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FCC launches 2014 Quadrennial Regulatory Review Notice and Order [Radio and Television Business Report (RBR-TVBR)](Radio and Television Business Report (RBR-TVBR) Via Acquire Media NewsEdge) The FCC released its 2014 Quadrennial Regulatory Review and Further Notice of Proposed Rulemaking and Report and Order, adopted at its 3/31 Open Meeting. In the move, the Commission combined the 2010 and 2014 quadrennial media ownership reviews. It doesn't loosening most broadcast ownership rules, but asks whether they should be lifted in the future. No changes were made to radio ownership rules but a proposal was discussed to eliminate the newspaper-radio and radio-television cross-ownership rules. On the TV side, the item also makes TV JSAs of over 15% of ad sales attributable as ownership interests. The FCC will require that attributable TV JSAs be reported to the FCC within 30 days of being entered into. As mentioned in the 3/31 meeting, existing JSAs that become attributable under the new rules will get two years to unwind, or to come into compliance. The Commission said it will provide for a public interest waiver of the new TV JSA attribution rules. In response, NAB SVP/Communications Ann Marie Cumming said: “NAB is currently reviewing the order with particular focus on details surrounding the waiver process. With the FCC now seeking to undo JSAs which it had previously approved, we believe there should be ample opportunities for broadcasters to pursue waivers that preserve the public services these station partnerships have made possible in local communities across the country.” See the full Review here, along with dissenting statements from Commissioners Ajit Pai and Michael O’Rielly: 2014 Quadrennial Regulatory ReviewAttachments & Related Documents Wheeler Statement Clyburn Statement Rosenworcel Statement Pai Statement O’Rielly Statement Released: April 15, 2014 Federal Communications CommissionFCC 14-28Before theFederal Communications CommissionWashington, D.C. 20554In the Matter of) ) 2014 Quadrennial Regulatory Review – Review of) MB Docket No. 14-50 the Commission's Broadcast Ownership Rules and) Other Rules Adopted Pursuant to Section 202 of) the Telecommunications Act of 1996) ) 2010 Quadrennial Regulatory Review – Review of) MB Docket No. 09-182 the Commission's Broadcast Ownership Rules and) Other Rules Adopted Pursuant to Section 202 of) the Telecommunications Act of 1996) ) Promoting Diversification of Ownership) MB Docket No. 07-294 In the Broadcasting Services) ) Rules and Policies Concerning) MB Docket No. 04-256 Attribution of Joint Sales Agreements) In Local Television Markets) )FURTHER NOTICE OF PROPOSED RULEMAKING AND REPORT AND ORDERAdopted: March 31, 2014 Released: April 15, 2014 Comment Date: [45 days after publication in the Federal Register] Reply Comment Date: [75 days after publication in the Federal Register] By the Commission:Chairman Wheeler and Commissioners Clyburn and Rosenworcel issuing separate statements; Commissioners Pai and O'Rielly dissenting and issuing separate statements.TABLE OF CONTENTS Heading Paragraph # I. INTRODUCTION…………………………………………………………………………………………………………………. 1 II. BACKGROUND…………………………………………………………………………………………………………………… 9 III. MEDIA OWNERSHIP RULES …………………………………………………………………………………………….. 15 A. Local Television Ownership Rule ……………………………………………………………………………………. 15 B. Local Radio Ownership Rule…………………………………………………………………………………………… 74 C. Newspaper/Broadcast Cross-Ownership Rule ………………………………………………………………….. 113 D. Radio/Television Cross-Ownership Rule…………………………………………………………………………. 200 E. Dual Network Rule ………………………………………………………………………………………………………. 226 IV. DIVERSITY ORDER REMAND ………………………………………………………………………………………… 242 A. Introduction…………………………………………………………………………………………………………………. 242 B. Background…………………………………………………………………………………………………………………. 246 C. Discussion…………………………………………………………………………………………………………………… 263 Federal Communications Commission FCC 14-28 V. DISCLOSURE OF SHARED SERVICE AGREEMENTS……………………………………………………….. 320 A. Introduction…………………………………………………………………………………………………………………. 320 B. Background…………………………………………………………………………………………………………………. 321 C. Discussion…………………………………………………………………………………………………………………… 328 VI. REPORT AND ORDER……………………………………………………………………………………………………… 340 A. Attribution of Television JSAs ………………………………………………………………………………………. 340 B. Filing Requirements and Transition Procedures……………………………………………………………….. 366 C. National Sales Representatives ………………………………………………………………………………………. 368 VII. PROCEDURAL MATTERS………………………………………………………………………………………………. 373 VIII. ORDERING CLAUSES …………………………………………………………………………………………………… 383 APPENDIX A – Final Rule Changes APPENDIX B – Proposed Rule Changes APPENDIX C – Final Regulatory Flexibility Analysis APPENDIX D – Supplemental Initial Regulatory Flexibility AnalysisI. INTRODUCTION 1. Today we take another major step in our review of our broadcast ownership rules. Our ongoing 2010 Quadrennial Review has generated a high level of interest and participation, creating an extensive record that continues to attract significant and substantive input well after the formal comment periods have expired. Such participation demonstrates that our broadcast ownership rules continue to be of importance and interest to market participants, public watchdogs, and consumers alike. We wish to build on that record to resolve the ongoing 2010 proceeding, and we are cognizant of our statutory obligation to review the broadcast ownership rules every four years. To accomplish both objectives, with this Further Notice of Proposed Rulemaking ("FNPRM") we are initiating this 2014 Quadrennial Review; incorporating the existing 2010 record into this proceeding; proposing rules that are formulated based on our evaluation of that existing record; and seeking new and additional information and data on market conditions and competitive indicators as they exist today. Ultimately, the rules we adopt in this 2014 proceeding will be based on a comprehensive, refreshed record that reflects the most current evidence regarding the media marketplace. We also consider related issues posed in our 2010 Quadrennial Review proceeding concerning the attribution and disclosure of agreements between broadcast stations, and in the accompanying Report and Order ("Order"), we determine that certain television joint sales agreements ("JSAs") are attributable. 