[Federal Register Volume 64, Number 180 (Friday, September 17, 1999)]
[Rules and Regulations]
[Pages 50622-50647]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-23694]



[[Page 50621]]

_______________________________________________________________________

Part III





Federal Communications Commission





_______________________________________________________________________



47 CFR Parts 21, 73, 74, and 76



Review of the Commission's Regulations Governing Attribution Ownership 
Rule; Final Rule



Broadcast Television National Ownership Rules; Final Rule



Review of the Commission's Regulations Governing Television 
Broadcasting; Television Satellite Stations Review of Policy and Rules; 
Final Rule



Comment Sought on Processing Order for Applications Filed Pursuant to 
the Commission's New Local Broadcast Ownership Rules; Notice

  Federal Register / Vol. 64, No. 180 / Friday, September 17, 1999 / 
Rules and Regulations  

[[Page 50622]]



FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 21, 73, 74 and 76

[MM Docket No. 94-150, 92-51, 87-154; FCC 99-207]


Review of the Commission's Regulations Governing Attribution 
Ownership Rule

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: This document amends the Commission's broadcast, broadcast 
cable cross-ownership and cable/Multipoint Distribution Service Cross-
ownership (``MDS'') attribution rules. The intended effect of this 
action is to improve the clarity and precision of our current rules 
while avoiding disruptions in funding to licensees.

DATES: Effective November 16, 1999, except for Sec. 73.3526(e)(14) and 
(e)(16) and Sec. 73.3613(d) and (e) which contain information 
collection requirements that are not effective until approved by the 
Office of Management and Budget. The FCC will publish a document in the 
Federal Register announcing the effective dates for those sections.

FOR FURTHER INFORMATION CONTACT: Mania K. Baghdadi, Jane Gross or Berry 
Wilson at (202) 418-2120, Policy and Rules Division, Mass Media Bureau.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order (``R&O''), FCC 99-207, adopted August 5, 1999; released 
August 6, 1999. The full text of the Commission's R&O is available for 
inspection and copying during normal business hours in the FCC Dockets 
Branch (Room TW-A306), 445 12 St. S.W., Washington, D.C. The complete 
text of this R&O may also be purchased from the Commission's copy 
contractor, International Transcription Services (202) 857-3800, 1231 
20th St., N.W., Washington, D.C. 20036.

Synopsis of Report & Order

Introduction

    1. The mass media attribution rules seek to identify those 
interests in or relationships to licensees that confer on their holders 
a degree of influence or control such that the holders have a realistic 
potential to affect the programming decisions of licensees or other 
core operating functions. In this R&O, we amend our broadcast and our 
cable/Multipoint Distribution Service (``MDS'') attribution rules to 
improve the precision of the attribution rules, avoid disruption in the 
flow of capital to broadcasting, afford clarity and certainty to 
regulatees and markets, and facilitate application processing--our 
goals in initiating this proceeding. In taking these steps, we have 
sought to avoid undue impact on our goal of promoting the rapid 
conversion of broadcast television licensees to a digital mode. We 
initiated this long-pending proceeding in 1995, sought further comment 
after the passage of the Telecommunications Act of 1996, and have had 
the benefit of numerous comments on the variety of issues resolved 
herein. The new attribution rules we adopt today are integrally related 
to the rules adopted in our companion local television ownership and 
national television ownership proceedings. A reasonable and precise 
definition of what interests should be counted in applying the multiple 
ownership rules is a critical element in assuring that those rules 
operate to promote the goals they were designed to achieve.

Background

    2. The attribution rules that are the subject of this proceeding 
define what constitutes a ``cognizable interest'' in applying the 
broadcast multiple ownership rules, the broadcast/cable cross-ownership 
rule, and the cable/MDS cross-ownership rule. We issued the Attribution 
Notice, 60 FR 6483, February 2, 1995, to review the attribution rules 
based on several considerations, including: (1) Changes in the 
broadcasting industry and in the multiple ownership rules since our 
last revision of the attribution rules over ten years ago and our 
consequent desire to ensure that the attribution rules remain effective 
in identifying interests that should be counted for purposes of 
applying the multiple ownership rules; (2) concerns raised that certain 
nonattributable investments, while permissible under current rules, 
might permit a degree of influence that warrants their attribution; (3) 
concerns that individually permissible cooperative arrangements between 
broadcasters are being used in combination so as to result in 
significant influence in multiple stations that is intended to be 
prohibited by the multiple ownership rules; and (4) the need to address 
attribution treatment of Limited Liability Companies (``LLCs'').
    3. We solicited comment in the Attribution Notice on several 
issues, including: (1) Whether to increase the voting stock benchmark 
from 5 percent to 10 percent and the passive investor benchmark from 10 
percent to 20 percent; (2) whether to expand the category of passive 
investors; (3) whether and, if so, under what circumstances to 
attribute nonvoting shares; (4) whether to retain our single majority 
shareholder exemption from attribution; (5) whether to revise our 
insulation criteria for limited partners, and whether to adopt an 
equity benchmark for noninsulated limited partners; (6) how to treat 
interests in LLCs and other new business forms under our attribution 
rules; (7) whether to eliminate the remaining aspects of our cross-
interest policy; and (8) how to treat financial relationships and 
multiple business interrelationships which, although not individually 
attributable, should perhaps be treated as attributable interests when 
held in combination.
    4. Congress subsequently enacted the Telecommunications Act of 1996 
(``1996 Act''), Public Law 104-104, 110 Stat. 56 (1996), which 
substantially relaxed several of our ownership rules. We issued the 
Attribution Further Notice, 61 FR 67275, December 20, 1996, to seek 
comment as to how these ownership rule revisions should affect our 
review of the attribution rules. We also sought comment on new 
proposals, including a proposal to attribute the otherwise 
nonattributable interests of holders of equity and/or debt in a 
licensee where the interest holder is a program supplier to a licensee 
or a same-market media entity and where the equity and/or debt holding 
exceeds a specified threshold. Additionally, we sought comment on: (1) 
Proposals to attribute television Local Marketing Agreements (``LMAs'') 
and to modify the scope of the radio LMA attribution rules; (2) whether 
we should revise our approach to joint sales agreements (``JSAs'') in 
specified circumstances; (3) a study conducted by Commission staff, 
appended to the Further Notice, on attributable interests in television 
broadcast licensees and on the implications of this study for our 
attribution rules, particularly on the voting stock benchmarks; (4) 
whether we should amend the cable/MDS cross-ownership attribution rule; 
and (5) transition issues.
    5. We believe the rule revisions we adopt today promote these 
goals. In this R&O, we: (1) Adopt an equity/debt plus attribution rule 
that would narrow, but not eliminate, the current exemptions from 
attribution for nonvoting stock and debt, as well as the single 
majority shareholder exemption; (2) attribute certain television LMAs 
and modify the radio LMA rules; (3) retain the 5 percent voting stock 
attribution benchmark, but raise the passive investor voting stock 
benchmark to 20 percent; (4) retain the current definition of passive 
investor; (5) eliminate the cross-interest policy;

[[Page 50623]]

(6) decline to adopt attribution rules for JSAs; (7) adopt as an 
attribution rule our interim processing policy under which we apply 
limited partnership insulation criteria to LLCs; (8) retain the current 
insulation criteria for attribution of limited partnerships; (9) revise 
the cable/MDS cross-ownership attribution rule to conform it to the 
broadcast attribution rules, as revised in this R&O and (10) establish 
transition measures with respect to interests made attributable as a 
result of rules adopted in this R&O that would result in violations of 
the multiple ownership rules. So that our broadcast attribution rules 
remain consistent, we also modify the attribution rules that apply to 
the broadcast/cable cross-ownership rule, Sec. 76.501(a) to incorporate 
the attribution rule changes adopted today.

