[Senate Report 108-141]
[From the U.S. Government Publishing Office]
108th Congress Report
SENATE
1st Session 108-141
_______________________________________________________________________
Calendar No. 270
PRESERVATION OF LOCALISM, PROGRAM DIVERSITY, AND COMPETITION IN
TELEVISION BROADCAST SERVICES ACT OF 2003
__________
R E P O R T
OF THE
COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
on
S. 1046
together with
ADDITIONAL VIEWS
DATE deg.September 3, 2003.--Ordered to be printed
SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
One Hundred Eighth Congress
first session
------
JOHN McCAIN, Arizona, Chairman
TED STEVENS, Alaska ERNEST F. HOLLINGS, South Carolina
CONRAD BURNS, Montana DANIEL K. INOUYE, Hawaii
TRENT LOTT, Mississippi JOHN D. ROCKEFELLER IV, West
KAY BAILEY HUTCHISON, Texas Virginia
OLYMPIA J. SNOWE, Maine JOHN F. KERRY, Massachusetts
SAM BROWNBACK, Kansas JOHN B. BREAUX, Louisiana
GORDON SMITH, Oregon BYRON L. DORGAN, North Dakota
PETER G. FITZGERALD, Illinois RON WYDEN, Oregon
JOHN ENSIGN, Nevada BARBARA BOXER, California
GEORGE ALLEN, Virginia BILL NELSON, Florida
JOHN E. SUNUNU, New Hampshire MARIA CANTWELL, Washington
FRANK LAUTENBERG, New Jersey
Jeanne Bumpus, Staff Director and General Counsel
Ann Begeman, Deputy Staff Director
Robert W. Chamberlin, Chief Counsel
Kevin D. Kayes, Democratic Staff Director and Chief Counsel
Gregg Elias, Democratic General Counsel
Calendar No. 270
108th Congress Report
SENATE
1st Session 108-141
======================================================================
PRESERVATION OF LOCALISM, PROGRAM DIVERSITY, AND COMPETITION IN
TELEVISION BROADCAST SERVICES ACT OF 2003
_______
September 3, 2003.--Ordered to be printed
_______
Mr. McCain, from the Committee on Commerce, Science, and
Transportation, submitted the following
R E P O R T
together with
ADDITIONAL VIEWS
[To accompany S. 1046]
The Committee on Commerce, Science, and Transportation, to
which was referred the bill (S. 1046) to amend the
Communications Act of 1934 to preserve localism, to foster and
promote the diversity of television programming, to foster and
promote competition, and to prevent excessive concentration of
ownership of the nation's television broadcast stations, having
considered the same, reports favorably thereon without
amendment deg. with an amendment with an amendment (in
the nature of a substitute) deg. and recommends that the bill
joint resolution deg. as amended do pass.
Purpose of the Bill
The purpose of this legislation is to prevent any one
entity from owning, operating, controlling, or having a
cognizable interest in broadcast television stations that have
an aggregate national audience reach exceeding 35 percent. The
legislation also would require entities that own, operate,
control, or have a cognizable interest in broadcast television
stations that have an aggregate national audience reach
exceeding 35 percent to divest such stations within one year
after the date of enactment of this legislation. Further, this
legislation would change the standard used by the Federal
Communications Commission (FCC or Commission) to review its
media ownership rules; require broadcast radio station group
owners that exceed local ownership limits to divest such
stations within one year after the date of enactment of this
legislation; reinstate the FCC's broadcast-newspaper and radio-
television cross ownership bans; require the Commission to hold
five public hearings in different areas in the United States
before it renders any decision in conjunction with its mandated
review of media ownership rules; and provide a small market
exemption from the Commission's broadcast-newspaper cross
ownership ban.
Background and Needs
For over seventy years, the FCC's regulation of broadcast
service has sought to ensure that the allocation of broadcast
licenses serves the public interest and promotes the core
values of competition, diversity, and localism that are
essential to the fabric of American democracy. Indeed, as was
noted by the Supreme Court over 50 years ago, our First
Amendment ``rests on the assumption that the widest possible
dissemination of information from diverse and antagonistic
sources is essential to the welfare of the public.'' Associated
Press v. United States, 326 U.S. 1 (1945).
In the earliest days of broadcast regulation, the FCC
reviewed common ownership issues on a case by case basis and
denied proposed combinations that would result in one owner
holding multiple licenses in a local market as inconsistent
with the ``public interest, convenience, and necessity.'' Over
time, the FCC has also sought to protect the public interest
through the adoption of bright line rules that limit license
ownership and guard against the accumulation of market power in
national and local media markets. Such limits have included
restrictions on the total numbers of radio stations and
television stations that a single entity could own in local and
national markets. However, with the passage of the
Telecommunications Act of 1996 (``1996 Act''), Congress
significantly loosened media ownership limits, and established
a requirement that the FCC review these limits every two years.
The Act itself repealed the prohibition on telephone-cable
cross ownership; overrode the remaining regulatory limits upon
cable-broadcast cross ownership; eliminated the national radio
ownership cap; relaxed restrictions on local radio ownership;
and eased the ``dual network'' rule. The 1996 Act also mandated
that the FCC review its media ownership rules biennially to
``determine whether any of such rules are necessary in the
public interest as the result of competition.''
On June 2, 2003, the FCC completed its 2002 biennial review
of its media ownership rules as required by section 202(h) of
the 1996 Act. In its recent decision, the FCC increased the
national ownership limits affecting the number of broadcast
television stations that one entity may own, operate, control
or in which an entity may hold a cognizable interest to 45
percent. It also relaxed its cross ownership rules, which limit
the ability of one entity to own a daily newspaper and multiple
radio and television stations in the same market.
There has been significant consolidation in the media
marketplace over the last decade. In the broadcast television
industry, the number of television station owners has dropped
40 percent since 1995. In radio, the number of commercial radio
station owners has declined by 34 percent since 1996, and the
top station group has increased its size from a total of 39
stations with annual revenues of $495 million, to over 1200
stations with annual revenues of almost $3.2 billion.