2. The existing record demonstrates not only the dynamic changes that are taking place in the media marketplace but also the continued and vital importance of traditional media outlets to local communities. The proliferation of broadband Internet connections and other technological advances have changed the ways in which many consumers access entertainment, news, and information programming. Yet traditional media outlets are still essential to achieving the Commission's goals of competition, localism, and viewpoint diversity. In particular, the record demonstrates that broadcast television and newspapers continue to be the most significant sources of local news content.1 And while the popularity of news websites unaffiliated with traditional media is increasing, the overwhelming majority of local news content available online originates from newspapers and local broadcast television stations.2 3. In addition, the record demonstrates that some broadcasters continue to generate significant and increasing local advertising revenue and improve their bottom lines with online advertising revenue. While nearly every industry struggled through the recent global financial crisis, some broadcasters have rebounded in a significant way and appear poised to grow stronger. At the same time, other broadcasters are less well positioned and continue to struggle, often in crowded major 1 See infra ¶¶ 130-131. 2 See infra ¶¶ 130-131. 2 markets. The forthcoming voluntary incentive auction of broadcast television spectrum, which is critically important to the Commission's efforts to unleash the full transformative potential of broadband Internet, will provide those and other broadcasters with a new and unique financial opportunity.3 We anticipate that the incentive auction will both free up significant spectrum for mobile broadband and result in an even healthier broadcast industry.4 4. While broadband Internet has impacted the lives of many consumers in myriad ways, including access to media content, millions of Americans continue to lack access to broadband at speeds necessary to take advantage of online content available via streaming or download.5 For these Americans — disproportionately those in rural areas, in low-income groups, on Tribal lands, and in U.S. Territories — traditional media still may be their only source of entertainment and local news and information content.6 5. It is clear that the impact of new technologies on the media marketplace is already significant. If broadband penetration continues to rise, which is a policy priority of the Commission, it may have major implications for a future review of our broadcast ownership rules. At this time, however, we believe that the broadcast ownership rules proposed herein remain necessary to protect and promote the Commission's policy goals in local markets. 6. With these considerations in mind, we issue this FNPRM to seek additional comment on the appropriateness of the broadcast ownership rules to today's evolving marketplace. We seek comment on whether to eliminate two rules that under prevailing market conditions no longer appear to be supported by their original rationales, and we propose to modernize and streamline additional rules. Specifically, as explained in greater detail below, we seek comment on whether to eliminate restrictions on newspaper/radio combinations because, on the record developed in the 2010 Quadrennial Review proceeding, the link between those limitations and the Commission's goal of promoting viewpoint diversity appears to be too tenuous to justify retaining the limitations. We seek comment on whether to eliminate the radio/television cross-ownership rule in favor of reliance on the local radio rule and the local television rule. We propose to retain the current local television ownership rule with a minor modification to update the previous analog contour provision in light of the digital transition. We seek comment on whether to retain the prohibition on the cross-ownership of newspapers and television stations, and if so, should we reform the restriction to consider waivers for newspaper/television combinations. We propose to retain the current local radio ownership rule and the dual network rule without modification. We seek comment on these proposals. 3 See Expanding the Economic and Innovative Opportunities of Spectrum Through Incentive Auctions, GN Docket No. 12-268, Notice of Proposed Rulemaking, 27 FCC Rcd 12357, 12359, 12364, ¶¶ 4, 16 (2012) ("Incentive Auctions NPRM"). 4 See id. at 12359, ¶ 4. The incentive auction is likely to affect the broadcast television industry in a number of respects, and, as discussed herein, we seek comment on the significance of these potential changes in the context of this quadrennial review proceeding. We anticipate being able to conduct the incentive auction in 2015. 5 See Inquiry Concerning the Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable and Timely Fashion, and Possible Steps to Accelerate Such Deployment Pursuant to Section 706 of the Telecommunications Act of 1996, as Amended by the Broadband Data Improvement Act, GN Docket No. 11-121, Eighth Broadband Progress Report, 27 FCC Rcd 10342, 10369, ¶ 44 (2012) ("Eighth Broadband Progress Report") (finding that approximately 19 million Americans lack access to fixed broadband meeting the 4 Mbps/1 Mbps speed benchmark). 6 Id. 3 7. Also, we seek additional comment on issues referred to us in the Third Circuit's remand in Prometheus II of certain aspects of the Commission's 2008 Diversity Order.7 Specifically, we tentatively conclude that the revenue-based eligible entity standard should be reinstated, as well as the associated measures to promote the Commission's goal of encouraging small business participation in the broadcast industry, which we believe will cultivate innovation and enhance viewpoint diversity. As directed by the court, we consider the socially and economically disadvantaged business definition as a possible basis for favorable regulatory treatment, as well as other possible definitions that would expressly recognize the race and ethnicity of applicants.8 We tentatively conclude that the record from the 2010 Quadrennial Review proceeding does not satisfy the demanding legal standards the courts have said must be met before the Government may implement preferences based on such race- or gender- conscious definitions and we seek further comment. We discuss the Commission's recent initiatives to foster diversity, including efforts to promote minority and female participation in communications industries, the release of minority and female broadcast ownership data, the ongoing study of Hispanic television, and the recent clarification of the Commission's policies and procedures for evaluating potential foreign investment in broadcast licensees. We seek comment on these proposals and conclusions. 