Issue Analysis

A. Stockholding Benchmarks

    6. Background. The Attribution Notice sought comment on whether we 
should increase the voting stock benchmarks from five to ten percent 
for non-passive investors and from ten to twenty percent for passive 
investors. This issue was originally raised in the Notice of Proposed 
Rule Making and Notice of Inquiry, 57 FR 14684, April 22, 1992) in MM 
Docket No. 92-51, (``Capital Formation Notice''), which cited concerns 
about the availability of capital to broadcasters. Insufficient 
evidence was submitted in comments to the Capital Formation Notice to 
warrant raising the benchmarks, and, therefore, the Attribution Notice 
again raised the issue of whether to increase the voting stock 
benchmarks. In the Attribution Further Notice, the Commission noted 
that commenters responding to the Attribution Notice had again not 
submitted specific empirical data sufficient to conclude that the 
benchmarks should be raised. The Attribution Further Notice thus asked 
for additional information to justify raising the benchmarks, including 
information on changes in the economic climate and competitive 
marketplace, and the link between additional capital investment and 
raising the voting stock benchmarks.
    7. Comments. Few commenters responded to our requests in the 
Attribution Further Notice for additional comments supporting the 
increase in the active investor benchmark to 10 percent.
    8. Decision. We have decided to retain the current active voting 
stock benchmark at 5 percent. First and most importantly, in reviewing 
the evidence related to the issue of non-passive voting equity 
benchmarks, we remain convinced that shareholders with ownership 
interests of 5 percent or greater may well be able to exert significant 
influence on the management and operations of the firms in which they 
invest. In this regard, we have not been presented with empirical 
evidence to rebut our conclusion in the Attribution Order that a ``5% 
benchmark is likely to identify nearly all shareholders possessed of a 
realistic potential for influencing or controlling the licensee, with a 
minimum of surplus attribution.''
    9. In this regard, a growing body of academic evidence indicates 
that an interest holder with 5 percent or greater ownership of voting 
equity can exert considerable influence on a company's management and 
operational decisions. This is particularly true with widely-held 
corporations where a 5 percent stockholder is likely to be among the 
largest shareholders in the firm. One recent study demonstrated that 
block trades involving 5 to 10 percent of the firm's voting stock 
resulted in a 27 percent turnover rate of the CEO of the traded firm, 
that a 20 to 35 percent block trade resulted in a 40 percent turnover 
rate of the CEO of the traded firm, and that block trades over 35 
percent of the voting equity resulted in a 56 percent turnover rate, 
L.E. Ribstein, Business Associations 987 (1990). The turnover of the 
CEO was tracked over a one year period following the date of the trade. 
These results, spanning an increasing level of ownership starting at 5 
percent, demonstrate a consistent relationship between ownership trades 
and the rate of replacement of top management. The results imply that 
investors who acquire and hold such large blocks of voting stock can 
influence the choice of management of the firms in which they invest.
    10. Another study presents evidence that 5 percent or greater 
stockholders vote more actively than less-than-five percent 
shareholders, and they tend to vote more often against the 
recommendations of management in votes over corporate anti-takeover 
amendments (J.A. Brickley, R.C. Lease and C.W. Smith, Ownership 
Structure and Voting on Antitakeover Amendments, 20 Journal of 
Financial Economics 267-291 (1988)). This study suggests that larger 
owners, starting at a 5 percent level of ownership, tend to be more 
active in influencing management than smaller owners. The two studies 
considered together provide evidence that ownership percentages 
starting at 5 percent can influence management policies and have an 
impact on firm value.
    11. In addition, notwithstanding our requests for empirical 
evidence, in the Attribution Notice and again in the Attribution 
Further Notice, commenters have not provided the kind of specific data 
to justify raising the non-passive investor benchmark even though they 
generally supported raising the benchmark. And, while commenters have 
not provided sufficient empirical evidence to justify raising the 
active voting stock benchmark, the Attribution Further Notice did 
incorporate and invite comment on a Commission staff study that 
categorized and quantified attributable interests in commercial 
broadcast television licensees, as reported in the Ownership Reports 
that licensees are required to file. Several facts emerge from that 
study that are relevant to our decision concerning the voting stock 
benchmarks. First, the study found and reported that increasing the 
attribution benchmark for non-passive investors from 5 percent to 10 
percent would decrease by approximately one third the number of 
currently-attributable owners. This increase in the non-passive 
investor benchmark would also increase from 81 to 134 the number of 
stations (out of 389 commercial for-profit television stations studied 
that are incorporated and are not single majority shareholder 
stations), for which no stockholders and only officers and directors 
would be held attributable. These large potential changes in the number 
of attributable owners heighten our concern about the impact of raising 
the 5 percent benchmark. In light of the lack of sufficient evidence 
that such an increase is necessary or appropriate, we are reluctant to 
institute a change that would have such a major impact.
    12. Further, we note that our concerns over capital availability 
that originally prompted the proposal to increase the active voting 
stock benchmark have eased somewhat, particularly in light of the 
increasing strength shown by the communications sector and financial 
markets in general over the past several years. For example, 
communications transactions increased by 38 percent during 1996, with 
the total value of mergers, acquisitions, share offerings and other 
deals totalling $113 billion. Within the communications sector, TV 
transfers of ownership in 1996 increased by 121.26 percent in dollar 
terms over 1995 figures, and FM and AM transfers increased by 283.27 
percent and 99.34 percent, respectively. In total, dollars spent on 
radio and television transactions increased from $8.32 billion in 1995 
to $25.362 billion in 1996, with the number of transactions

[[Page 50624]]

increasing from 849 to 1115 over the same period. Station trading 
remained strong in 1997, with a total of 1067 radio and television 
transactions worth $23.44 billion. In 1998, the total number of radio 
and television transactions fell slightly, as a result of the slower 
pace of radio consolidation, to 950 transactions, with the value of 
these transactions remaining fairly stable at $22.8 billion. This 
overall increase in capital spending from 1995 to 1998 occurred while 
our current attribution rules were in effect, and therefore provides us 
with strong evidence that those rules do not impede the availability of 
capital in the communications industry. And, to the extent that there 
are still concerns about not impeding capital flow to broadcasting, we 
believe that they will be adequately addressed by our increase in the 
passive investor benchmark. In sum, in reviewing the overall body of 
evidence on this issue, we believe that our original decision to set a 
5 percent benchmark to capture influential interests remains valid and 
will not unduly restrict capital availability.
    13. Finally, retention of the 5 percent benchmark remains 
consistent with the SEC's analogous 5 percent benchmark. Pursuant to 
Sec. 13(d)(1) of the Exchange Act, 15 U.S.C. 78m(d)(1), any person who 
becomes a direct or indirect owner of more than 5 percent of any class 
of stock of a company through a stock acquisition must file a statement 
with the Securities and Exchange Commission (SEC). The purpose of this 
reporting requirement is generally to ensure that investors are alerted 
to potential changes in control. The broadcast attribution rules have a 
similar objective as they are intended to identify ownership interests 
that confer on their holders the potential to influence or control a 
licensee's day-to-day operations.
Passive Investor Benchmarks
    14. Comments. Most commenters that responded to this issue favored 
raising the passive investor benchmark.
    15. Decision. We will increase the voting stock benchmark from 10 
percent to 20 percent for passive investors. We believe that increasing 
the passive investor benchmark to 20 percent will give broadcasters 
increased access to investment capital, while preserving the 
Commission's ability to enforce its ownership rules effectively. This 
decision takes into account the special nature of the passive investor 
category, in terms of the legal and fiduciary requirements that 
constrain passive investors' involvement in the management and 
operational affairs of the firms in which they invest.
    16. We believe that we can increase the passive investor benchmark 
without incurring substantial risk that investors who should be counted 
for purposes of applying the multiple ownership rules will avoid 
attribution. Clearly, passive investors continue to face multiple 
constraints on their ability to become directly involved with the 
management and operations of the firms in which they invest, including 
statutory and regulatory restrictions as well as fiduciary obligations.
    17. In setting the limit at 10 percent, we noted that an increase 
above 10 percent was not advisable at that time based on our concern 
about the impact on corporate management that could result, even 
unintentionally, from the trading and voting of large blocks of stock 
by purportedly passive investors. We have not been presented with any 
evidence to indicate that our ten percent benchmark has resulted in any 
such block trading problems. Moreover, any inadvertent effect of a 
passive investor's decision to sell its stock, for example, because it 
is dissatisfied with the return on its investment, simply reflects the 
marketplace at work, and a responsive action by management to make the 
entity more profitable in response to a sale is simply an appropriate 
reaction to market demands.
    18. While we note that our concerns about capital availability have 
eased somewhat, to the extent that these concerns remain, particularly 
based on funding needs related to the conversion to digital television, 
we believe that increasing the passive investor benchmark is a 
relatively safe way to facilitate such further investment in 
broadcasting, without compromising the ability of our attribution rules 
to capture influential interests. Raising that benchmark will reduce 
barriers to investment in broadcasting and result in greater 
efficiencies in the use of capital.
Definition of Passive Investors
    19. Background. In response to the Capital Formation Notice, 
several commenters raised the issue as to whether the Commission should 
expand its definition of ``passive investors'' to include such 
institutional investors as pension funds, commercial and investment 
banks, and certain investment advisors. These commenters argued that 
these largely institutional investors invest primarily for reasons of 
financial returns, rather than to exert significant influence or 
control, and therefore their interests should be treated as passive 
investments. In the Attribution Notice, the Commission stated that it 
did not intend to revisit its 1984 decision, which defined the passive-
investor category to include only bank trust departments, insurance 
companies and mutual funds, and we tentatively concluded that we would 
not expand the passive investor category to include Small Business 
Investment Companies (``SBICs'') and Special Small Business Investment 
Companies (``SSBICs''), as we had not been able to conclude that these 
entities met our definition of ``passive.'' Nonetheless, we invited 
further comment on these tentative conclusions.
    20. Comments. Several commenters urged the Commission to expand its 
passive investor category.
    21. Decision. We reaffirm our earlier decision to retain the 
current definition of ``passive investors,'' which is limited to bank 
trust departments, insurance companies and mutual funds. We noted that 
we earlier stated that we ``do not intend to revisit our decision of 
1984 in order to broaden the category of passive investors. . . .'' We 
are not convinced that other types of investors lack the interest and/
or the ability to actively participate in the affairs of the firms in 
which they invest. This is particularly true of public pension funds, 
many of which have apparently become increasingly active in proxy 
fights and other devices to put pressure on management perceived to be 
underperforming. Furthermore, commercial and investment bank activities 
do not fall under the same fiduciary restrictions, discussed above, 
that apply to bank trust departments. And, we have not been presented 
with sufficient evidence thus far to revise our earlier tentative 
conclusion not to include SBICs and SSBICs in the definition of passive 
investors.