Similarly, media consolidation has resulted in substantial
changes to the broadcast television programming market. One
recent study by Tom Wolzien of Bernstein Research, notes that
five media conglomerates control ``about a 75 percent share of
prime-time viewing'' and are on pace to soon control roughly
``the same percentage of TV households in prime time as the
three networks did 40 years ago.'' Accordingly, while
technology has provided a number of new media outlets, these
outlets are largely controlled by the same large media
conglomerates. This increasing influence over programming and
distribution outlets has generated an outpouring of concern
among many groups and private citizens who believe that robust
structural safeguards are needed to protect the public interest
and to promote competition, diversity, and localism in
broadcasting.
Moreover, increased media consolidation has also fueled
public concern about efforts to relax the commission's cross-
ownership restriction. Changes that would allow a single entity
to own or control a variety of media properties in local
markets (e.g. a newspaper, television and radio stations, cable
systems, Internet web sites) raise significant concerns about
the preservation of diverse and antagonistic sources of news
and information in local markets.
I. THE NATIONAL TELEVISION OWNERSHIP CAP
For several decades, the FCC's national television
ownership limits focused on restricting the number of
television stations an entity could own. Then, in 1985, the FCC
adopted an additional ownership limit based on audience reach.
This rule allowed entities to acquire interests in television
stations as long as the combined reach of those stations did
not exceed 25 percent of the national audience determined by
market rankings. See Memorandum Opinion and Order, Gen. Docket
No. 83-1009, FCC 84-638 (adopted Dec. 19, 1984).
Under section 202 of the 1996 Act, Congress directed the
FCC to eliminate the restriction on the total number of
television stations that an entity could own (which at the time
prohibited common ownership of more than 12 television
stations), and increased the national audience cap from 25
percent to 35 percent. See Telecommunications Act of 1996, Pub.
L. No. 104-104, 110 Stat. 56 (1996). In its 1998 Biennial
Review, the FCC decided to retain the 35 percent cap so it
could: (1) observe the effects of recent changes in the rules
required by the 1996 Act; (2) observe the effects of the
national ownership cap having been raised to 35 percent; and
(3) preserve the power of local affiliates to bargain with
their networks in order to promote diversity of programming.
1998 Biennial Regulatory Review, Biennial Review Report, 15 FCC
Rcd 11058 (adopted May 26, 2000).
After the 1998 Biennial Review was released, three of the
national networks, FOX, NBC, and CBS, challenged the FCC's
decision to retain the 35 percent cap. The D.C. Circuit, while
rejecting the networks' constitutional challenges, held that
the FCC's decision to retain the 35 percent cap was arbitrary
and capricious, finding the FCC had provided ``no valid reason
to think the [national TV ownership rule] is necessary to
safeguard competition'' or ``to advance diversity.''
Furthermore, the court determined the FCC had failed to comply
with the review required by 202(h) byproviding ``no analysis on
the state of competition in the television industry to justify its
decision''. Fox Television Stations, Inc. v. FCC, 280 F.3d 1027,
rehearing granted, 293 F.3d 537 (D.C. Cir. 2002); Sinclair Broadcast
Group, Inc. v. FCC, 284 F.3d 148 (D.C. Cir. 2002), rehearing denied
Aug. 13, 2002.
While the networks asked the court to vacate the 35 percent
cap, the D.C. Circuit expressly declined this invitation.
Instead the court chose to remand the rule to the Commission
for further consideration. As the court explained,
``Although the Commission's decision to retain the
rule was, as written, arbitrary and capricious and
contrary to 202(h), we cannot say with confidence that
the Rule is likely irredeemable . . . . We note that
although the Commission in its 1998 Report failed to
develop any affirmative justification for the rule
based on competitive concerns, it did, albeit, somewhat
cryptically, advert to possible competitive problems in
the national markets for advertising and program
production . . . . In sum, we cannot say it is unlikely
that the Commission will be able to justify a future
decision to retain the Rule. Fox, 293 F.3d at 1048-
49.''
As a result of the Court's directive, the Commission
invited comment on whether to retain, eliminate, or modify the
35 percent national ownership rule as part of its 2002 Biennial
Review of the Commission's media ownership rules.
FCC Decision. In its June 2, 2003 decision, the Commission
found that although evidence in the record before it supported
the retention of a national ownership cap, it did not support a
cap of 35 percent. Therefore the FCC raised the cap on the
number of broadcast television stations one party may own from
stations constituting 35 percent of the national audience share
to station constituting 45 percent of the national audience
share. The national audience share is calculated by adding the
number of TV households in each market in which a company owns
a station divided by the total number of United States
television households.
The Commission found that a national television cap serves
the policy goal of localism by preserving a balance of power
between the networks and their affiliates serving local needs
and interests by ensuring that affiliates can play a meaningful
role in selecting programming suitable for their communities.
The Commission also found that a modest relaxation of the cap
would help networks compete more effectively with cable and DBS
operators and would promote free, over-the-air television by
deterring migration of expensive programming to cable networks.
Independent stations affiliated with the networks argue
that retention of the 35 percent cap is essential to the
preservation of localism and diversity over the airwaves.
Affiliates argue that raising the cap above 35 percent could
potentially silence the voices of local independently-owned and
operated outlets and cause a flurry of media mergers and
further consolidation of national networks. They also argue
that the national ownership cap ensures that programming
decisions remain in the hands of local broadcasters, not in the
hands of national networks.
II. RULES PROHIBITING CROSS OWNERSHIP
Local Radio/TV Cross Ownership. In 1970, the FCC adopted
rules limiting the common ownership of local radio and
television broadcast stations (``Local Radio/TV Cross Ownership
Rule'') in a single market. In 1989, the FCC adopted a
presumptive waiver policy to permit certain radio/TV
combinations. The Commission then relaxed the rule in 1999 to
balance the FCC's diversity and competition concerns with its
desire to permit broadcasters and the public to realize the
economic efficiencies enjoyed by common ownership of radio and
television stations. Prior to the FCC's recent action, its
rules allowed the common ownership of:
2 television stations and up to 6 radio stations in
any market where at least 20 independent ``voices''
would remain post-combination or 1 television station
and up to 7 radio station (where such entity could own
2 television stations and 6 radio stations);
2 television stations and up to 4 radio stations in
any market where at least 10 independent ``voices''
would remain post-combination;
1 television station and 1 radio station no matter
the number of independent ``voices'' that would remain
post-combination. See 47 C.F.R. Sec. 73.3555(c).