8. Finally, we take steps herein to address concerns about the use of a variety of sharing agreements between independently owned television stations. First, this FNPRM proposes to define a category of sharing agreements designated as Shared Service Agreements ("SSAs") and proposes to require commercial television stations to disclose those SSAs. We believe that this action will lead to more comprehensive information about the prevalence and content of SSAs between television stations. The current lack of information impedes the Commission's and the public's assessment of the level of influence and control that these agreements may confer over independent stations. In addition, in the Order, we adopt attribution standards for a specific category of sharing agreements, television JSAs. Consistent with Commission precedent with respect to radio JSAs, as well as radio and television local marketing agreements ("LMAs"), we find that certain agreements convey sufficient influence to be akin to ownership and we will therefore attribute to the brokering station same-market television JSAs that cover more than 15 percent of the weekly advertising time for the brokered station.II. BACKGROUND 9. The media ownership rules subject to this quadrennial review are the local television ownership rule, the local radio ownership rule, the newspaper/broadcast cross-ownership rule, the radio/television cross-ownership rule, and the dual network rule.9 Congress requires the Commission to review these rules every four years to determine whether they "are necessary in the public interest as the result of competition" and to "repeal or modify any regulation [the Commission] determines to be no longer in the public interest."10 The Third Circuit has instructed that "necessary in the public interest" is a '"plain public interest' standard under which 'necessary' means 'convenient,' 'useful,' or 'helpful,' not 7 Prometheus Radio Project v. FCC, 652 F.3d 431, 437 (3d Cir. 2011) ("Prometheus II"); see also Promoting Diversification of Ownership in the Broadcasting Services, MB Docket No. 07-294, Report and Order and Third Further Notice of Proposed Rulemaking, 23 FCC Rcd 5922 (2008) ("Diversity Order" and "Diversity Third FNPRM"). 8 Prometheus II, 652 F.3d at 471-73. 9 These rules are found, respectively, at 47 C.F.R. §§ 73.3555(b), (a), (d), and (c) and 47 C.F.R. § 73.658(g). 10 Telecommunications Act of 1996, Pub. L. No. 104-104, § 202(h), 110 Stat. 56, 111-12 (1996); Consolidated Appropriations Act, 2004, Pub. L. No. 108-199, § 629, 118 Stat. 3, 99-100 (2004) ("Appropriations Act") (amending Sections 202(c) and 202(h) of the 1996 Act). In 2004, Congress revised the then-biennial review requirement to require such reviews quadrennially. See Appropriations Act § 629, 118 Stat. at 100. 4 'essential' or 'indispensable.'"11 There is no "'presumption in favor of repealing or modifying the ownership rules.'"12 Rather, the Commission has the discretion "to make [the rule] more or less stringent."13 This 2014 Quadrennial Review will focus on identifying a reasoned basis for retaining, repealing, or modifying each rule consistent with the public interest.14 10. The Commission began the 2010 proceeding with a series of workshops held between November 2009 and May 2010. Participants in the workshops discussed the scope and content of the review process. Thereafter the Commission released a Notice of Inquiry ("NOI") on May 25, 2010, seeking comment on a wide range of issues to help determine whether the current media ownership rules continue to serve the Commission's policy goals.15 Subsequently, the Commission commissioned eleven economic studies, conducted by outside researchers and Commission staff, which were peer reviewed and then released to the public, in order to provide data on the impact of market structure on the Commission's policy goals of competition, localism, and diversity.16 11. After the release of the NOI, the Court of Appeals for the Third Circuit issued its opinion in Prometheus II, which considered appeals from the Commission's review of the media ownership rules in the 2006 Quadrennial Review Order.17 The court affirmed the Commission's decision to retain the 11 Prometheus Radio Project v. FCC, 373 F.3d 372, 394 (3d Cir. 2004) ("Prometheus I"). The court also concluded that the Commission is required "to take a fresh look at its regulations periodically in order to ensure that they remain 'necessary in the public interest.'" Id. at 391. 12 CBS NPRM Comments at 3 (citing Fox Television Stations v. FCC, 280 F.3d 1027, 1048 (D.C. Cir. 2002);Sinclair Broad. Group, Inc. v. FCC, 284 F.3d 148, 159 (D.C. Cir. 2002)). The court in Prometheus I determined that Section 202(h) does not carry a presumption in favor of deregulation. See Prometheus I, 373 F.3d at 395 (rejecting the "misguided" findings in Fox and Sinclair regarding a '"deregulatory presumption'" in Section 202(h));see also Prometheus II, 652 F.3d at 444-45 (confirming the standard of review under Section 202(h) adopted inPrometheus I). 13 Prometheus I, 372 F.3d at 395; see also Prometheus II, 652 F.3d at 445. 14 See Prometheus I, 373 F.3d at 395; Prometheus II, 652 F.3d at 445. 15 See 2010 Quadrennial Regulatory Review – Review of the Commission's Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, MB Docket No. 09-182, Notice of Inquiry, 25 FCC Rcd 6086 (2010) ("NOI"). 16 Media Bureau Announces the Release of Requests for Quotation for Media Ownership Studies and Seeks Suggestions for Additional Studies in Media Ownership Proceeding, MB Docket No. 09-182, Public Notice, 25 FCC Rcd 7514 (Med. Bur. 2010); FCC Releases Five Research Studies on Media Ownership and Adopts Procedures For Public Access to Underlying Data Sets, MB Docket No. 09-182, Public Notice, 26 FCC Rcd 8472 (Med. Bur. 2011);FCC Releases Three Additional Research Studies on Media Ownership, MB Docket No. 09-182, Public Notice, 26 FCC Rcd 10240 (Med. Bur. 2011); FCC Releases the Final Three Research Studies on Media Ownership, MB Docket No. 09-182, Public Notice, 26 FCC Rcd 10380 (Med. Bur. 2011). The media ownership studies for the 2010 Quadrennial Review proceeding are available at http://www.fcc.gov/encyclopedia/2010-media-ownership-studies. In the NPRM, the Commission sought formal comment on the studies. 2010 Quadrennial Regulatory Review – Review of the Commission's Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, MB Docket No. 09-182, Notice of Proposed Rulemaking, 26 FCC Rcd 17489, 17556-64, ¶¶ 171-93 (2011) ("NPRM"). Few commenters provided specific criticisms of individual studies, though the University of Southern California Annenberg School for Communications & Journalism ("USC") provided an all-around critique of the studies. USC NPRM Comments at 5 (submitted on behalf of the Communication Policy Research Network). Overall, we find that the studies provide useful data and analysis regarding the impact of market structure on the Commission's policy goals, and we will discuss the studies in the context of the relevant rule sections below. 