B. Equity/Debt Plus and Attribution Exemptions

Background
    22. In the Attribution Notice, we invited comment as to whether 
multiple cross-interests or currently nonattributable interests, when 
held in combination, raise diversity and competition concerns 
warranting regulatory oversight. We anticipated that any regulation of 
such inter-relationships would require case-by-case review of 
applications, but we did not otherwise delineate specific proposals to 
address these concerns. We also invited comment as to whether to 
restrict or eliminate the current nonvoting stock and single-majority 
shareholder attribution exemptions, expressing concerns that some 
interest holders that are eligible for these

[[Page 50625]]

exemptions might nonetheless exert significant influence such that the 
interest should be attributed.
    23. In the Attribution Further Notice, we proposed to adopt a 
targeted equity/debt plus (``EDP'') attribution approach to deal with 
the foregoing concerns. We noted that our proposed new EDP rule would 
operate in addition to other attribution standards and would attempt to 
increase the precision of the attribution rules, address our concerns 
about multiple nonattributable relationships, and respond to concerns 
about whether the single majority shareholder and nonvoting stock 
attribution exemptions were too broad. This approach would not 
eliminate the nonvoting and single majority shareholder exemptions from 
attribution, but would limit their availability in certain 
circumstances. Under this approach, we proposed to attribute the 
otherwise nonattributable debt or equity interests in a licensee where: 
(1) the interest holder was also a program supplier to the licensee or 
a same-market broadcaster or other media outlet subject to the 
broadcast cross-ownership rules, including newspapers and cable 
operators; and (2) the equity and/or debt holding exceeds 33 percent. 
Under our EDP proposal, a finding that an interest is attributable 
would result in that interest being counted for all applicable multiple 
ownership rules, local and national.
Comments
    24. Single Majority Shareholder and Nonvoting Stock Attribution 
Exemptions. As discussed in the Attribution Further Notice, most 
commenters in response to the Attribution Notice urged us to retain the 
single majority shareholder and nonvoting stock attribution exemptions, 
but network affiliates have expressed concerns that the exemptions have 
allowed networks to extend their nationwide reach by structuring 
nonattributable deals in which the networks effectively exert 
significant influence if not control over licensees.
Decision
    25. Overview. As we noted in the Attribution Further Notice, the 
relaxation of the multiple ownership rules resulting from the 1996 Act 
requires neither relaxation nor tightening of our attribution rules but 
does underscore the importance of maximizing the precision of the 
attribution rules. We should take care in enforcing the multiple 
ownership limits, which have been deliberately set at certain levels, 
to ensure that the attribution rules neither unduly loosen nor restrict 
those limits, but rather apply them with the greatest precision to 
entities that have the power to influence a licensee's operations. We 
have been mindful of this goal in the decisions that follow.
    26. We will not eliminate the single majority shareholder or 
nonvoting stock exemptions, but, rather, to address the concerns that 
we raised in the Attribution Notice and Attribution Further Notice, we 
will adopt our equity/debt plus attribution proposal, modified as 
discussed herein, as a new rule that would function in addition to the 
other attribution rules. Under this new EDP rule, where the investor is 
either (1) a ``major program supplier,'' as defined herein to include 
all programming entities (including networks and inter-market time 
brokers) that supply over 15 percent of a station's total weekly 
broadcast programming hours, or (2) a same-market media entity subject 
to the broadcast multiple ownership rules (including broadcasters, 
cable operators, and newspapers), its interest in a licensee or other 
media entity in that market will be attributed if that interest, 
aggregating both debt and equity holdings, exceeds 33 percent of the 
total asset value (equity plus debt) of the licensee or media entity. 
As a shorthand, we will use the term, ``total assets,'' herein to refer 
to the total asset value of the licensee. In the case of a major 
program supplier, the EDP rule will apply and the interest will be 
attributable only if the investment is in a licensee to which the 
requisite triggering amount of programming is provided. A finding that 
an interest is attributable under EDP would result in attribution for 
purposes of applying all relevant multiple ownership rules, local and 
national, except that, as discussed in the TV National Ownership Order, 
we will not double-count same-market TV stations towards application of 
the national TV ownership rules.
    27. We will define equity to include all stock, whether common or 
preferred and whether voting or nonvoting. We will also include equity 
held by insulated limited partners in limited partnerships. Debt 
includes all liabilities, whether short-term or long-term. Total 
assets, by definition, is equal to the sum of all debt plus all equity. 
Finally, an interest that is attributable pursuant to the EDP rule will 
count in determining compliance with all applicable ownership rules, 
national as well as local.
    28. The equity/debt plus approach is intended to resolve our 
concerns, expressed in the Attribution Notice, that multiple 
nonattributable business interests could be combined to exert influence 
over licensees. As we stated in the Attribution Notice, we are 
concerned that our nonvoting stock, single majority shareholder, and 
debt attribution exemptions can permit nonattributable investments that 
could carry the potential for influence such that they implicate 
diversity and competition concerns and should be attributed.
    29. The EDP rule addresses the most serious concerns we raised in 
the Attribution Notice and Attribution Further Notice concerning the 
underinclusiveness of the attribution rules, particularly those that 
were supported in the record. Based on the record, we have targeted our 
remedy and focused those concerns in shaping the EDP rule. For example, 
except in cases involving a same-market media entity or major program 
supplier, as defined herein, the single majority shareholder exemption 
and exemptions for nonvoting stock, preferred stock, corporate debt and 
other corporate liabilities will continue to apply as they do now. 
Moreover, the EDP rule will not apply to a program supplier's 
investment in a licensee or station unless the program supplier 
provides over 15 percent of that station's total weekly broadcast 
hours. Thus, a program supplier may invest without limit in the 
nonvoting stock, preferred stock or debt of a licensee to which it does 
not provide the requisite level of programming without having its 
interest attributed.
    30. Furthermore, same-market or other relationships not within the 
defined EDP triggering relationships described herein will continue to 
be non-attributable. For example, an investor that is not a major 
program supplier and that is not a same-market media entity (i.e., it 
does not have an attributable interest in a station, newspaper, or 
cable system in a given market) can continue to hold more than 33 
percent of the total nonvoting assets of two stations or more in that 
same market without either interest being attributable.
    31. The targeted approach embodied in the EDP rule reflects our 
current judgment as to the appropriate balance between our goal of 
maximizing the precision of the attribution rules by attributing all 
interests that are of concern, and only those interests, and our 
equally significant goals of not unduly disrupting capital flow and of 
affording ease of administrative processing and reasonable certainty to 
regulatees in planning their transactions. In this regard, some 
commenters have urged us to retain our