--``Voices'' included local broadcast
television stations, cable systems, radio
stations, and daily newspapers of a certain
circulation.
Newspaper/Broadcast Cross Ownership. In 1975, the FCC
adopted a rule prohibiting the common ownership of a full-
service broadcast station and a daily newspaper when the
broadcast station's service contour encompasses the newspaper's
city of publication (``Newspaper/Broadcast Cross Ownership
Rule''). See 47 C.F.R. Sec. 73.3555(d). When the Commission
adopted the rule, it grandfathered newspaper/broadcast
combinations in many markets (so long as the ownership of the
combination remained the same), but required divestiture of
properties in highly concentrated markets. Currently, more than
70 ``grandfathered'' newspaper/broadcast combinations exist.
FCC Decision. In its June 2, 2003, decision, the FCC
concluded that neither the Local Radio/TV Cross Ownership Rule
nor the Newspaper/Broadcast Cross Ownership Rule could be
justified for larger markets, finding that citizens rely on an
abundance of sources for news. Additionally, the FCC found
these rules did not promote competition because radio, TV, and
newspapers generally compete in different economic markets. The
FCC found that greater participation by newspaper publishers in
the television and radio business would improve the quality and
quantity of news available to the public.
As a result, the FCC replaced the cross ownership rules
with a new set of cross-media limits. In establishing these new
restrictions, the FCC developed a Diversity Index to measure
the presence of key media outlets in markets of various sizes.
According to the Commission, the index suggested that there
were three types of markets in terms of ``viewpoint diversity''
concentration, each warranting different regulatory treatment.
The Commission replaced the newspaper/broadcast and the local
radio/TV cross ownership rules with the following cross-media
limits for the three market types:
In markets with three or fewer TV stations, no cross
ownership is permitted among TV, radio, and newspapers.
A company may obtain a waiver of that ban if it can
show that the television station does not serve the
area served by the cross-owned property (i.e. the radio
station or the newspaper).
In markets with between four and eight TV stations,
combinations are limited to one of the following:
--(A) A daily newspaper; one TV station; and
up to half of the radio station limit for that
market (i.e. if the radio limit in the market
is six, the company can only own three);
--(B) A daily newspaper; and up to the radio
station limit for that market (i.e. no TV
stations); or
--(C) Two TV stations (if permissible under
local TV ownership rule); up to the radio
station limit for that market (i.e. no daily
newspapers).
In markets with nine or more TV stations, the FCC
eliminated the newspaper/broadcast cross ownership ban
and the local radio/TV cross ownership ban.
Significant concerns have been raised before the Committee
that the FCC's new rules allowing greater media cross ownership
will permit excessive consolidation in local markets, which
could threaten the diversity of viewpoints offered to a local
community, stifle democracy, and reduce competition among media
outlets to put forth the best news product. Some critics
believe the prohibition on cross ownership is also necessary to
protect advertisers that substitute between newspapers,
broadcast television, and broadcast radio. Without robust
competition for advertising dollars, many small businesses will
be forced to pay higher advertising rates, which may result in
consumers paying more for products in a market with commonly
owned newspapers and broadcast stations as such costs are
passed on to them.
Cross-ownership threatens localism as well, according to
the concerned parties. When one entity is allowed to own more
than one media outlet in a community, critics fear large
corporations will buy several media outlets there and ``pipe
in'' news and programming feeds from a central distribution
facility, rather than airing locally-originated news and
programming. Such consolidation may also decrease the number of
opinions and viewpoints that are provided to a community by its
media outlets if a consolidated media company, for example,
only has one editorial board instead of an editorial board for
each media property.
III. THE LOCAL RADIO OWNERSHIP CAP
The origins of local radio ownership limits can be traced
back to 1938. At that time, the FCC denied an application for a
new AM station based on the fact that the parties who
controlled the applicant also controlled another AM station in
the same community. The FCC believed that two stations in the
same community owned by the same party would not compete with
each other, and thereby the ``public convenience, interest and
necessity'' would not be served. Genesee Radio Corp., 5 FCC 183
(1938).
In the 1950s, the FCC placed this policy decision in its
rules stating, ``AM licensees are prohibited from owning
another AM station that would provide `primary service' to a
`substantial portion' of the `primary service area' of a
commonly owned AM station, except where the public interest
would be served by multiple ownership''. See Amendment of
sections 3.35, 3.240 and 3.636 of the Rules and Regulations
Relating to Multiple Ownership of AM, FM and Television
Broadcast Stations, Report and Order, 18 FCC 288 at 295-296
(1953). FM licensees were similarly restricted. From 1940 to
1964, the FCC enforced this rule on a case-by-case basis.
In 1964, the FCC developed a new local ownership rule using
a signal contour-based definition that only looked at the
overlap of the radio stations' signals, rather than using a
``primary service area'' definition. The new rule prohibited
common ownership of same service stations when any overlap of
signal contours occurred. The rule was designed to ``promote
maximum diversification of program and service viewpoints and
to prevent undue concentration of economic power contrary to
the public interest''. See Amendment of sections 73.35, 73.240
and 73.636 of the Commission's Rules, First Report and Order,
22 F. C. C. 2d 339, 344 (1970).
In 1992, the FCC found that the increasing number of media
outlets (TV, radio, cable, etc.) justified a relaxation of its
local radio ownership rule. Therefore, the FCC changed its
rules to allow a single party to own multiple stations in the
same local market. Specifically, for markets with more than 15
radio stations, a single licensee was permitted to own up to
two AM Stations and two FM stations, provided that the combined
audience share of the stations did not exceed 25 percent. For
stations in markets with fewer than 15 radio stations, a single
licensee was permitted to own up to three stations, (of which
no more than two could be AM or FM stations), provided that the
owned stations represented less than 50 percent of the total
number of radio stations in the market.