17 Prometheus II, 652 F.3d at 431; 2006 Quadrennial Regulatory Review – Review of the Commission's Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, MB Docket No. 06-121, Report and Order and Order on Reconsideration, 23 FCC Rcd 2010, 2016-17, ¶ 9 (2008) ("2006 Quadrennial Review Order"). 5 local television and radio rules in order to protect competition in local media markets.18 The court also affirmed the Commission's retention of the dual network rule based on potential harm to competition that would result from mergers among the top four networks.19 In addition, the court affirmed the Commission's conclusion to retain the radio/television cross-ownership rule based on its contribution to the Commission's diversity goal.20 The Third Circuit vacated and remanded the newspaper/broadcast cross-ownership rule as modified by the Commission in the 2006 Quadrennial Review Order on procedural grounds, concluding that the Commission had failed to comply with the notice and comment provisions of the Administrative Procedure Act ("APA").21 Finally, the court vacated and remanded a number of measures adopted in the Commission's 2008 Diversity Order.22 Specifically, the court vacated and remanded measures adopted in the Diversity Order that were designed to increase ownership opportunities for "eligible entities," including minority- and women-owned entities, because it determined that the Commission's revenue-based eligible entity definition was arbitrary and capricious.23 The court directed the Commission to address this issue in the course of the 2010 Quadrennial Review. 12. On December 22, 2011, the Commission released the NPRM, in which the Commission proposed modest, incremental changes to the broadcast ownership rules and sought comment on those changes. The Commission also sought comment in the NPRM on the aspects of the Commission's 2008Diversity Order that the Third Circuit had remanded in Prometheus II, as well as other actions that the Commission might take to increase the level of broadcast station ownership by minorities and women. Finally, the Commission sought comment on various attribution issues that define which interests in a licensee must be counted in applying the broadcast ownership rules. In particular, the Commission sought comment on the impact of certain programming or other sharing agreements between stations and whether it should modify the broadcast attribution rules to account for such agreements or adopt disclosure requirements. In doing so, the Commission referenced its pending proceeding regarding the potential attribution of television JSAs. In that proceeding, the Commission had tentatively concluded that television JSAs have the same effects in local television markets that radio JSAs do in local radio markets and that the Commission should therefore attribute television JSAs. 13. On November 14, 2012, the Media Bureau released a report on the ownership of commercial broadcast stations ("2012 323 Report").24 Consistent with other data and extensive comment already in the record, the 2012 323 Report confirmed low levels of broadcast station ownership by women and minorities — a fact long recognized by the Commission.25 On December 3, 2012, the 18 Prometheus II, 652 F.3d at 460-61, 462-63. The local radio rule was also retained, in part, to help promote the Commission's diversity goal. See id. at 462-63. 19 Id. at 463-64. 20 Id. at 456-58. 21 Id. at 453. The court did not address the substantive modifications to the rule. 22 Id. at 471. 23 Id. 24 See 2010 Quadrennial Regulatory Review – Review of the Commission's Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, MB Docket No. 09-182, Report on Ownership of Commercial Broadcast Stations, 27 FCC Rcd 13814 (Med. Bur. 2012) ("2012 323 Report"). The2012 323 Report is based on ownership information, as of November 1, 2009, and October 1, 2011, submitted by broadcasters in their biennial Form 323 filings. See FCC Form 323, Ownership Report for Commercial Broadcast Stations, available at http://transition.fcc.gov/Forms/Form323/323.pdf; see also 47 C.F.R. § 73.3615. 25 See, e.g., Diversity Order, 23 FCC Rcd at 5924, ¶ 1 (noting that "minority- and women-owned businesses" historically have not been "well-represented in the broadcasting industry"); Policies and Rules Regarding Minority and Female Ownership of Mass Media Facilities, MM Docket No. 94-149, Notice of Proposed Rulemaking, 10 FCC Rcd 2788, 2789, ¶ 5 (1995) ("[D]espite the Commission's efforts to increase minority ownership of broadcast and cable facilities, minorities today remain significantly underrepresented among mass media owners."). 6 Commission granted the request of several parties for "an additional, formal opportunity to comment on the [2012 323 Report]."26 On May 30, 2013, the Minority Media and Telecommunications Council ("MMTC") submitted a study titled "The Impact of Cross Media Ownership on Minority/Women Owned Broadcast Stations" ("MMTC Cross-Ownership Study").27 The Commission sought comment on this study during the summer of 2013.28 14.Policy Goals.The media ownership rules have consistently been found to be necessary to further the Commission's longstanding policy goals of fostering competition, localism, and diversity. We seek additional comment on the NPRM's tentative conclusion that these policy goals continue to be the appropriate framework within which to evaluate and address minority and female interests as they relate to the broadcast ownership rules.29III. MEDIA OWNERSHIP RULES A. Local Television Ownership Rule 1.Introduction 15. Based on the record that was compiled for the 2010 Quadrennial Review, we tentatively conclude that the current local television ownership rule remains necessary in the public interest and should be retained with a limited modification.30 As discussed below, we believe that, based on the current media marketplace and the record in this proceeding, the public interest would be best served by replacing the Grade B contour overlap test used to determine when to apply the local television ownership rule with a digital noise limited service contour ("NLSC") test, rather than the DMA-based approach proposed in the NPRM. We believe that the local television ownership rule is necessary to promote competition. We further believe that the competition-based rule we propose in this FNPRM also would promote viewpoint diversity by helping to ensure the presence of independently owned broadcast television stations in local markets and would be consistent with our localism goal.31 We find that the 26 See Commission Seeks Comment on Broadcast Ownership Report, MB Docket No. 09-182, Public Notice, 27 FCC Rcd 15036 (Med. Bur. 2012) ("2012 323 Report Comments PN"). 