission has similar
concerns about the administrative and practical challenges of
developing, implementing and applying a diversity credits program. The
2004 proposal suggested that the program rely on ascribing a diversity
credits number to each broadcast license or possibly each licensee. Who
would make that allocation of diversity credits, and on what criteria
would the Commission or other arbiter determine the number of credits
to be awarded to each license or licensee?
74. Such a program also raises potentially complicated definitional
issues. How would the Commission define ``diversity'' in this context?
In the 2002 Biennial Review Order, the Commission described several
types of diversity, focusing on viewpoint diversity as the relevant
touchstone for purposes of the structural media ownership rules. Would
a diversity credit system have as its goal fostering viewpoint
diversity, ownership diversity, both forms of diversity, or some other
type of diversity?
75. Once diversity is defined, how would parties--or the
Commission--determine, qualitatively or quantitatively, whether a
transaction promotes or harms diversity? How would the degree to which
the transaction harms or benefits diversity be quantified, such that
the number of credits awarded for, or required before approval of, such
a transaction could be determined? For example, would the impact on
diversity vary depending on the size of the market, the number of
operators therein, or the characteristics of the stations involved in
the transaction? Would a requirement that parties remit to the
Commission a certain number of diversity credits to receive approval of
a transaction replace the Commission's existing structural broadcast
ownership rules, which are based primarily on other policy goals, such
as competition and localism? Or would compliance with the diversity
credit regime be an additional requirement before a transaction were
permitted?
76. Recognizing that diversity credits could be used as a form of
currency in the broadcast market, how could the Commission effectively
test such a scheme to ensure it would not lead to any unintended
consequences? Developing and implementing a system that ensures that
the award of diversity credits leads to the desired result--increasing
diverse ownership in the broadcast market--rather than inadvertently
skewing the market towards an unintended outcome, including greater
concentration or loss of localism and viewpoint diversity, would seem
to be a particular challenge. The Commission seeks comment on how to
address these issues.
77. Tipping Point Formula and Source Diversity Formula. In 2002,
MMTC proposed a ``tipping point formula'' for use in the local radio
market in lieu of the Commission's now-abandoned practice of
``flagging'' radio transactions that, after initial analysis based on
advertising revenue, approached a level of local concentration that
raised public interest concerns about preserving diversity and
competition. In 2003, DCS proposed a ``source diversity formula'' for
use in the broader media market that seemed to be an attempt to
quantify the benefit derived from increased viewpoint diversity. As
with diversity credits, the Communications Act provides no explicit
authority to adopt or apply these formulas, and the Commission seeks
comment on possible sources of such statutory authority. Moreover,
because MMTC and DCS have provided little update to the formulas since
proposing them, the Commission seeks input generally on their relevance
in today's marketplace. The formulas also raise administrative and
practical concerns on which the Commission seeks comment, as discussed
below.
[[Page 6754]]
78. MMTC's tipping point formula attempted to determine when a
proposed transaction would create an entity that could control so much
advertising revenue that ``well run independents'' could not survive or
offer ``meaningful local service'' (all undefined). The formula's
asserted goal was to assess how much ``revenue'' an ``independent''
would need on average to survive in a given market, with this number
then being multiplied by the number of ``independents'' in that market.
Because the Commission's abandoned flagging approach relied on
advertising revenues, the term ``revenue'' in MMTC's tipping point
formula appears also to refer to advertising revenue. MMTC essentially
suggests that the Commission should bar any transaction that would
reduce the revenue available to support independent operators in a
market to an amount below what could sustain those operators. Stated
differently, a broadcaster would not be permitted to acquire competing
stations in a market if the purchase would create revenue so great as
to leave insufficient revenue for the independents in the market. MMTC
provided the following variables as inputs for its formula, as well as
the formula shown below:
MR: Market revenue.
MR1: Amount of market revenue drawn by largest platform.