Shortly thereafter, the most profound change in local radio
ownership limits occurred with the enactment of the
Telecommunications Act of 1996, which eliminated the national
ownership limit (then prohibiting a single entity from owning
more than 40 radio stations nationwide) and directed the FCC to
further revise its local ownership rule by allowing the
following combinations:
--In local radio markets with 45 or more radio
stations, a company may own 8 stations, only 5 of which
may be in one class, AM or FM;
--In local radio markets with 30-44 radio stations, a
company may own 7 stations, only 4 of which may be in
one class, AM or FM;
--In local radio markets with 15-29 radio stations, a
company may own 6 stations, only 4 of which may be in
one class, AM or FM; and
--In local radio markets with 14 or fewer radio
stations, a company may own 5 stations, only 3 of which
may be in one class, AM or FM, except that a party may
not own, operate, or control more than 50 percent of
the stations in such market. See 47 U.S.C. 202(b).
FCC Decision. In its June 2, 2003, decision, the Commission
found that local limits on radio ownership remained necessary
to further the public interest. However, it changed its
methodology for implementing the local radio ownership rule.
As noted above, the FCC previously used a signal contour
methodology to define a ``local radio market'' for purposes of
determining whether a station owner was in compliance with the
local ownership limits. This methodology led to some anomalous
results that appeared to frustrate the local ownership limits
in the 1996 Act. The most commonly cited example is Minot,
North Dakota, where one entity owns six of the seven commercial
stations that directly serve the Minot area. In its recent
decision, the Commission eliminated the use of the signal
contour methodology and replaced it with a geographic market
methodology. Under this new methodology, all radio stations
licensed to communities in an Arbitron Metro market are counted
as being in that ``local radio market'' regardless of their
signal reach. Under the new market definition, certain station
groups will exceed the limits on local radio ownership. The FCC
decided to ``grandfather'' these existing clusters under its
news rules, rather than requiring the owners to come into
compliance with the limits under the new market definition.
Legislative History
Senators Stevens, Hollings, Burns, Lott, Dorgan, and Wyden
introduced S. 1046 on May 13, 2003. The Committee held hearings
regarding media ownership on January 30, May 6, May 13, May 22,
and June 4, 2003. All five FCC Commissioners attended the
hearing on June 4, 2003, during which the participants
discussed the FCC's new rules.
On June 19, 2003, the Senate Commerce, Science, and
Transportation Committee held an executive session at which S.
1046 was considered. The bill was approved by voice vote and
was ordered reported with amendments including: an amendment by
Senator McCain to clarify Congressional intent with respect to
the media ownership rules review standard to be used by the
FCC; an amendment by Senator McCain to vitiate the FCC's
grandfathering of radio broadcast station ownership under the
new local radio ownership rules; an amendment offered by
Senators Dorgan, Hollings, Hutchinson, Snowe, Wyden, and
Cantwell to restore the cross ownership media rules to their
pre-June 2, 2003, status, as well as a second degree amendment
by Senator Stevens providing small markets with an exemption to
the newspaper/broadcast cross ownership rule under certain
circumstances; and an amendment by Senator Boxer to require the
FCC to hold five geographically diverse public hearings before
concluding its media ownership rules review.
Estimated Costs
In accordance with paragraph 11(a) of rule XXVI of the
Standing Rules of the Senate and section 403 of the
Congressional Budget Act of 1974, the Committee provides the
following cost estimate, prepared by the Congressional Budget
Office:
U.S. Congress,
Congressional Budget Office,
Washington, DC, July 25, 2003.
Hon. John McCain,
Chairman, Committee on Commerce, Science, and Transportation,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for S. 1046, the
Preservation of Localism, Program Diversity, and Competition in
Television Broadcast Service Act of 2003.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Melissa E.
Zimmerman (for federal costs): Theresa Gullo (for the state and
local impact); and Jean Talarico (for the impact on the private
sector).
Sincerely,
Robert A. Sunshine
(For Douglas Holtz-Eakin, Director.)
Enclosure.
Congressional Budget Office Cost Estimate
S. 1046--Preservation of Localism, Program Diversity, and Competition
in Television Broadcast Service Act of 2003
Summary: S. 1046 would change current law and existing
regulations concerning ownership of television, radio, and
newspapers. The bill also would clarify the frequency and
nature of the Federal Communication Commission's (FCC's)
reviews of those regulations. CBO estimates that implementing
S. 1046 would cost the FCC less than $500,000 over the 2004-
2008 period.
S. 1046 contains no intergovernmental mandates as defined
in the Unfunded Mandates Reform Act (UMRA) and would not affect
the budgets of state, local, or tribal governments.
S. 1046 would impose private-sector mandates on the owners
of radio stations, television stations, and newspapers. The
most costly mandate would be imposed on the owners of radio
stations. Based on information from several industry experts,
CBO expects that the cost of all the private-sector mandates in
the bill would exceed the annual threshold for such mandates
established by UMRA ($117 million in 2003, adjusted annually
for inflation).
Estimated cost to the Federal Government: S. 1046 would
void regulations issued by the FCC on June 2, 2003, pertaining
to the ownership of television stations, radio stations, and
newspapers. The bill would reinstate the regulations concerning
ownership of multiple media outlets that were in effect before
that date. S. 1046 also would direct the FCC not to grant or
transfer a television license if that act would result in an
entity owning or controlling television stations that reach an
aggregate national audience of more than 35 percent. CBO
estimates that those changes would not have a significant
effect on federal spending.
In addition, sections 5 and 6 of the bill would clarify
existing law regarding how the FCC reviews its regulations on
broadcast ownership. Under the bill, the FCC would have to
review its regulations every two years and hold at least five
public hearings in different areas of the United States in
conjunction with each review. Based on information provided by
the FCC, CBO estimates that those provisions would cost less
than $500,000 each year over the 2004-2008 period, subject to
the availability of appropriated funds.
Estimated impact on state, local, and tribal governments:
S. 1046 contains no intergovernmental mandates as defined in
UMRA and would not affect the budgets of state, local, or
tribal governments.