27 Letter from David Honig, President, MMTC, to Chairwoman Mignon Clyburn, Commissioner Ajit Pai, and Commissioner Jessica Rosenworcel, FCC (May 30, 2013) (attaching Mark Fratrik, BIA/Kelsey, The Impact of Cross Media Ownership on Minority/Women Owned Broadcast Stations (May 30, 2013) ("MMTC Cross- Ownership Study")) ("MMTC May 30, 2013 Ex Parte Letter"). 28 Media Bureau Invites Comments on Study Submitted by the Minority Media and Telecommunications Council in 2010 Quadrennial Review of Broadcast Ownership Rules, Public Notice, 28 FCC Rcd 8244 (Med. Bur. 2013) ("Public Notice Seeking Comment on MMTC Cross-Ownership Study"). 29 26 FCC Rcd at 17497, ¶ 21. Based on the record developed in response to the NPRM, we continue to believe that the longstanding policy goals of competition, localism, and diversity are broadly defined to promote the core responsibilities of broadcast licensees. See id. We are not persuaded by the comments in the record that it would be appropriate to adopt any additional formal policy goals. See, e.g., Diversity and Competition Supporters ("DCS") NPRM Comments at 5 (proposing that the Commission adopt the goals of remedying the present effects of past discrimination and preventing future discrimination); Don Schellhardt ("Schellhardt") NPRM Comments at 6 (urging the Commission to add promoting "robust employment" as a policy goal); Writers Guild of America, East, AFL-CIO ("WGAE") NPRM Comments at 2-3 (asserting that the Commission must add the additional goal of increasing the resources devoted to diverse local news programming in order to effectively promote the core policy goals of competition, localism, and diversity). We seek comment on this tentative conclusion. 30 Section 202(h) of the 1996 Act, 47 U.S.C. § 303 note; NPRM, 26 FCC Rcd at 17498, ¶ 26; see also 2006 Quadrennial Review Order, 23 FCC Rcd at 2060, ¶ 87. 31 Consistent with the Commission's finding in the 2006 Quadrennial Review Order, we tentatively find that the evidence in the record fails to demonstrate that the local television ownership rule threatens local programming. 23 FCC Rcd at 2067, ¶ 103. For example, broadcasters assert that eliminating the rule would promote localism, as the efficiencies of common ownership allow broadcasters to initiate or retain local news and public interest (continued….) 7 local television ownership rule we propose in this FNPRM would be consistent with our goal of promoting minority and female ownership of broadcast television stations. Finally, we believe that our proposed limited modification of the rule will better promote competition, and that this benefit would outweigh any burdens, which would be minimized by our proposal to grandfather combinations as described herein. 16. We propose to modify the local television ownership rule to allow an entity to own up to two television stations in the same DMA if: (1) the digital NLSCs of the stations (as determined by section 73.622(e) of the Commission's rules) do not overlap; or (2) at least one of the stations is not ranked among the top-four stations in the market and at least eight independently owned television stations would remain in the DMA following the combination.32 In calculating the number of stations remaining post-merger, only those stations whose digital NLSC overlaps with the digital NLSC of at least one of the stations in the proposed combination would be considered, which would be consistent with the contour overlap provision of the current rule. In addition, we propose to retain the existing failed/failing station waiver policy. We seek comment on these proposed modifications to the local television ownership rule and ask whether there have been any developments since the NPRM that we should take into account in our review of the rule. We seek comment on the costs and benefits of our proposed local television ownership rule. To the greatest extent possible, commenters should quantify the expected costs or benefits of the proposed rule and provide detailed support for any actual or estimated values provided, including the source of such data and/or the method used to calculate reported values.2.Background 17. In the NPRM, the Commission proposed to retain the local television ownership rule, with one modification. Specifically, the NPRM proposed to retain the top-four prohibition, eight-voices test, and numerical limits of the existing rule, while proposing to replace the Grade B contour overlap provision with a DMA-based approach, under which the Commission would prohibit ownership of two stations in the same DMA unless at least one of the stations is not rated in the top four and at least eight independent voices would remain after the transaction.33 The NPRM also invited comment on whether to adopt a market size waiver standard, the impact of multicasting on the local television ownership rule, and the impact of the proposed rule on minority and female ownership.34 18. Multiple commenters supported the Commission's proposal to retain the local television ownership rule to promote competition.35 Many commenters also asserted that the rule remains necessary to protect the Commission's localism and viewpoint diversity goals and to promote minority and female (Continued from previous page) programming. See, e.g., Grant Group NPRM Comments at 10; LIN NPRM Comments at 4; National Association of Broadcasters ("NAB") NPRM Comments at 18-20. By contrast, public interest commenters assert that while common ownership may produce efficiencies, such efficiencies do not always result in increased local content. See, e.g., Free Press NPRM Comments at 46-48 (citing Danilo Yanich, Ownership Matters: Localism, Local Television News, and the FCC (May 20, 2009) (presented at the International Communication Association annual meeting)). We note that the court in Prometheus II upheld the Commission's rationale in the 2006 Quadrennial Review Orderfor retaining the local television ownership rule. See Prometheus II, 652 F.3d at 458-62. 32 See Appendix B; see also 47 C.F.R. § 73.622(e). 33 NPRM, 26 FCC Rcd at 17502-07, ¶¶ 36-51. 34 Id. at 17508-11, ¶¶ 52-59. 35 See American Cable Association ("ACA") NPRM Comments at 12; DISH Network ("DISH") NPRM Reply at 1; Free Press NPRM Comments at 44-45; National Telecommunications Cooperative Association ("NTCA") NPRM Reply at 5. 