MR2: Amount of market revenue drawn by second largest platform.
IN: Number of independent stations in the market.
SU: Minimum fixed cost for an independent station to stay on the
air.
VFSU: Variability Factor for Survival Operations, reflecting the
average amount of revenues per independent station that must be
available in the market, collectively, to take account of variations
among the independent stations and thereby ensure that well-run weak
independents stay on the air.
LS: Minimum additional cost, beyond SU, for an independent
station to offer a meaningful local service.
VFLS: Variability Factor for Local Service reflecting the
average amount of revenue per independent station that must be
available in the market, collectively, to take account of variations
among the independent stations and thereby ensure that well-run weak
independents remain viable.
LSTP: Local Service Tipping Point, i.e., the point at which, if
the top two station groups control more revenue, independents will
begin to lose their ability to offer meaningful local service.
SUTP: Survival Tipping Point, i.e., the point at which, if the
top two station groups control more revenue, independents will be
unable to meet their fixed operating costs and must, therefore, sell
out or go dark.
Based on these inputs, according to MMTC, the Local Service Tipping
Point is the point at which: IN (SU + VFSU + LS + VFLS) = MR-(MR1 +
MR2), and the Survival Tipping point is the point at which: IN (SU +
VFSU) = MR-(MR1 + MR2). In presenting these variables, MMTC noted that
``[t]he cost of maintaining a station on the air varies somewhat
depending on local market factors[,]'' that such regional or local
differences ``can be designed into a formula by indexing a market's
cost of living relative to the national average[,]'' and that such
issues could be addressed in a negotiated rulemaking involving all
interested parties.
79. We seek comment on the various terms used in the formula. For
example, how should the terms ``independent'' and ``platform'' be
defined in the context of today's radio marketplace? How should the
terms ``well-run independent'' and ``well-run weak independent'' be
defined? What objective criteria can we apply to distinguish between a
``well-run independent'' and a ``well-run weak independent'' to ensure
that use of a tipping point formula does not prop up stations that are
either poorly managed or simply not airing programming that responds to
the community's interests? What is meant by ``meaningful local
service''? We also seek comment on whether any determinations about how
well a station is run or the concept of ``meaningful local service''
might create First Amendment concerns.
80. MMTC's formula appears to rely on advertising revenues. If so,
how would the Commission and potential applicants obtain reliable
advertising revenue for all radio stations? If another type of revenue
is more appropriate, what data would the Commission rely on to obtain
information about this other revenue? How should the concept of ``fixed
operating costs'' be quantified? How should the Commission account for
local and regional cost differences?
81. Finally, the Commission seeks comment on what seems to be the
fundamental premise behind MMTC's tipping point formula: that retaining
independents (however that term is defined) in a market maintains
diversity (however that term is defined). We also invite commenters to
address any other issues that they believe are raised by the tipping
point formula proposal.
82. DCS submitted its source diversity formula in response to a
challenge from then-Chairman Powell to derive an ``HHI [Herfindahl-
Hirschman Index used to measure market concentration] for Diversity.''
The formula appears to seek to measure the level of consumer welfare
derived from viewpoint diversity in the radio and television broadcast
market, and DCS suggested it could be a ``thermometer'' to determine
whether ``a national or local market manifest[s] strong diversity,
moderate diversity, or slight diversity.'' DCS proposed that the
Commission conduct a negotiated rulemaking to determine what
significance to accord to various ``temperature readings'' on this
thermometer, i.e., what temperatures would reflect ``poor health,'' or
``strong health.'' DCS appeared to suggest that the source diversity
formula could be used in lieu of the Commission's now-repealed ``eight
voices'' test.