[[Page 50626]]

current approach or implement a new case-by-case approach, considering 
the combined impact of multiple business and financial relationships in 
a particular transaction.
    32. However, we believe that the bright-line EDP test is superior 
to a case-by-case approach. The EDP rule will provide more regulatory 
certainty than a case-by-case approach that requires review of contract 
language. Thus, the EDP rule will permit planning of financial 
transactions, would also ease application processing, and would 
minimize regulatory costs. While an ad hoc approach might be more 
tailored than the EDP rule, it also might lead to complicated 
interpretation and processing difficulties and would likely add 
uncertainty to resolution of attribution cases. Of course, we retain 
discretion to review individual cases that present unusual issues on a 
case-by-case basis where it would serve the public interest to conduct 
such a review. Such cases might occur, for example, when there is 
substantial evidence that the combined interests held are so extensive 
that they raise an issue of significant influence such that the 
Commission's multiple ownership rules should be implicated, 
notwithstanding the fact that these combined interests do not come 
within the parameters of the EDP rule. We do not intend by this 
reservation of discretion to resurrect the cross-interest policy, 
elsewhere eliminated in this R&O. Rather, we merely emphasize our 
obligation under the Communications Act to apply the public interest 
standard and, as necessary, to scrutinize extraordinary or 
unanticipated circumstances that may arise.
    33. In the Attribution Further Notice, we invited comment on the 
impact of a 33 percent EDP threshold on small business entities, 
particularly on whether there would be a disproportionate impact on 
small or minority entities. While some parties have argued that 
adoption of an equity/debt plus proposal would deter capital flow to 
broadcasting generally and might curb investment in smaller, minority, 
or UHF stations, in particular, or in digital television, others have 
argued strongly that this is not the case. We have no reason to believe 
that the EDP rule would unduly deter investment. The equity/debt plus 
proposal does not preclude investment by any entity; rather, it limits 
nonattributable investment levels for entities that have the potential 
to influence licensees. Moreover, the limit does not apply to all 
entities that might invest or help fund the transition to digital 
television or otherwise invest in licensees. In addition, we will 
consider individual rule waivers in particular cases where substantial 
evidence is presented that the conversion to digital television would 
otherwise be unduly impeded or that a waiver would significantly 
expedite DTV implementation in that particular case.
    34. While we have invited comment on those issues, it is 
nonetheless our view that promoting our goal of ensuring adequate 
funding for the transition to digital television is better accomplished 
through our ownership rather than our attribution rules. The 
attribution rules are designed to attribute entities that wield 
significant influence on core operations of the licensee. It is the 
ownership rules that limit investment based on our core policies of 
diversity and competition. Arguments with respect to whether additional 
investment should be permitted have been made in the context of our 
companion multiple ownership proceedings. We believe that the 
attribution rules should function as precisely as possible to identify 
influential interests and that relaxation of ownership limits, if 
warranted, should be accomplished directly through revision of the 
multiple ownership rules, not indirectly through manipulation of what 
is considered ``ownership.''
    35. Triggering Relationships. As we proposed in the Attribution 
Further Notice, the EDP approach will focus directly on those 
relationships that may trigger situations in which there is significant 
incentive and ability for the otherwise nonattributable interest holder 
to exert influence over the core operations of the licensee. The 
approach of focusing on specified triggering relationships would extend 
the Commission's current recognition that the category or nature of the 
interest holder is important to whether an interest should be 
attributed. For example, under the current broadcast attribution rules, 
passive investors are subject to a higher voting stock attribution 
benchmark, since these parties are subject to fiduciary and other 
restraints on their exercise of influence over licensees and are, by 
their nature, principally concerned with investment returns rather than 
direct influence over the licensee. The two relationships that will 
trigger the rule, major program supplier and same-market media entity, 
are relationships that afford the interest holder the incentive and 
means to exert influence over the licensee.
    36. In adopting the EDP rule, we affirm our tentative conclusion in 
the Attribution Further Notice that there is the potential for certain 
substantial investors or creditors to exert significant influence over 
key licensee decisions, even though they do not hold a direct voting 
interest or may only have a minority voting interest in a corporation 
with a single majority shareholder, which may undermine the diversity 
of voices we seek to promote. They may, through their contractual 
rights and their ongoing right to communicate freely with the licensee, 
exert as much, if not more, influence or control over some corporate 
decisions as voting equity holders whose interests are attributable.
    37. Same-Market Media Entities. As we noted in the Attribution 
Further Notice, same-market broadcasters and certain other same-market 
media entities may raise particular concerns because of our goal of 
protecting local diversity and competition. Firms with existing local 
media interests may have an incentive and means to use financing or 
contractual arrangements to obtain a degree of horizontal integration 
within a particular local market that should be subject to local 
multiple ownership limitations. Indeed, the Commission's cross-interest 
policy reflected its concern for competition and diversity where an 
entity has an attributable interest in one media outlet and a 
``meaningful relationship'' with another media outlet serving 
substantially the same area. Accordingly, we will include same-market 
media entities as one of the relationships that will trigger 
application of the EDP rule.
    38. To trigger application of the EDP rule to same-market media 
entities, the interest held in the non-EDP media entity in the same 
market must be attributable without reference to the EDP rule; the 
holding of a non-attributable interest in one station or entity in a 
market does not trigger application of the EDP rule where an EDP level, 
but otherwise non-attributable, interest is acquired. Thus, under this 
prong of the EDP rule, a nonvoting interest in 34 percent of the total 
assets of two stations in the same market will not result in 
attribution of either station. This is because the EDP rule is only 
triggered when the entity acquiring the second interest also holds an 
interest in a same-market media entity that is attributable under the 
current attribution rules other than the EDP rule. We follow case law 
in the cross-interest policy context in this regard. As discussed 
below, that policy is implicated in situations where a party holds an 
attributable interest in one media outlet and has a ``meaningful 
relationship'' with another media outlet serving ``substantially the 
same area. As we proposed, we will include same-