Estimated impact on the private sector: S. 1046 would
impose private-sector mandates as defined in UMRA on the owners
of radio stations, television stations, and newspapers. The
most costly mandate would be imposed on the owners of radio
stations. Based on information from several industry experts,
CBO expects that the cost of all mandates in the bill would
exceed the annual threshold for private-sector mandates
established by UMRA ($117 million in 2003, adjusted annually
for inflation).
Ownership of Radio Stations
The FCC adopted a Report and Order on media ownership on
June 2, 2003. That decision would maintain the current
limitation on radio ownership. At the same time, however, the
FCC's decision would change the methodology for defining local
radio markets to a market-based approach using Arbitron Metro
rating boundaries. That change would reduce the number of
stations a company may own in a local market. Consequently,
many owners of radio stations would exceed the ownership limit
if the FCC's new rules become effective. To avoid requiring
those owners to sell their stations, the FCC's June 2 decision
included a ``grandfather'' provision that would exclude those
owners from the new ownership limit. Section 4 of this bill
would revoke that ``grandfather'' provision. As a result, those
owners of radio stations not in compliance with the local
market caps under the new market definitions would be required
to sell some properties within one year after enactment of this
bill.
The cost of this mandate on owners of radio stations would
be incurred in the form of diminished value for the stations
they would be required to sell. Based on information
fromindustry sources, CBO estimates that the cost would exceed the
annual threshold for private-sector mandates. Bear, Stearns & Company
estimates that owners of radio stations would be required to sell over
200 stations to comply with the removal of the ``grandfather''
provision. The consensus of industry experts is that the owners of
those stations would be able to sell them only at prices considerably
below recently recorded market prices. Two reasons are cited. First,
the bill's mandate would create a buyer's market in which many stations
would be on the market at the same time. The bargaining power of
potential buyers would grow as the deadline approached for the owner of
stations to meet the ownership limitations. Second, in some instances,
current owners enjoy economic advantages in operating and marketing the
clusters of stations that they own; potential new owners of some of
those stations would be unlikely to capture such benefits and thus
would not account for them in their offers.
Ownership of Commercial Television Broadcast Stations
Currently, a broadcast network can own and operate local
broadcast stations that reach up to 35 percent of households
nationwide. The FCC increased the ownership cap to 45 percent
in its June 2 decision, and that new cap is likely to become
effective within a few months. Section 3 of S. 1046 would
restore the current national television ownership cap of 35
percent. The bill also would require any party that holds
licenses for commercial television broadcast stations that
exceed the 35 percent limit to sell some of their stations to
comply with this limit within one year from the date of
enactment.
According to the FCC, two companies would exceed the cap:
Viacom Inc. (the owner of CBS) and News Corps. (the owner of
Fox). Based on information from government and industry
sources, CBO estimate that Viacom, Inc. and News Corps. would
likely be able to sell their stations at a fair market value.
Therefore, the cost of this mandate would be only the
transaction cost involved in the sale.
Cross-Ownership of Media Outlets
Prior to June 2, 2003, the FCC prohibited companies from
owning a television station and newspaper in a single market
and limited the combined number of radio and television
stations that companies could own in a single market. The FCC's
June 2 decision relaxed those restrictions. As a result, under
current law, companies will be able to request approval from
the FCC to own additional cross-media properties. Section 7 of
S. 1046 would reinstate the more restrictive broadcast-
newspaper and radio-television cross-ownership rules that were
in effect on June 1, 2003, retroactively to June 2, 2003. The
costs to the private-sector of reinstating the cross-ownership
rules would be the loss in profits that would otherwise be
earned by those who would purchase additional media properties
under the relaxed restrictions. CBO has no basis for estimating
that loss.
Further, if media owners purchase properties during the
period that the FCC's relaxed restrictions are in effect that
are not in compliance with the requirements of S. 1046, those
owners would be required to sell such properties. Given the
strong possibility that the more restrictive cross-media rules
will be reinstated, it is very unlikely that any parties would
apply for or receive licenses under the relaxed rules prior to
enactment of this legislation.
Estimate prepared by: Federal Costs: Melissa E. Zimmerman;
impact on state, local, and tribal governments: Theresa Gullo;
impact on the private sector: Jean Talarico.
Estimate approved by: Robert A. Sunshine, Assistant
Director for Budget Analysis.
Regulatory Impact Statement
In accordance with paragraph 11(b) of rule XXVI of the
Standing Rules of the Senate, the Committee provides the
following evaluation of the regulatory impact of the
legislation, as reported:
NUMBER OF PERSONS COVERED
S. 1046 would restore the FCC's 35 percent national
broadcast television ownership cap and its cross ownership
rules, and would make other changes to the Communications Act
of 1934. The number of persons covered by this legislation
should be consistent with current levels of individuals
affected.
ECONOMIC IMPACT
S. 1046 would restrict consolidation of media companies in
the United States. Although the legislation may have an adverse
economic impact on those companies, it is expected to help
ensure an environment conducive to economic opportunity for
diverse, local programming and advertising.
PRIVACY
S. 1046 is not expected to have an adverse effect on the
personal privacy of any individuals that will be impacted by
this legislation.
PAPERWORK
S. 1046 is expected to have a minimal impact on current
paperwork levels.
Section-by-Section Analysis
Section 1. Short title
This section would provide that the legislation may be
cited as the ``Preservation of Localism, Program Diversity, and
Competition in Television Broadcast Service Act of 2003''.
Sec. 2. Congressional findings and purposes
This section states that the principle of localism has been
the ``pole star'' for regulation of the broadcast industry by
the FCC for nearly 70 years, and that any increase in the
national television multiple ownership cap may harm this
principle. In addition, this section states that retaining the
national television multiple ownership cap at 35 percent would
prevent further national concentration that may occur, the
pernicious effects of which may be difficult to eradicate once
begun, and would ensure the independence of non-network owned
stations from becoming passive conduits for network
transmissions.