83. DCS depicted the source diversity formula as shown below with
the following variables: X = consumer welfare derived from viewpoint
diversity; p = a program consumed from a particular source; g = the
number of programs from a particular source that are available for
consumption; C = the number of consumers consuming a particular
program; T = consumers' mean media consumption time devoted to the
absorption of viewpoints in a particular program; Z = consumers' mean
attentiveness to a particular program; m = a source (including all
outlets owned by that source); and n = number of differently owned
sources offering programs consumed. The formula as proposed was:
[GRAPHIC] [TIFF OMITTED] TP28FE19.006
DCS acknowledged that the formula was imperfect and would need testing
and validation before deployment.
84. The formula raises several fundamental questions. Is the
formula sufficiently comprehensive for commenters to gauge without
additional explanation whether it can provide a meaningful assessment
of consumer welfare and viewpoint diversity in a particular market? Are
there terms used in the formula inputs that require definition prior to
any assessment of the formula's utility? For example, do terms such as
``source'' and ``program'' need to
[[Page 6755]]
be defined before analyzing the formula? Are there other terms that
need defining? How will the formula inputs be obtained? For example, we
seek comment on how to capture inputs such as ``consumers' mean
attentiveness to a particular program'' and ``consumers' mean media
consumption time devoted to the absorption of viewpoints in a
particular program.'' How should the Commission determine the level of
diversity to ascribe to various formula results (e.g., ``strong
diversity,'' ``moderate diversity,'' or ``slight diversity'')? Finally,
the Commission invites commenters to address any other issues that they
believe are raised by the source diversity formula.
85. Cost-Benefit Analysis. For the three structural media ownership
rules and all of the diversity-related proposals discussed above, the
Commission seeks comment on how to compare the benefits and costs
associated with retaining, modifying or eliminating the rule or
adopting the diversity-related proposal, with any proposed modification
to the proposal. Commenters supporting modification or elimination of
any rule or adoption of any proposal should explain the anticipated
economic impact of any proposed action and, where possible, quantify
benefits and costs of proposed actions and alternatives. Do the current
rules create benefits or costs for any segment of consumers? Do the
rules create 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? How do the rules create
these benefits and costs, and what evidence supports this explanation?
How can the value of these benefits and costs be measured for parties
receiving them? What factors create uncertainty about the existence or
size of these benefits and costs, and how should the Commission's
economic analysis take these uncertainties into account?
86. How would elimination of any rules alter the benefits and
costs? What are the comparative benefits and costs of modifying any
rule rather than eliminating it entirely? For instance, would loosening
the current local television or local radio ownership restrictions, or
allowing certain of the Big Four networks and not others to merge lead
to any consumer benefits, such as increased choice, innovation, or
investment in programming? What amount of additional scale would be
required to realize such benefits? Would these benefits conflict with,
or come at a cost to, our traditional policy goals of competition,
viewpoint diversity or localism, and if so, how should we measure and
evaluate these tradeoffs? What are the comparative benefits and costs
of tightening the current restrictions? The Commission asks commenters
to support their claims about benefits and costs with relevant economic
theory and evidence, including empirical analysis and data.
Procedural Matters
87. Ex Parte Rules--Permit-But-Disclose. The proceeding that this
NPRM initiates 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 Sec. 1.1206(b)
of the Commission's rules. In proceedings governed by Sec. 1.49(f) of
the Commission's rules, 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 Commission's Electronic Comment
Filing System (ECFS) 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.
88. Filing Requirements--Comments and Replies. Pursuant to
Sec. Sec. 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 ECFS.
Electronic Filers: Comments may be filed electronically
using the internet by accessing the ECFS: http://apps.fcc.gov/ecfs/.
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.
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.
Commercial overnight mail (other than U.S. Postal Service
Express Mail and Priority Mail) must be sent to 9050 Junction Drive,
Annapolis Junction, MD 220701.
U.S. Postal Service first-class, Express, and Priority
mail must be addressed to 445 12th Street SW, Washington, DC 20554.