[[Page 50627]]

market radio and television broadcasters as well as cable operators and 
newspapers in the category of same-market media entities subject to the 
equity/debt plus attribution standard. Cable operators and newspapers 
are subject to cross-ownership rules and have also been subject to the 
cross-interest policy. There is, accordingly, good reason to include 
them in the EDP rule.
    39. For purposes of applying this prong of the EDP rule to radio 
stations, newspapers, and cable operators, as proposed in the 
Attribution Further Notice, we will define the ``same market'' by 
reference to the definition of the market used in the underlying 
multiple ownership rule that is implicated. As noted by Knight-Ridder, 
such an approach will help avoid confusion among the regulated entities 
in applying the EDP rule. With respect to television stations, as we 
also noted in the Attribution Further Notice, the definition of what is 
the same market for purposes of applying the EDP attribution standard 
is resolved in the companion television local ownership proceeding.
    40. Program suppliers. In the Attribution Further Notice, we 
invited comment on whether we should include program suppliers under 
the ``equity/debt plus'' attribution test to address our concern and 
that of some commenters that program suppliers such as networks could 
use nonattributable interests to exert influence over critical station 
decisions, including programming and affiliation choices. We cited 
recent transactions involving program suppliers where it appeared that 
nonattributable investors could be granted rights over licensee 
decisions that might afford them significant influence over the 
licensee. We invited comment as to whether we should encompass radio 
and television time brokerage agreements or LMAs under the proposed 
``equity/debt plus'' attribution approach, if we specify program 
suppliers as a triggering category.
    41. We will include major program suppliers in the EDP rule. We 
will define the ``major program suppliers'' that are subject to this 
new attribution standard to include entities that provide more than 15 
percent of a station's total weekly broadcast programming hours. We 
believe that the 15 percent standard should apply to all providers of 
programming to stations, including those that provide programming 
pursuant to inter-market LMAs. As noted above, the EDP rule would apply 
only to the major program supplier's investments in a station to which 
it supplies the requisite amount of programming. In addition, where a 
person or entity has an attributable interest in a major program 
supplier, that person or entity will be deemed to be a major program 
supplier for purposes of applying the EDP rule.
    42. We have decided to define a major program supplier subject to 
the EDP rule as all programming entities that supply over 15 percent of 
a station's weekly programming for the following reasons. We agree with 
those commenters that argue that not every program provider can exert 
sufficient influence such that its otherwise non-attributable financial 
interests in a licensee should potentially be subject to attribution. 
We note the views of commenters that the major networks should be 
subject to the EDP rule and those that argue for including providers of 
substantial amounts of programming to a station. Those entities that 
provide substantial quantities of programming to a licensee are, we 
believe, in a strong position to exert significant influence over that 
licensee, particularly when the programming connection is coupled with 
the requisite financial investment, such that the EDP rule should be 
triggered. We believe that the 15 percent standard accomplishes these 
goals, as it would encompass those entities providing substantial 
quantities of programming that also have the requisite investment in 
the station and would exclude those entities that provide only small 
amounts of programming and that therefore do not have potential to 
exert significant influence over licensees. Moreover, it is a standard 
that we have experience in applying, as it is the standard currently 
used in determining whether an intra-market radio LMA is per se 
attributable, and it is the standard that will be used in determining 
whether an intra-market TV LMA is per se attributable. Under our new 
rule, an intra-market LMA is per se attributable if it involves more 
than 15 percent of a station's programming. In contrast, an inter-
market LMA is attributable, under the EDP rule, only if it involves 
more than 15 percent of a station's programming and if the LMA is 
accompanied by a financial investment that is above the 33 percent 
investment threshold. It would sweep too broadly to attribute inter-
market LMAs that are unaccompanied by the requisite financial 
investment. The substantial investment provides additional incentive 
and ability for influence or control. Finally, it is a clear and 
administratively simple standard to apply, promoting our goal of making 
the EDP rule a bright-line test.
    43. A clear rationale exists for not attributing network 
affiliation agreements not accompanied by the requisite investment or 
debt agreements not involving program suppliers or same-market 
broadcasters. We do not attribute all network affiliation agreements 
because, absent a substantial equity or other investment that may 
create accompanying obligations, the affiliate is free to negotiate 
with the network for particular terms. With respect to lenders, such as 
banks, our experience indicates that their motivation is return on 
their investment, and that they do not have the same incentive as the 
networks to influence the programming or other core operational choices 
of the licensee.
    44. While some commenters strongly argued that applying the EDP 
rule to program suppliers would curb investment in broadcast stations 
and possibly hurt weaker UHF stations and might deter investment that 
would facilitate the conversion to DTV, they do not provide empirical 
evidence to support this argument. We also note that the rule does not 
preclude investment, but merely provides that investments over a 
certain level will be deemed presumptively attributable. Networks are 
therefore free to invest in their affiliates, subject of course to the 
applicable multiple ownership rules. Moreover, the EDP rule does not 
attribute investments, even those by networks in their affiliates, 
which fall below the 33 percent threshold. Thus, a major program 
supplier may have an investment that is equivalent to 32 percent of the 
total assets of a station to which it supplies programming in excess of 
the 15 percent standard. This would comply with all EDP limits and the 
interests would not be attributable. In addition, the EDP rule does not 
affect investments by entities other than major program suppliers or 
same-market media entities. Accordingly, we believe that the EDP rule 
will not curb investment, deter new entry, or curb the conversion to 
DTV.
    45. We have decided not to sweep so broadly as to include all 
entities from which a licensee obtains programming but only to include 
those entities that provide more than 15 percent of a station's weekly 
total programming. We have not been presented evidence that smaller 
program suppliers and syndicators that do not provide substantial 
quantities of programming to stations have the potential to wield 
significant influence such that their investment should be attributed. 
Under these circumstances, there appears to be no real need to impose 
constraints on investments by these syndicators and by new networks 
that do not provide the triggering amount of programming. If it

[[Page 50628]]

appears that problems arise in these areas, we can later broaden the 
EDP rule.
    46. Investment Thresholds. Under the EDP rule, where the creditor 
or equity interest holder is a same-market broadcaster or major program 
supplier, as defined herein, in addition to applying the existing 
attribution criteria, we would attribute any financial interest or 
investment in a station or other media outlet where it exceeds 33 
percent of the total assets (debt plus voting, non-voting and preferred 
stock) of the licensee. We intend to aggregate the equity and debt 
interests of such an investor (including both non-voting stock in 
whatever form it is held and voting stock) in a licensee or other media 
outlet for purposes of applying the investment threshold. Thus, when 
the investor's total investment in the licensee or other media outlet, 
aggregating all debt and equity interests, exceeds a specified 
threshold percentage of all investment in the licensee (the sum of all 
equity plus debt), that investment would be attributable. In 
aggregating the different classes of investment, equity and debt, we 
intend to use total assets (debt plus voting, non-voting, and preferred 
stock) as a base. We will not apply the percentage threshold separately 
to debt and to equity interests because this could lead to distortions 
in applying the EDP rule, depending on the percentage of total assets 
that each class of interests comprises. For example, were we to apply 
the percentage thresholds separately, a company with only 10 percent of 
its capital from debt would be attributable to a creditor providing 
only 3.4 percent of the company's total assets, while any equity holder 
providing 32 percent of the total capital would be nonattributable.
    47. The FCC has recognized that holding voting stock in sufficient 
quantities confers the ability to exert influence or control over the 
licensee. Our decision to expand our focus beyond voting stock to 
nonvoting stock and debt is buttressed by academic literature. 
Nonvoting stock and debt may now be used to control or influence a 
licensee in a significant manner, especially when coupled with another 
meaningful relationship or when held by someone that has the incentive 
to influence the station or media entity. There is an incentive for 
licensees and other entities that face regulatory constraints on their 
acquisition of voting stock and other currently attributable interests 
(e.g., networks that face the 35 percent national reach cap) to seek to 
combine currently non-attributable investments with contractual rights 
in such a manner so as to gain significant influence, and we believe 
that the current attribution exemptions have afforded such entities the 
ability to do so. Accordingly, the EDP rule examines not only the 
investment in voting stock but also nonvoting equity and debt in order 
to limit the ability of such entities to circumvent the attribution 
rules.
    48. We have decided to set the threshold at 33%, as proposed in the 
Attribution Further Notice. We believe that a 50 percent threshold 
would be inappropriately high. Our goal is not merely to attribute 
interests with the potential to control but also those with a realistic 
potential to exert significant influence. On the other hand, the 
suggested thresholds of 25 percent or 10 percent seem too low. In 
setting the threshold for attribution of these newly attributable 
interests, we want to be cautious not to set the limit so low as to 
unduly disrupt capital flow to broadcasting. In addition, we believe 
that the threshold for attribution of nonvoting interests should be 
substantially higher than the attribution level for voting interests, 
which give the holder a ready means to influence the company. The 
proposed 33% threshold seems to be an appropriate and reasonable 
attribution threshold. We note that we have discretion to exercise our 
judgment in setting a percentage threshold in this regard and to draw 
an appropriate line, a challenging yet inevitable task for government 
agencies. We have employed a 33 percent benchmark applied in the 
context of the cross-interest policy, and that particular benchmark 
does not appear to have had a disruptive effect. In Cleveland 
Television, the Commission held that a one-third non-voting preferred 
stock interest by a broadcaster in another station in the same market 
conferred ``insufficient incidents of contingent control'' to violate 
the multiple ownership rules or the cross-interest policy, and that the 
holders, by virtue of ownership of the non-voting preferred stock 
interest would not retain the means to directly or indirectly control 
the station. More recently, we have applied Cleveland Television's 33 
percent threshold in Roy M. Speer, where we limited the non-
attributable equity holdings of a same-market television licensee in 
another local television station to 33 percent. We will use this 
threshold in applying the EDP rule but note that we could adjust the 
threshold later, if warranted.
    49. We recognize that the attributable status of a certain 
investment could change, based, for example, on a change in the firm's 
assets, resulting in the investor's interests dropping below the 33 
percent threshold, or vice versa. We will require parties to maintain 
compliance with the attribution criteria as any such changes occur. 
Where sudden, unforeseeable changes take place, however, we will afford 
parties a reasonable time, generally one year, to come into compliance 
with any ownership restrictions made applicable as a result of the 
change in attributable status. Finally, we note that we have 
conditioned a number of recent cases that have raised similar concerns 
on the outcome of this proceeding. We intend to issue separate orders, 
as necessary, to apply the EDP rule to any cases that have been 
conditioned on the outcome of this proceeding.