8 Federal Communications Commission FCC 14-28 ownership.36 Others, particularly public advocacy commenters, urged the Commission not only to retain the television ownership limits, but to tighten them.37 Free Press and UCC et al. argued that the ability to multicast has eliminated the need for common ownership of multiple stations, and they asserted that returning to the single-license rule could create ownership opportunities for minorities and women.38 19. In contrast, broadcast industry commenters asserted that the local television ownership rule should be eliminated or substantially relaxed as a result of competition for viewers and advertising revenue from non-broadcast video alternatives.39 Many broadcasters argued that such relief is particularly warranted in small and mid-sized markets, where the current rule generally does not allow any common ownership.40 Broadcasters asserted also that eliminating the rule would promote localism, as the efficiencies of common ownership would allow broadcasters to initiate or retain local news and public interest programming, which requires significant capital investment.41 In addition, broadcasters asserted that common ownership can benefit the Commission's viewpoint diversity goals, as owners of station combinations have natural incentives to counterprogram their stations to maximize audience and revenue share.423.Discussion 20.Market. As proposed in the NPRM, we tentatively find that the local television ownership rule continues to be necessary to promote competition among broadcast television stations in local television viewing markets.43 ACA and WGAW supported the Commission's decision in the NPRM to focus its analysis on the promotion of competition among local broadcast television stations.44 In particular, WGAW asserted that the Internet is not a substitute for local television stations, primarily because the Internet is not yet an independent source of local news, and cannot be considered a competitor in local television markets.45 Conversely, many broadcasters opposed the Commission's 36 Communications Workers of America ("CWA") NPRM Comments at 4-6; CWA NPRM Reply at 5-6; DCS NPRM Comments at 38; WGAE NPRM Comments at 3; Writers Guild of America, West, Inc. ("WGAW") NPRM Comments at 3. 37 Schellhardt NPRM Comments at 2, 7; Free Press NPRM Comments at 44-45; Free Press NPRM Reply at 18-22; National Hispanic Media Coalition ("NHMC") et al. NPRM Comments at 3-5; Office of Communication of United Church of Christ ("UCC") et al. NPRM Comments at 24. 38 Free Press NPRM Comments at 44-45; Free Press NPRM Reply at 20-21; UCC et al. NPRM Comments at 24. 39 Belo NPRM Comments at 3-4; CBS NPRM Comments at 10; Entravision NPRM Comments at 4; Cedar Rapids Television ("CRT") NPRM Comments at 13; Grant Group NPRM Comments at 7-10; Gray NPRM Comments at 6- 7; LIN NPRM Comments at 3-4; NAB NPRM Comments at 11-12; Nexstar NPRM Comments at 8-10. In addition, Sinclair asserted that the Commission could allocate more stations if it wants to promote competition in local television markets. See Sinclair NPRM Comments at 11. 40 See Coalition of Smaller Market Television Stations ("Small Market Coalition") NPRM Reply at 7; CRT NPRM Comments at 13; Grant Group NPRM Comments at 7-10; Gray NPRM Comments at 6-7; Nexstar NPRM Comments at 9-10. 41 See Grant Group NPRM Comments at 10; Gray NPRM Comments at 7-8; LIN NPRM Comments at 4; NAB NPRM Comments at 18-20; Nexstar NPRM Comments at 22-23. 42 See Gray NPRM Comments at 7; Nexstar NPRM Comments at 15. 43 NPRM, 26 FCC Rcd at 17500, ¶ 33; see also Prometheus II, 652 F.3d at 458-61 (upholding the Commission's decision to retain the local television ownership rule in order to promote competition among broadcast television stations in local markets). 44 ACA NPRM Comments at 12; WGAW NPRM Comments at 2. 45 WGAW NPRM Comments at 2-3 (citing findings from Media Ownership Study 6, Less of the Same: The Lack of Local News on the Internet 10, by Matthew Hindman (2011) ("Media Ownership Study 6")); but see Nexstar (continued….) 9 Federal Communications Commission FCC 14-28 decision to focus on competition among local broadcast television stations and asserted that stations face competition for audience share and advertising revenue from non-broadcast video alternatives, such as multichannel video programming distributors ("MVPDs") and the Internet.46 According to these commenters, the Commission is compelled to consider such competing sources of video programming in its local television ownership rule and, as a result, must eliminate or substantially relax the rule.47 Although we believe the record in the 2010 Quadrennial Review proceeding supports our view of the appropriate parameters for defining the market, we seek comment on whether developments since theNPRM should cause us to shift the focus of our analysis. 21. First, we believe that the video programming market remains the relevant market for review of the local television ownership rule.48 We also believe that the video programming market is distinct from the radio listening market. While multiple broadcast commenters argued in favor of an expansive market definition that would include nearly all forms of media, we tentatively find such arguments to be unpersuasive.49 The Commission has previously found that the video programming market is distinct from other media markets because consumers do not view non-video entertainment options (e.g., listening to music or reading) and non-delivered video options (e.g., DVDs or movie theaters) as good substitutes for watching television, and there is no evidence in the current record that would cause us to disturb these findings.50 (Continued from previous page) NPRM Reply at 5 (stating that 202(h) does not require a media alternative to be a perfect substitute to be considered a competitor). 46 See Belo NPRM Comments at 3, 6; CBS NPRM Comments at 11; CRT NPRM Comments at 12-13; Entravision NPRM Comments at 4-5; Grant Group NPRM Comments at 8; NAB NPRM Comments at 12; NAB NPRM Reply at 9-10; Nexstar NPRM Comments at 6-9; Nexstar NPRM Reply at 3-4; Sinclair NPRM Comments at 9-10. In addition, many broadcasters asserted that they compete for advertising revenue with non-video sources of information and entertainment, such as radio stations, newspapers, billboards, and magazines. See, e.g., Belo NPRM Comments at 3, 6; CRT NPRM Comments at 12-13; NAB NPRM Comments at 12. 47 See, e.g., Belo NPRM Comments at 3-4; CBS NPRM Comments at 10; NAB NPRM Comments at 11-12; NAB NPRM Reply at 9-10; see also The Walt Disney Company ("Disney") NPRM Reply at 2-3 (arguing that the Commission should consider growth of new media outlets and, instead of regulating the broadcast industry, should find ways to incent ownership of broadcast stations). 