Sec. 3. National television multiple ownership limitations
This section would eliminate Section 202(c)(1)(B) of the
1996 Act, which directs the Commission to modify its rules for
multiple ownership to increase the national television multiple
ownership cap to 35 percent. In its place, the bill would
codify the 35 percent cap by adding a new Section 340 to the
Communications Act of 1934. Section 340 would prevent any
license for a commercial broadcast television station to be
granted, transferred or assigned to a party if it would result
in a party owning, operating, controlling or having a
cognizable interest in television stations having an aggregate
national audience reach exceeding 35 percent.
The bill would define ``audience reach'' using the same
terms that the Commission set forth in 47 C.F.R. Sec. 73.3555,
except this definition would allow the Commission to substitute
any successor definition it may adopt to delineate television
markets for the purpose of imposing the 35 percent cap. The
bill would define ``cognizable interest'' using the same terms
as the Commission has set forth in 47 C.F.R. Sec. 73.3555.
This section would also require divestiture of broadcast
stations by any party whose holdings exceed the 35 percent cap.
Section 340(b) would require this divestiture to take place
within one year after the date of the enactment of this bill.
Currently, two networks are over the 35 percent cap and would
be required to divest--Viacom/CBS at just over 39 percent and
FOX/News Corp. at 37.8 percent.
Lastly, Section 340(c) would prevent the FCC from using its
forbearance authority in Section 10 of the Communications Act
of 1934 to prevent this new Section 340 from taking effect.
Sec. 4. No grandfathering
This section would prevent the FCC from grandfathering
owners of existing radio station clusters that exceed the local
radio ownership cap under the FCC's new market definition. As a
result, those owners with station clusters in excess of the
local limits would be required to come into compliance within
one year after the date of enactment of the Act.
Sec. 5. Clarification of Congressional intent with respect to ownership
rules review
This section would modify Section 202(h) to specifically
allow the FCC to repeal, strengthen, limit, or retain its media
ownership rules during its next 202(h) review if it determines
such changes to be in the public interest. Courts have
interpreted Section 202(h) to carry ``with it a presumption in
favor of repealing or modifying ownership rules'' as part of
``a process of deregulation'' set in place by the
Telecommunication Act 1996 Act. Fox Television Stations Inc. v.
FCC, 280 F.3d 1027, 1048 (D.C. Cir. 2002); Sinclair Broad.
Group, Inc. v. FCC, 284 F.3d 148, 152 (D.C. Cir. 2002). When
the FCC Commissioners appeared before the Committee on June 4,
2003, several Commissioners agreed that section 202(h) allows
the FCC to strengthen or repeal its broadcast ownership rules,
but requested clarification from Congress. This section would
provide such clarification.
Sec. 6. Public hearing requirement
This section would require the Commission to hold five
public hearings in different areas of the United States before
it renders any decision in conjunction with its media ownership
review pursuant to 202(h) of the Communications Act of 1934.
Sec. 7. Restoration of cross ownership rules
This section would reinstate the Commission's Newspaper/
Broadcast and Local Radio/TV Cross Ownership Rules that were in
place on June 1, 2003.
This section would also provide an exemption to the
Newspaper/Broadcast Cross Ownership Rule under certain
conditions for small markets with a Designated Market Area
(DMA) of 150 or higher. If a broadcast station and a newspaper
in such a community wish to come under common ownership, the
potential common owner could petition the public utility
commission in the community's State or States for a
recommendation approving the transaction. If a respective
public utility commission finds that such a transaction would
enhance the community's local news and information, promote the
financial stability of the newspaper or broadcast station or
generally promote the public interest, then the public utility
commission may refer the transaction to the FCC which may grant
a waiver of compliance with the cross ownership rules. The FCC
may grant the waiver approving the transaction within 60 days
after the FCC receives it unless the Commission finds there is
compelling evidence that the transaction would be contrary to
the public interest. If approved, the newspaper and the
broadcast station covered by the waiver must maintain separate
editorial boards. Additionally, if the broadcast station or the
newspaper issues an editorial viewpoint via broadcast or print,
respectively, the other commonly owned media outlet should
broadcast or print their respective viewpoint if one has been
established.
ROLLCALL VOTES IN COMMITTEE
In accordance with paragraph 7(c) of rule XXVI of the
Standing Rules of the Senate, the Committee provides the
following description of the record votes during its
consideration of S. 1239:
Senator Sununu (for himself and Senator Breaux) offered an
amendment to provide conditional grandfathering of licenses
granted in excess of the national audience reach limitation
that would be imposed by new section 340 of the Communications
Act of 1936. By rollcall vote of 7 yeas and 16 nays as follows,
the amendment was defeated:
YEAS--7 NAYS--16
Mr. Brownback Mr. Stevens \1\
Mr. Smith \1\ Mr. Burns
Mr. Fitzgerald \1\ Mr. Lott
Mr. Ensign Mrs. Hutchison \1\
Mr. Allen \1\ Ms. Snowe
Mr. Sununu Mr. Hollings
Mr. Breaux Mr. Inouye \1\
Mr. Rockefeller \1\
Mr. Kerry \1\
Mr. Dorgan
Mr. Wyden
Mrs. Boxer
Mr. Nelson
Ms. Cantwell
Mr. Lautenberg \1\
Mr. McCain
\1\ By proxy
Mr. Stevens offered a second degree amendment to the
amendment offered by Mr. Dorgan to provide for a small market
exemption from the cross ownership rules. By rollcall vote of
14 yeas and 9 nays as follows, the amendment was adopted:
YEAS--14 NAYS--9
Mr. Stevens Mr. Lott
Mr. Burns Ms. Snowe
Mrs. Hutchison Mr. Rockefeller
Mr. Brownback Mr. Kerry \1\
Mr. Smith Mr. Dorgan
Mr. Fitzgerald \1\ Mr. Wyden
Mr. Ensign \1\ Mr. Nelson
Mr. Allen Ms. Cantwell
Mr. Sununu Mr. McCain
Mr. Hollings
Mr. Inouye \1\
Mr. Breaux
Mrs. Boxer
Mr. Lautenberg
\1\ By proxy
Mr. McCain offered an amendment to vitiate the Commission's
grandfathering of radio broadcasting station ownership under
its new broadcast media ownership rules. By rollcall vote of 12
yeas and 11 nays as follows, the amendment was adopted:
YEAS--12 NAYS--11
Mr. Stevens \1\ Mr. Burns
Ms. Snowe Mr. Lott
Mr. Hollings Mrs. Hutchison \1\
Mr. Inouye \1\ Mr. Brownback
Mr. Kerry \1\ Mr. Smith \1\
Mr. Dorgan Mr. Fitzgerald \1\
Mr. Wyden Mr. Ensign
Mrs. Boxer Mr. Allen \1\
Mr. Nelson Mr. Sununu
Ms. Cantwell Mr. Rockefeller \1\
Mr. Lautenberg Mr. Breaux
Mr. McCain
\1\ By proxy
ADDITIONAL VIEWS
Additional Views of Senators Dorgan, Hutchison, Hollings, Snowe,
Inouye, Lott, Boxer, and Lautenberg
During the Executive Session on June 19, 2003, several
issues were raised during the consideration of S. 1046. As
drafted, S. 1046 would maintain the current national television
ownership limit at 35 percent. However, the Committee also
adopted by voice vote a Dorgan/Snowe/Hutchison/Hollings
amendment to restore the newspaper-broadcast cross ownership
ban in most major markets. We are providing these additional
remarks to explain why the Committee took this action.