C. Time Brokerage Agreements or LMAs

Background
    50. An LMA or time brokerage agreement is a type of contract that 
generally involves the sale by a licensee of discrete blocks of time to 
a broker that then supplies the programming to fill that time and sells 
the commercial spot announcements to support the programming. 
Currently, we do not attribute television LMAs, and, accordingly, these 
relationships are not subject to our multiple ownership rules. In the 
radio context, however, time brokerage of another radio station in the 
same market for more than fifteen percent of the brokered station's 
weekly broadcast hours results in attribution of the brokered station 
to the brokering licensee for purposes of applying our multiple 
ownership rules.
    51. In the Attribution Further Notice, we incorporated the 
tentative proposal, initially set forth in the Local Ownership Further 
Notice, 60 FR 6490, December 19, 1996, to attribute television LMAs 
based on the same principles that currently apply to radio LMAs. Thus, 
time brokerage of another television station in the same market for 
more than fifteen percent of the brokered station's weekly broadcast 
hours would be attributable and would count toward the brokering 
licensee's national and local ownership limits. We specifically 
proposed to count attributed television LMAs in applying our other 
ownership rules, including, for example, the broadcast-newspaper cross-
ownership rule, the broadcast-cable cross-ownership rule, and the one-
to-a-market rule (or radio-television cross-ownership rule).
Comments
    52. Most commenters addressing this issue supported our proposal to 
attribute television LMAs based on the

[[Page 50629]]

same principles that currently apply to radio LMAs.
    53. Many parties agreed with our tentative conclusion that 
television LMAs should be attributable because they confer significant 
influence over the programming of the brokered party's station.
    54. Commenters opposed to attributing LMAs generally did not 
disagree that LMAs confer significant influence over the programming of 
the brokering party's station, but either denied that LMAs can have 
negative competitive or diversity effects or argued that their public 
interest benefits outweigh these other considerations.
    55. We issued a Public Notice requesting all parties to all 
existing television LMAs, or time brokerage agreements, to provide 
certain factual information regarding the terms and characteristics of 
these agreements. The responses received to the questionnaire also 
provide information supporting our view that LMAs accord the broker 
significant influence that warrants attribution. First, the LMA, or 
time brokerage agreement, typically brokered most, if not all, of the 
brokered station's broadcast time. The percent of time brokered with 
both same-market and out-of-market LMA stations averaged 90 percent or 
greater. Second, LMA contracts tended to have extended maturities, 
which are renewable in the majority of cases. Same-market LMA contracts 
averaged seven years in duration, and ranged from one to 21 years, 
while out-of-market LMA contracts averaged somewhat less at five years, 
with a range from two to ten years. In addition, a significant number 
of LMA agreements contained options to purchase the station.
    56. Decision. We will adopt a new rule to per se attribute 
television LMAs, or time brokerage of another television station in the 
same market, for more than fifteen percent of the brokered station's 
broadcast hours per week and to count such LMAs toward the brokering 
licensee's local ownership limits. We have determined in the TV 
National Ownership Order that we will not count same-market LMAs 
towards the brokering licensee's national ownership limits, as that 
would constitute double-counting these LMAs. We will count inter-market 
time brokerage agreements where they come under the EDP rule for 
purposes of the national ownership limits. We believe that the 
rationale for attributing LMAs set forth in the Radio Ownership Order, 
57 FR 18089, April 29,1992--i.e., to prevent the use of time brokerage 
agreements to circumvent our ownership limits--applies equally to same-
market television LMAs. We will determine whether an LMA involves a 
``same market'' station based upon the revised duopoly rule's 
standards. Thus, if the brokered station is in the same DMA as the 
brokering station, the LMA is ``same market'' for purposes of 
determining compliance with the ownership rules. If the LMA is found to 
be a same-market LMA, we will then apply the other multiple ownership 
rules to see if they are implicated.
    57. We note that in the Radio Ownership Order, the Commission 
voiced its concern that substantial time brokerage arrangements among 
stations serving the same market, combined with the increased common 
ownership permitted by the revised local rules, could undermine 
broadcast competition and diversity. The Commission therefore decided 
to preclude that possibility by attributing local time brokerage 
arrangements, at least until it had some experience with the effect of 
that new regulatory approach in broadcast markets. We are convinced 
that the radio LMA attribution rule adopted in that Order has operated 
successfully to ensure that the goals set forth in the radio ownership 
rules are not undermined by the existence of unattributed influence 
over radio stations in the same market. We believe that a similar 
approach is warranted concerning television LMAs.
    58. In the Attribution Further Notice, we reiterated our belief 
that the attribution rules must function effectively and accurately to 
identify all interests that are relevant to the underlying purposes of 
the multiple ownership rules and that should therefore be counted in 
applying those rules. Now, based on our experience with attribution of 
radio LMAs and the record in this proceeding, we conclude that a stand-
alone, or per se, rule that attributes a same-market television LMA, or 
time brokerage of a television station in the same market, for more 
than 15 percent of the brokered station's weekly broadcast hours is 
necessary to accomplish this goal.
    59. We will count attributed television LMAs toward all applicable 
broadcast ownership rules, which include the duopoly rule and the one-
to-a-market, or radio-television cross-ownership rule. We have 
determined in the TV National Ownership Order that we will not count 
same-market LMAs towards the brokering licensee's national ownership 
limits, as that would constitute double-counting these LMAs. We will 
count inter-market time brokerage agreements attributable under EDP 
because they are accompanied by the requisite financial investment for 
purposes of the national ownership limits. Attribution is based on 
influence or control that should be considered cognizable and defines 
what we mean by ownership. Indeed, with the exception of radio LMAs, an 
exception which we eliminate today, our other current attribution rules 
apply across the board to all the relevant ownership limits. There is 
no reasonable basis for treating television LMAs any differently.
    60. The record in this proceeding supports our decisions to 
attribute television LMAs and to count attributed radio LMAs toward all 
applicable radio ownership limits. Our analysis, above, of the 
information submitted by parties to television LMAs in response to our 
Public Notice indicates that television LMAs, or time brokerage 
agreements, may give the brokering station influence over the 
programming of the brokered station such as should be recognized as an 
attributable relationship. Moreover, we agree with most commenters, 
representing a variety of interests ranging from ABC to the public 
interest group MAP, that television LMAs, like radio LMAs, permit a 
degree of influence and control that warrants ownership attribution. We 
find it particularly noteworthy that commenters that opposed 
attributing television LMAs did not disagree that such LMAs confer 
substantial influence over brokered stations. Instead, these commenters 
argued that LMAs are beneficial and provide diversity benefits, an 
issue relevant to the question of how much common ownership should be 
permitted, consistent with our competition and diversity goals, rather 
than the cognizability of the interest. This issue is being considered 
in the TV Local Ownership and TV National Ownership proceedings.
    61. We also note that, under the EDP rule, above, we will attribute 
an inter-market time brokerage agreement or LMA (or any other program 
supply arrangement) that brokers more than 15 percent of a station's 
programming (i.e., a program supplier, as defined above) when held in 
combination with more than 33 percent of the total assets (debt plus 
voting, non-voting and preferred stock) of a station. Prior to the EDP 
rule, an inter-market LMA would not have been attributed regardless of 
the level of non-voting equity and debt interests held by the brokering 
station. With the exception of the EDP rule, we will not attribute 
television time brokerage agreements between stations in different 
markets. We disagree with Pappas, which asserted that our proposal to 
treat television LMAs as cognizable interests must also apply to 
television network