48 See NPRM, 26 FCC Rcd at 17500-01, ¶ 33; 2006 Quadrennial Review Order, 23 FCC Rcd at 2064, ¶ 97 (analyzing the local television ownership rule in the context of the video programming market); 2002 Biennial Regulatory Review – Review of the Commission's Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Telecommunications Act of 1996, MB Docket No. 02-277, Report and Order and Notice of Proposed Rulemaking, 18 FCC Rcd 13620, 13672-73, ¶¶ 142-145 (2003) (referring to the video programming market as the "delivered video programming market") ("2002 Biennial Review Order"). Although the video programming market broadly speaking also includes video programming delivered via MVPDs and the Internet, as discussed in paragraphs 22-25 and consistent with Commission precedent cited here, we tentatively conclude that non-broadcast sources of video programming should not be included in our analysis of the local television ownership rule at this time. See 2006 Quadrennial Review Order, 23 FCC Rcd at 2064, ¶ 97; 2002 Biennial Review Order, 18 FCC Rcd at 13673, ¶ 145. 49 See, e.g., Belo NPRM Comments at 3, 6; CRT NPRM Comments at 12-13; NAB NPRM Comments at 12. 50 2002 Biennial Review Order, 18 FCC Rcd at 13672-73, ¶ 142. In addition, we note the NPRM's tentative conclusion that it is not now appropriate to expand the relevant product market beyond video programming to include non-video information sources of local news and information. NPRM, 26 FCC Rcd at 17501, ¶ 35. This tentative conclusion was based on evidence that Internet-only websites provide only a small amount of local news content and a lack of evidence that non-video information sources modify their programming decisions based on the actions of local broadcast television stations or vice versa. Id. We did not receive significant comment on this specific issue in the 2010 proceeding, and we seek comment on whether we should confirm the NPRM's tentative conclusion for the reasons discussed therein. Id. 10 Federal Communications Commission FCC 14-28 22. Second, we believe that our analysis regarding the local television ownership rule should continue to focus on promoting competition among broadcast television stations in local television viewing markets.51 In order to compete effectively in its local market, and thereby gain market share, a broadcast television station must invest in better programming and provide programming tailored to the needs and interests of the local community, including local news and public interest programming.52 By strengthening their position in the local market, television broadcasters are better able to compete for advertising revenue and retransmission consent fees, an increasingly important source of revenue for many stations. Viewers in the local market benefit from such competition among numerous strong rivals in the form of higher quality programming.53 23. While we are keenly aware of the growing popularity of video programming delivered via MVPDs and the Internet, we tentatively find that competition from such video programming providers is currently of limited relevance for the purposes of our analysis. These programming alternatives compete largely in national markets — cable network programming is generally uniform across all markets, as is video programming content available via the Internet — and, unlike local broadcast stations, such programming providers are not likely to respond to conditions in local markets.54 Though certain broadcast commenters disputed this notion, we tentatively find their arguments to be unsupported by evidence of non-broadcast video programmers modifying their programming decisions based on the competitive conditions in a particular local market.55 24. In addition, we tentatively find that broadcast television's strong position in the local advertising market supports our view that non-broadcast video programmers are not yet meaningful substitutes in local television markets. Broadcasters asserted that we should expand the relevant market, in part because of increased competition for advertising from non-broadcast sources of video programming, particularly in the local advertising market.56 The data do not support this claim. From 2008 through 2011, though overall local advertising spending was down from its highs in 2005 and 2006, local broadcast television's market share actually increased and achieved the highest levels since 2004.57 51 2006 Quadrennial Review Order, 23 FCC Rcd at 2064, ¶ 97. 52 Id.53 Id.54 Id.55 Entravision NPRM Comments at 4-5 (claiming that the Commission should not focus on whether non-broadcast video providers alter their behavior based on changes in the local market, but whether local television stations can survive the loss of audience share and advertising revenue resulting from viewers' reliance on non-broadcast video alternatives); NAB NPRM Comments at 15 (asserting that platforms such as cable, satellite, and new media — as distinguished from program networks — have incentives to compete in local markets to gain subscribers and local advertising revenue); Sinclair NPRM Comments at 9-10 (asserting that cable news channels should be considered competitors to local newscasts, even though cable news is generally national in scope, because many viewers watch local newscasts to obtain national news); Nexstar NPRM Reply at 5 (suggesting that broadcasters must compete with national cable networks even if the cable network does not react to competitive changes in local markets). 56 See, e.g., NAB NPRM Comments at 12-16. 57 SNL KAGAN, ADVERTISING FORECASTS: U.S. MARKET TRENDS & DATA FOR ALL MAJOR MEDIA 25-26 (2011) ("SNL KAGAN ADVERTISING FORECASTS 2011"). For the election years in this time period, broadcast television's advertising revenue market share increased from 13.6 percent in 2008 to 15.8 percent in 2010; for non-election years, the market share increased from 13.4 percent in 2009 to 14.9 percent in 2011. Id. In addition, market share in 2012, an election year, is expected to rise to 16.0 percent. Id. at 26. We note also that broadcast television's share of national advertising revenue has remained relatively consistent since 2008, and the industry has seen significant gains in retransmission consent fees and online revenue. In fact, total broadcast television revenue for 2012 is predicted to reach its highest level since 2000. See id. at 147 (reporting approximately $26.3 billion in total revenue for 2000); SNL KAGAN, ECONOMICS OF BROADCAST TV RETRANSMISSION REVENUE 2 (2012) ("SNL KAGAN BROADCAST TV RETRANSMISSION REVENUE") (predicting approximately $24.8 billion in total revenue for 2012). 