One of the things the FCC did in its June 2nd Report and
Order on media ownership was to largely eliminate the ban on
new newspaper-broadcast cross ownership combinations. We
disagree with that decision because we fear the negative impact
that additional newspaper-broadcast combinations will have on
localism, diversity, and competition in those markets.
Inevitably the merging of broadcasters and newspapers reduces
the number of voices in individual markets and threatens to
place too much control over local news and information in the
hands of too few companies.
The Committee received testimony and statistical evidence
underscoring the dangers inherent in the FCC's order lifting
the cross ownership ban. If the FCC order lifting the ban were
allowed to remain, broadcast-newspaper mergers could occur in
nearly 200 markets, meaning that 98 percent of the American
public could effectively lose many of the most relied upon
independent voices in their community.
This would allow almost two-thirds of the markets in the
country to have only four local news sources (from television
stations and newspapers). And, it would make it possible for
individual markets to be dominated by a single newspaper/TV
conglomerate which could control well over half the news
audience and two-thirds of the reporters in a given local
market.\1\ Clearly, this would be devastating for local
competition and diversity in local news.
---------------------------------------------------------------------------
\1\ Analysis of June 2nd FCC Order, ``Mass Deregulation of Media
Threatens to Undermine Democracy,'' Consumer Federation of America and
Consumers Union, June 2, 2003.
---------------------------------------------------------------------------
Numerous witnesses before the Committee demonstrated that
new technologies, such as the Internet and cable television,
have--so far--failed to replace local broadcast and newspapers
as the major sources of news and information for citizens. The
FCC's own studies show that 80 percent of consumers still rely
upon television and newspapers for their local and national
news, and when asked, (in comparison to broadcast television
and newspapers) consumers do not cite the Internet or cable
television as a significant source of local news.\2\ As a
result, the growth of the Internet and other new technologies
has not created a significant enough change in consumer
behavior to warrant relaxation of the cross ownership ban.
---------------------------------------------------------------------------
\2\ Nielsen Media Research, Consumer Survey On Media Usage (FCC
Media Ownership Working Group Study No. 8, September 2002).
---------------------------------------------------------------------------
The Federal courts have previously acknowledged that this
cross ownership ban reflects an appropriate legislative and
regulatory tool to promote competition and diversity of
ownership,\3\ yet the FCC's proposed relaxation of this rule is
likely to undermine these democratic principles. Furthermore,
as Frank Blethen, Publisher of the Seattle Times testified to
this Committee, ``There is no business justification that I'm
aware of--other than monopolization--for lifting any of the
current rules or for allowing any entity to engage in cross-
media ownership.'' \4\
---------------------------------------------------------------------------
\3\ FCC v. National Citizens Comm. for Broadcasting, 436 US 775,
802 (1978)
\4\ Frank Blethen, Testimony before the Senate Commerce Committee,
``Media Ownership (Broadcast),'' May 13, 2003.
---------------------------------------------------------------------------
Recognizing the significant role broadcast stations and
newspapers still play in local communities, we know of no
better tool to ensure that the public airwaves are used to
promote the important principles of localism, diversity, and
competition. Therefore, the committee agreed that it is
imperative to reinstate the FCC's previous ban on newspaper-
broadcast cross ownership in the same communities.
Changes in Existing Law
In compliance with paragraph 12 of rule XXVI of the
Standing Rules of the Senate, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
material is printed in italic, existing law in which no change
is proposed is shown in roman):
COMMUNICATIONS ACT OF 1934
Title III--Provisions Relating to Radio
PART I. GENERAL PROVISIONS
SEC. 340. NATIONAL TELEVISION MULTIPLE OWNERSHIP LIMITATIONS.
(a) National Audience Reach Limitation.--The Commission
shall not permit any license for a commercial television
broadcast station to be granted, transferred, or assigned to
any party (including all parties under common control) if the
grant, transfer, or assignment of such license would result in
such party or any of its stockholders, partners, or members,
officers, or directors, directly or indirectly, owning,
operating or controlling, or having a cognizable interest in
television stations which have an aggregate national audience
reach exceeding 35 percent.
(b) No Grandfathering.--The Commission shall require any
party (including all parties under common control) that holds
licenses for commercial television broadcast stations in excess
of the limitation contained in subsection (a) to divest itself
of such licenses as may be necessary to come into compliance
with such limitation within one year after the date of
enactment of this section.
(c) Section Not Subject to Forbearance.--Section 10 of this
Act shall not apply to the requirements of this section.
(d) Definitions.--
(1) National audience reach.--The term `national
audience reach' means--
(A) the total number of television households
in the Nielsen Designated Market Area (DMA)
markets in which the relevant stations are
located, or as determined under a successor
measure adopted by the Commission to delineate
television markets for purposes of this
section; divided by
(B) the total national television households
as measured by such DMA data (or such successor
measure) at the time of a grant, transfer, or
assignment of a license.
No market shall be counted more than once in making
this calculation.