[[Page 50630]]

affiliation agreements and argued that, for attribution purposes, there 
is little substantive difference between an LMA and a network 
affiliation agreement, in that both involve the provision of television 
programming and the sale of television advertising time.
    62. In the Radio Rules Order, the Commission stated that time 
brokerage agreements involving radio stations licensed to different 
markets ``raise little public interest concern; indeed they can be 
difficult to distinguish from network affiliation agreements, of which 
the Commission has long approved.'' Both LMAs and network affiliation 
agreements clearly confer some level of influence over the programming 
and commercial time of a licensee. Neither, however, taken alone, 
constitutes an attributable interest. It is the combination of 
ownership of a local competing media interest and programming and 
direct operational influence via a substantial same-market LMA that 
raises our concern and drives our decision to attribute such LMAs under 
our multiple ownership rules. This concern does not arise where there 
is no such combination of interests, as for example, network 
affiliation contracts or out-of-market LMAs unaccompanied by 
substantial investment in the programmed station. It is only when an 
out-of-market LMA provides more than 15 percent of a station's 
programming, in addition to holding an investment of more than 33 
percent of total assets of the station, that we deem the level of 
influence sufficient to warrant attribution. Under those circumstances, 
where substantial investment in the licensee is combined with provision 
of substantial quantities of programming, we believe that the level of 
influence is sufficient to warrant attribution regardless of the fact 
that the programming provider is not a media entity in the same market. 
And, as we have noted, where the program supply agreement takes the 
form of a network affiliation agreement, the network, like the out-of-
market LMA broker, will have its interest in its affiliate attributed 
if it invests in the affiliate above the EDP threshold.
    63. Modify radio rules. In our Attribution Further Notice, we 
stated that if we adopt our proposal for attributing television LMAs, 
we would also consider similarly modifying the radio LMA rules (47 CFR 
73.3555(a)(3)), because radio LMAs are currently considered only for 
purposes of applying the radio duopoly rule (47 CFR 73.3555(a)(1)), and 
invited comment on how the radio LMA attribution rules should be 
modified in this regard. Paxson, the only commenter to address this 
issue, generally argued against attributing radio or television LMAs 
for purposes of ownership restrictions other than the duopoly rules. We 
have decided to adopt our proposal to attribute same-market radio LMAs 
for purposes of applying our other multiple ownership rules that are 
applicable to radio stations, including, for example, the daily 
newspaper cross-ownership rule, and the one-to-a-market (or radio-
television cross-ownership) rule. The other attribution rules apply 
across the board, and there is no reason not to apply attribution of 
radio LMAs consistently to all applicable radio ownership rules. 
Accordingly, we will modify our radio LMA attribution rules to reflect 
this change.
    64. Requirement to File TV LMAs. In our Attribution Further Notice, 
we incorporated from the TV Local Ownership Further Notice the 
tentative proposal that attributable television LMAs be filed with the 
Commission in addition to being kept at the stations involved in an 
LMA. In the Radio Ownership Order, the Commission required that all 
radio time brokerage contracts be placed in the public inspection files 
of the stations involved, and that local time brokerage agreements be 
filed with the Commission within 30 days of execution. The Commission 
noted that these requirements would impose only a minimal burden on 
licensees but would permit it and others to monitor time brokerage 
agreements to ensure that licensees retain control of their stations 
and adhere to the Communications Act, Commission Rules and policies and 
the antitrust laws. We believe that these same reasons are valid today 
with respect to television time brokerage agreements.
    65. We will require stations involved in television time brokerage 
agreements (inter-market as well as intra-market agreements) to keep 
copies of those agreements in their local public inspection files, with 
confidential or proprietary information redacted where appropriate, and 
require the licensee that is the brokering station to file with the 
Commission, within 30 days of execution of such agreement, a redacted 
copy of any time brokerage agreements that would result in the 
arrangement being attributed in determining the brokering licensee's 
compliance with the multiple ownership rules. We will amend our rules 
accordingly. We note that these provisions impose an affirmative 
obligation on licensees to determine, in the first instance, whether a 
particular LMA is attributable (either under the per se rule or the EDP 
rule), and to file the agreement with the Commission if it is.
    66. Programming responsibility safeguards. In our Attribution 
Further Notice, we emphasized, as we did in our radio ownership 
proceeding, ``that the licensee is ultimately responsible for all 
programming aired on its station, regardless of its source,'' and 
invited comment on what, if any, specific safeguards we should adopt 
with respect to television LMAs to ensure a brokered station's ability 
to exercise its programming responsibility. We believe that attribution 
of same-market television LMAs, along with our new filing requirements, 
will subject LMAs arrangements to sufficient scrutiny by competitors, 
the public and the Commission, that brokering stations will have strong 
incentives to avoid unauthorized acquisition of control of the brokered 
station. We remind all parties to LMAs that, as we noted in the Radio 
Ownership Order, ``our rules require the licensee to maintain control 
over station management and ultimate programming decisions, regardless 
of any time brokerage agreements that may exist.''
    67. Simulcasting. In our Attribution Further Notice, we stated that 
we would resolve the issue, raised in the Local Ownership Further 
Notice, as to whether the program duplication or simulcasting limits 
that apply to commonly owned or time brokered radio stations should 
apply to television LMAs. No commenters addressed this particular 
question, although some argue generally that LMAs result in duplicative 
programming. Other commenters disagree, pointing out that, from the 
perspective of a time broker, time brokerage agreements pay off through 
the ability to attract additional, new audiences to the brokered 
station. A duplication of programming would not attract additional 
audiences, but would merely divide the audience currently enjoyed by 
the time broker's owned station with the audience of the brokered 
station.
    68. With respect to radio broadcasting, ``simulcasting,'' or 
program duplication, refers to the simultaneous broadcasting of a 
particular program over co-owned stations serving the same market, or 
the broadcasting of a particular program by one station within 24 hours 
before or after the identical program is broadcast over the other 
station. In the Radio Ownership Order, the Commission limited 
simulcasting on commonly owned stations in the same service serving 
substantially the same area to 25 percent of the broadcast schedule, 
stating that it saw no benefit to the