11 Federal Communications Commission FCC 14-28 While the shares of local advertising on cable television and the Internet also increased during this time period, those gains do not appear to be at the expense of broadcast television stations.58 We seek comment on whether there have been any significant changes since these figures became available. 25. For the foregoing reasons, we believe that broadcast television stations continue to play a unique and vital role in local communities that is not meaningfully duplicated by non-broadcast sources of video programming. In addition to providing viewers with the majority of the most popular programming on television,59 broadcast television stations remain the primary source of local news and public interest programming.60 Moreover, millions of U.S. households lack broadband access at speeds sufficient to stream or download video programming available via the Internet.61 Accordingly, we tentatively find that the record continues to support a local television ownership rule designed to promote 58 SNL KAGAN ADVERTISING FORECASTS 2011 at 25-26. NAB asserted that the recent growth in television station advertising revenue is temporary and not likely to "address the structural changes that have taken place in the [television] market" because the predicted 2012 advertising revenues for the broadcast television industry are below the levels achieved in 2006. NAB NPRM Reply at 10 & n.36. While advertising revenues for broadcast television stations were lower during this period, we believe the evidence does not support the conclusion that this was the result of a unique change in the television marketplace; instead, the total advertising market for all media experienced a significant contraction, which was most likely the result of the global financial crisis that impacted nearly all markets. SNL KAGAN ADVERTISING FORECASTS 2011 at 20. Moreover, total station revenue for 2012 was predicted to exceed the total station revenue for 2006 and to grow steadily through 2017. Id. at 147; SNL KAGAN BROADCAST TV RETRANSMISSION REVENUE at 2. However, we seek comment on whether any structural changes have occurred in the television marketplace and, if so, whether to adjust our 2014 Quadrennial Review analysis to account for such changes. 59 See paragraphs 234 and 235, infra, for a discussion of the popularity of broadcast network programming relative to cable network programming in the context of the dual network rule. See also National Association of Broadcasters, Testimony of Hearst Television President and CEO David Barrett on “The Future of Video” (press release), June 27, 2012 ("[A]pproximately 96 . . . of the top 100 shows are on broadcast television."). 60 The current record demonstrates that, at present, alternative video programmers do not generate significant amounts of original local content. While the growth of local and hyperlocal websites may change our analysis in the future, currently many communities lack access to broadband connections to take advantage of such websites. Also, currently the vast majority of original content on the Internet is generated by traditional media outlets such as broadcast television stations or newspapers, and may be repackaged by other web outlets. See, e.g., PEW RESEARCH CENTER'S PROJECT FOR EXCELLENCE IN JOURNALISM, HOW NEWS HAPPENS: A STUDY OF THE NEWS ECOSYSTEM OF ONE AMERICAN CITY (2010) ("PEW BALTIMORE STUDY"), available athttp://www.journalism.org/files/legacy/Baltimore%20Study_Jan2010_0.pdf; STEVE WALDMAN AND THE WORKING GROUP ON INFORMATION NEEDS OF COMMUNITIES, FCC, THE INFORMATION NEEDS OF COMMUNITIES: THE CHANGING MEDIA LANDSCAPE IN A BROADBAND AGE 123-24 (2011) ("INFORMATION NEEDS OF COMMUNITIES"),available at http://transition.fcc.gov/osp/inc-report/The_Information_Needs_of_Communities.pdf (referencing several studies to support the conclusion that "the growing number of web outlets relies on a relatively fixed, or declining, pool of original reporting provided by traditional media"). These studies were cited in the record earlier in this proceeding and no evidence was submitted to refute their validity or otherwise demonstrate that alternate video programmers are producing a significant amount of original local content. In addition, the findings of these studies are consistent with Media Ownership Study 6, which found that, in the top 100 markets, there is a very limited amount of local news content available on the Internet that is not provided by traditional media organizations (e.g., broadcasters or print media). Media Ownership Study 6 at 29-30. 61 See Eighth Broadband Progress Report, 27 FCC Rcd at 10369, ¶ 44 (finding that approximately 19 million Americans lack access to fixed broadband meeting the 4 Mbps/1 Mbps speed benchmark). Some broadcasters inferred from the NPRM that the Commission will not consider the impact of the Internet until there is 100 percent access to broadband — a position that these commenters challenged. See, e.g., Belo NPRM Comments at 5; Nexstar NPRM Comments at 12; Nexstar NPRM Reply at 6. It is not our position that broadband deployment and adoption must be universal to warrant inclusion in this rule; however, the current level of access to and adoption of such service are certainly relevant when considering the extent to which video programming provided via the Internet is a meaningful substitute for broadcast television stations in local television viewing markets. 12 Federal Communications Commission FCC 14-28 competition among broadcast television stations.62 We believe the 2010 Quadrennial Review record supports the use of this approach, and we seek comment on whether this market definition should apply for purposes of our 2014 Quadrennial Review. 26.Contour Overlap. The NPRM proposed to eliminate the Grade B contour overlap test and rely solely on Nielsen DMAs to determine when to apply the local television ownership rule.63 TheNPRM recognized that the DMA approach could have a disproportionate impact in certain DMAs and sought comment on the impact of such a change.64 As discussed below, we tentatively find that the public interest is best served by retaining the contour-based approach of the previous rule but by replacing the analog Grade B contour with the digital NLSC. We seek comment on whether any developments have occurred since the NPRM that should cause us to reconsider our proposed approach. 27.<br (c) 2014 Streamline RBR, Inc. All Rights Reserved. Provided by Syndigate.info, an Albawaba.com company |