89. Initial Regulatory Flexibility Act Analysis. The Regulatory
Flexibility Act of 1980, as amended (RFA), requires that a regulatory
flexibility analysis be prepared for notice and comment rulemaking
proceedings, unless the agency certifies that ``the rule will not, if
promulgated, have a significant economic impact on a substantial number
of small entities.'' The RFA generally defines the term ``small
entity'' as having the same meaning as the terms ``small business,''
``small organization,'' and ``small governmental jurisdiction.'' In
addition, the term ``small business'' has the same meaning as the term
``small business concern'' under the Small Business Act. A ``small
business concern'' is one which: (1) Is independently owned and
operated; (2) is not dominant in its field of operation; and (3)
satisfies any additional criteria established by the Small Business
Administration (SBA).
90. Written public comments are requested on the IFRA and must be
filed in accordance with the same filing deadlines as comments on this
NPRM, with a distinct heading designating them as responses to the
IRFA. In
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addition, a copy of this NPRM and the IRFA will be sent to the Chief
Counsel for Advocacy of the SBA.
91. Paperwork Reduction Act. This NPRM seeks comment on whether the
Commission should adopt 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 public and the Office of Management and Budget (OMB)
to comment on these information collection requirements. In addition,
pursuant to the Small Business Paperwork Relief Act of 2002, we seek
specific comment on how we might further reduce the information
collection burden for small business concerns with fewer than 25
employees.
92. People with Disabilities. To request materials in accessible
formats for people with disabilities (braille, large print, electronic
files, audio format), send an email to fcc504@fcc.gov or call the
Consumer and Governmental Affairs Bureau at 202-418-0530 (voice), 202-
418-0432 (tty).
93. Additional Information. For additional information on this
proceeding, please contact Brendan Holland of the Media Bureau,
Industry Analysis Division, Brendan.Holland@fcc.gov, (202) 418-2757.
Initial Regulatory Flexibility Analysis
94. Need for, and Objective of, the Proposed Rules. This NPRM
begins an examination of the Commission's media ownership rules and
possible changes to these rules. As discussed in the NPRM, the
Commission is required by statute to review its media ownership rules
every four years to determine whether they ``are necessary in the
public interest as the result of competition.'' Consistent with the
Communications Act, the Commission must examine its media ownership
rules and consider whether they continue to serve our public interest
goals of competition, viewpoint diversity and localism, or whether they
should be modified or eliminated. Specifically, the NPRM examines the
three remaining media ownership rules, the Local Radio Ownership Rule,
the Local Television Ownership Rule and the Dual Network Rule. In
addition, the NPRM seeks comment on several proposals that were
advanced in previous rulemakings and which the Commission indicated it
would examine further in the context of this review of its structural
ownership rules. These proposals, to extend cable procurement
requirements to broadcasters, develop a model for market-based,
tradeable ``diversity credits'' to serve as an alternative method for
adopting ownership limits, and adopt formulas aimed at creating media
ownership limits that promote diversity, are presented by their
proponents as initiatives that could further the Commission's diversity
goal. The Commission anticipates that these initiatives, if ultimately
adopted, might benefit small entities.
95. Legal Basis. The proposed action is authorized under sections
1, 2(a), 4(i), 303, 307, 309, and 310 of the Communications Act of
1934, as amended, and section 202(h) of the Telecommunications Act of
1996.
96. 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.
97. Television Broadcasting. According to the U.S. Census Bureau
2017 NAICS Definitions, this U.S. 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 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 reports
that 751 firms in this category operated in that year. Of that number,
656 had annual receipts of $25 million or less, 25 had annual receipts
between $25 million and $49,999,999 and 70 had annual receipts of $50
million or more. Based on this data, the Commission estimates that the
majority of commercial television broadcast stations are small entities
under the applicable size standard.
98. Additionally, the Commission has estimated the number of
licensed commercial television stations to be 1,349. Of this total,
1,248 stations (or about 92.5 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) in November 2018, and therefore
these stations qualify as small entities under the SBA definition.