(2) Cognizable interest.--Except as may otherwise be
provided by regulation by the Commission, the term
`cognizable interest' means any partnership or direct
ownership interest and any voting stock interest
amounting to 5 percent or more of the outstanding
voting stock of a licensee.
TELECOMMUNICATIONS ACT OF 1996
SEC. 202. BROADCAST OWNERSHIP.
(a) National Radio Station Ownership Rule Changes
Required.--The Commission shall modify section 73.3555 of its
regulations (47 C.F.R. 73.3555) by eliminating any provisions
limiting the number of AM or FM broadcast stations which may be
owned or controlled by one entity nationally.
(b) Local Radio Diversity.--
(1) Applicable caps.--The Commission shall revise
section 73.3555(a) of its regulations (47 C.F.R.
73.3555) to provide that--
(A) in a radio market with 45 or more
commercial radio stations, a party may own,
operate, or control up to 8 commercial radio
stations, not more than 5 of which are in the
same service (AM or FM);
(B) in a radio market with between 30 and 44
(inclusive) commercial radio stations, a party
may own, operate, or control up to 7 commercial
radio stations, not more than 4 of which are in
the same service (AM or FM);
(C) in a radio market with between 15 and 29
(inclusive) commercial radio stations, a party
may own, operate, or control up to 6 commercial
radio stations, not more than 4 of which are in
the same service (AM or FM); and
(D) in a radio market with 14 or fewer
commercial radio stations, a party may own,
operate, or control up to 5 commercial radio
stations, not more than 3 of which are in the
same service (AM or FM), except that a party
may not own, operate, or control more than 50
percent of the stations in such market.
(2) Exception.--Notwithstanding any limitation
authorized by this subsection, the Commission may
permit a person or entity to own, operate, or control,
or have a cognizable interest in, radio broadcast
stations if the Commission determines that such
ownership, operation, control, or interest will result
in an increase in the number of radio broadcast
stations in operation.
(c) Television Ownership Limitations.--
(1) National ownership limitations.--The Commission
shall modify its rules for multiple ownership set forth
in section 73.3555 of [its regulations (47 C.F.R.
73.3555)--
(A) by eliminating] its regulations (47 CFR
73.3555) by eliminating the restrictions on the
number of television stations that a person or
entity may directly or indirectly own, operate,
or control, or have a cognizable interest in,
nationwide[; and] .
[(B) by increasing the national audience
reach limitation for television stations to 35
percent.]
(2) Local ownership limitations.--The Commission
shall conduct a rulemaking proceeding to determine
whether to retain, modify, or eliminate its limitations
on the number of television stations that a person or
entity may own, operate, or control, or have a
cognizable interest in, within the same television
market.
(d) Relaxation of One-To-A-Market.--With respect to its
enforcement of its one-to-a-market ownership rules under
section 73.3555 of its regulations, the Commission shall extend
its waiver policy to any of the top 50 markets, consistent with
the public interest, convenience, and necessity.
(e) Dual Network Changes.--The Commission shall revise
section 73.658(g) of its regulations (47 C.F.R. 658(g)) to
permit a television broadcast station to affiliate with a
person or entity that maintains 2 or more networks of
television broadcast stations unless such dual or multiple
networks are composed of--
(1) two or more persons or entities that, on the date
of enactment of the Telecommunications Act of 1996, are
``networks'' as defined in section 73.3613(a)(1) of the
Commission's regulations (47 C.F.R. 73.3613(a)(1)); or
(2) any network described in paragraph (1) and an
English-language program distribution service that, on
such date, provides 4 or more hours of programming per
week on a national basis pursuant to network
affiliation arrangements with local television
broadcast stations in markets reaching more than 75
percent of television homes (as measured by a national
ratings service).
(f) Cable Cross Ownership.--
(1) Elimination of restrictions.--The Commission
shall revise section 76.501 of its regulations (47
C.F.R. 76.501) to permit a person or entity to own or
control a network of broadcast stations and a cable
system.
(2) Safeguards against discrimination.--The
Commission shall revise such regulations if necessary
to ensure carriage, channel positioning, and
nondiscriminatory treatment of nonaffiliated broadcast
stations by a cable system described in paragraph (1).
(g) Local Marketing Agreements.--Nothing in this section
shall be construed to prohibit the origination, continuation,
or renewal of any television local marketing agreement that is
in compliance with the regulations of the Commission.
[(h) Further Commission Review.--The Commission shall
review its rules adopted pursuant to this section and all of
its ownership rules biennially as part of its regulatory reform
review under section 11 of the Communications Act of 1934 and
shall determine whether any of such rules are necessary in the
public interest as the result of competition. The Commission
shall repeal or modify any regulation it determines to be no
longer in the public interest.]
(h) Further Commission Review.--
(1) In general.--The Commission shall review its
rules adopted pursuant to this section, and all of its
ownership rules biennially as part of its regulatory
reform review under section 11 of the Communications
Act of 1934 and shall determine whether--
(A) any rule requires strengthening or
broadening;
(B) any rule requires limiting or narrowing;
(C) any rule should be repealed; or
(D) any rule should be retained.
(2) Change, repeal, or retain.--The Commission shall
change, repeal, or retain such rules pursuant to its
review under paragraph (1) as it determines to be in
the public interest.
Before making any determination under this subsection
concerning an ownership rule or regulation, the Commission
shall hold no less than 5 public hearings in different areas of
the United States with respect to that rule or regulation.
(i) Elimination of Statutory Restriction.--Section 613(a)
(47 U.S.C. 533(a)) is amended--
(1) by striking paragraph (1);
(2) by redesignating paragraph (2) as subsection (a);
(3) by redesignating subparagraphs (A) and (B) as
paragraphs (1) and (2), respectively;
(4) by striking ``and'' at the end of paragraph (1)
(as so redesignated);
(5) by striking the period at the end of paragraph
(2) (as so redesignated) and inserting ``; and''; and
(6) by adding at the end the following new paragraph:
``(3) shall not apply the requirements of this
subsection to any cable operator in any franchise area
in which a cable operator is subject to effective
competition as determined under section 623(l)''.