99. Radio Broadcasting. This U.S. 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 created the following small business size standard for such
businesses: those having $38.5 million or less in annual receipts.
Economic Census data for 2012 show that 2,849 firms in this category
operated in 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 and 26 with annual receipts of $50
million or more. Based on this data, we estimate that the majority of
commercial radio broadcast stations were small under the applicable SBA
size standard.
100. Apart from the U.S. Economic Census, the Commission has
estimated the number of licensed commercial AM radio stations to be
4,426 stations and the number of commercial FM radio stations to be
6,737, for a total number of 11,364. Of this total, 11,355 stations (or
99.9 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) in November 2018, and therefore these
stations qualify as small entities under the SBA definition.
101. 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 radio or
[[Page 6757]]
television station is dominant in its field of operation. Accordingly,
the estimate of small businesses to which the proposed rules may apply
does not exclude any radio or television station from the definition of
small business on this basis and is therefore possibly over-inclusive.
102. Description of Projected Reporting, Recordkeeping and other
Compliance Requirements. The proposals, if ultimately adopted, would
require modification of several Commission forms and their
instructions: (1) FCC Form 301, Application for Construction Permit for
Commercial Broadcast Station; (2) FCC Form 314, Application for Consent
to Assignment of Broadcast Station Construction Permit or License; and
(3) FCC Form 315, Application for Consent to Transfer Control of
Corporation Holding Broadcast Station Construction Permit or License.
The Commission also would modify, as necessary, 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 we do not
anticipate that compliance will require the expenditure of any
additional resources or place additional burdens on small businesses.
103. 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 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.
104. The NPRM begins a statutorily mandated examination of whether
three remaining media ownership rules remain in the public interest as
a result of competition and promote the Commission's longstanding
policy goals of competition, viewpoint diversity and localism. The NPRM
acknowledges new technologies and changed marketplace conditions that
affect whether the rules remain in the public interest considering
competition and the need to allow broadcasters, including small
entities, to achieve the economies of scale and scope necessary to
continue to compete in a changed marketplace. The NPRM considers
measures designed to minimize the economic impact of any changes to
these rules on firms generally, as well as initiatives designed to
promote broadcast ownership opportunities among a diverse group of
owners, including small entities. The NPRM also invites comment on the
effects of any rule changes on different types of broadcasters (e.g.,
independent or network-affiliated), the benefits and costs associated
with any proposals, and any potential to have significant impact on
small entities.
105. The NPRM proposes no new reporting requirements, performance
standards or other compliance obligations, although, as discussed
above, it may modify, as necessary, certain existing reporting forms
should it adopt any changes to its media ownership rules. Should the
Commission ultimately adopt changes to its media ownership rules that
could increase requirements or compliance burdens for small entities,
it will determine whether possible exemptions, waiver opportunities,
extended compliance deadlines or other measures would mitigate any
potential impact on small entities.
106. Federal Rules that May Duplicate, Overlap or Conflict with the
Proposed Rules. None.
Ordering Clauses
107. 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, and section 202(h) of
the Telecommunications Act of 1996, this Notice of Proposed Rulemaking
is adopted.
108. It is further ordered, pursuant to applicable procedures set
forth in Sec. Sec. 1.415 and 1.419 of the Commission's rules,
interested parties may file comments on the NPRM in MB Docket No. 18-
349 on or before sixty (60) days after publication in the Federal
Register and reply comments on or before ninety (90) days after
publication in the Federal Register.
109. It is furthered ordered that the Commission's Consumer and
Governmental Affairs Bureau, Reference Information Center, shall send a
copy of this NPRM, including the IRFA, to the Chief Counsel for
Advocacy of the Small Business Administration.
Federal Communications Commission.
Katura Jackson,
Federal Register Liaison Officer, Office of the Secretary.
[FR Doc. 2019-03278 Filed 2-27-19; 8:45 am]
BILLING CODE 6712-01-P