[[Page 50631]]

public from permitting commonly owned same-service stations in the same 
market to substantially duplicate programming. The Commission reasoned 
that the limited amount of available radio spectrum could be used more 
efficiently by other parties to serve competition and diversity goals, 
and that substantial same-service simulcasting would not aid 
economically disadvantaged stations because the audience for the 
programming in question would be shared by two or more stations.
    69. At this time, we will not apply simulcasting limits to 
television LMAs. We are not aware that broadcasters involved in 
television LMAs are simulcasting their programming to any significant 
extent. Moreover, we believe such simulcasting is unlikely to occur 
because it would most likely work to the disadvantage of the stations 
engaged in the LMA. We note that television coverage differs from 
radio, in that there are fewer television stations per market, and 
those stations cover a larger market area than do radio stations. We 
assume that if television stations commonly operated under an LMA in 
the same market simulcast programming, they would split the audience 
for that programming between themselves, losing the audience for 
alternative programming to other television stations in that market. 
Because stations' advertising revenues are generally based on audience 
share, revenue and basic profits would be negatively affected by such 
practices. There consequently appears to be a significant market 
disincentive against simulcasting in the context of same-market 
television LMAs. To the extent that simulcasting occurs, it may reflect 
the owner's (or broker') attempt to maximize the audience reach within 
the DMA. As indicated above, we received no comments specifically 
addressing this question, nor have we seen any evidence that the 
concerns with respect to simulcasting by commonly owned or time 
brokered radio stations apply to television stations operating under 
LMAs. Should we find evidence to the contrary at a future date, we may, 
of course, revisit this decision.
    70. Grandfather Existing LMAs. In our Attribution Further Notice, 
we stated that if we decided to attribute television LMAs as we 
proposed in this proceeding, we intended to resolve the issues of 
grandfathering, renewability and transferability of existing TV LMAs in 
the separate TV Local Ownership proceeding so that we could evaluate 
the extent to which grandfathering might be needed based on the nature 
of the local ownership rules we adopt. These issues are outside the 
scope of this proceeding, and, as we noted in the Attribution Further 
Notice, will be resolved in the TV Local Ownership Order. 

D. Cross-Interest Policy

Background
    71. Overview. The cross-interest policy has been applied to 
preclude individuals or entities from holding an attributable interest 
in one media property (broadcast station, newspaper, cable system) and 
having a ``meaningful'' albeit nonattributable interest in another 
media entity serving ``substantially the same area.'' This policy 
originally developed as a supplement to the multiple ownership 
``duopoly'' rule which prohibited the common ownership, operation, or 
control of two stations in the same broadcast service serving 
substantially the same area. Ownership, operation or control as 
contemplated by this rule was originally defined as actual control or 
ownership of 50 percent or more of the stock of a licensee. Since this 
definition did not encompass minority stock ownership, positional 
interests (such as officers and directors), and limited partnership 
interests, the cross-interest policy was developed to address the 
competitiveness and diversity concerns created when a single entity 
held these types of otherwise permissible interests in two (or more) 
competing outlets in the same market. In essence, the cross-interest 
policy filled gaps in our attribution criteria that had become apparent 
through our case-by-case application of the ownership rules.
    72. Through case-by-case adjudication, the following relationships 
came to be viewed as constituting ``meaningful'' interests subject to 
the cross-interest policy: key employees, joint ventures, 
nonattributable equity interests, consulting positions, time brokerage 
arrangements, and advertising agency representative relationships. The 
cross-interest policy did not prohibit these interests outright, but 
required an ad hoc determination regarding whether the nonattributable 
interests at issue in each case would be permitted.
    73. In 1989, after a comprehensive review to assess the continuing 
need for the cross-interest policy, the Commission issued a Policy 
Statement limiting the scope of the cross-interest policy so that it 
would no longer apply to consulting positions, time brokerage 
arrangements and advertising agency representative relationships. The 
Commission decided that it no longer needed to apply the cross interest 
policy to those relationships because: (1) the need for the policy had 
decreased based on new attribution provisions that had superseded it; 
(2) the costs to the public and the Commission of administering the 
policy were difficult to justify given the reduced need for continued 
oversight of these relationships; (3) growth of media outlets had 
undercut the notion that any single individual or entity could skew 
competition through the cross-interests at issue; and (4) alternative 
safeguards, such as antitrust laws, fiduciary duties and private 
contract rights were available to curb anti-competitive conduct.
Comments
    74. Current Aspects of the Cross-Interest Policy. After the Policy 
Statement, three aspects of the cross-interest policy remain in effect:
    (1) Key employee relationships. The cross-interest policy has 
generally prohibited an individual who serves as a key employee, such 
as general manager, program director, or sales manager, of one station 
from having an attributable ownership interest in or serving as a key 
employee of another station in the same community or market. The 
application of the cross-interest policy in these situations is 
premised on the potential impairment to competition and diversity and 
the apparent conflict of interest arising from the ability of key 
employees to implement policies to protect their substantial equity 
interest in the other station.
    (2) Nonattributable equity interests. The cross-interest policy has 
also typically proscribed an individual who has an attributable 
interest in one media outlet from holding a substantial nonattributable 
equity interest in another media outlet in the same market. The 
Commission's concern with these relationships has been that the 
individual could use the attributable interest in one media outlet to 
protect the financial stake in the other media outlet, thus impairing 
arm's length competition. (Two or more separate non-attributable 
interests in a market are not proscribed by this policy, as neither 
gives rise to the potential to influence station operations that would 
concern us.)
    (3) Joint venture arrangements. The cross-interest policy has 
prevented two local broadcast licensees from entering into joint 
associations to buy or build a new broadcast station, cable television 
system, or daily newspaper, in the same market. These joint ventures 
have triggered cross-interest scrutiny because the successful operation 
of the joint venture was thought to require a

[[Page 50632]]

cooperative relationship between otherwise competing stations, and this 
would impair competition in the local market.
    75. Prior Notices. In the Cross-Interest Notice, we asked for 
comments as to whether we should retain our cross-interest policy in 
these three areas--key employees, non-attributable equity interests, 
and joint ventures. We also invited comment as to whether we should 
amend the attribution rules to incorporate the key employee portion of 
the cross-interest policy. We sought further comment on whether 
retention of the remaining named components of the cross-interest 
policy was necessary to prevent anticompetitive practices, whether 
alternative deterrent mechanisms exist to assure competition and 
diversity, and whether continued regulation of relationships not 
specifically addressed by the Commission's attribution rules is 
necessary. We also questioned whether regulatory oversight of one or 
more of these interests should be limited to geographic markets with 
relatively few media outlets. Five comments and reply comments were 
filed in response to the Cross-Interest Notice. The majority of 
commenters urged the Commission to eliminate the cross-interest policy 
as it applies to all of these relationships. One commenter, CFA/TRAC, 
urged the Commission to retain the policy. In the Attribution Notice, 
we sought to update the record with respect to retention of the cross-
interest policy in light of changes in the multiple ownership rules and 
additional changes we were proposing to the attribution rules. In the 
Attribution Further Notice, we sought additional comment as to the 
effect on our cross-interest policy of our proposed equity/debt plus 
approach, which would apply to cases raising concerns of competition 
and diversity normally reflected in the cross-interest policy. We also 
sought comment on whether the equity/debt plus approach would be 
preferable to a case-by-case approach, which is used to administer the 
cross-interest policy. We specifically noted that the bright line 
approach could provide certainty and minimize regulatory costs.
    76. Most commenting parties expressly discussing this issue favored 
eliminating at least portions, if not all of the cross-interest policy.
    77. A few commenters either opposed elimination of the cross-
interest policy, or urged the Commission not to change the rules.
Decision
    78. We will eliminate the above noted remaining components of the 
cross interest policy. Our goals in initiating this proceeding include 
maximizing the clarity of the attribution rules, providing reasonable 
certainty and predictability to parties to allow transactions to be 
planned, and easing application processing. As discussed above, 
commenters have argued that the vagueness and uncertainty imposed by 
the ad hoc application of the cross-interest policy have chilled 
investment. As CalPERS argues, this uncertainty impedes the ability of 
broadcasters to enter into transactions because the policy can be 
invoked to prohibit a seemingly permissible transaction.
    79. Today, we have revised the attribution rules to adopt the EDP 
rule, a bright line test, which we believe will increase regulatory 
certainty and reduce regulatory costs. In adopting that rule, we will 
reach those situations involving formerly nonattributable interests 
that raised the most concern with respect to issues of competition and 
diversity, some of which were previously addressed in administering the 
cross-interest policy. We agree with commenters who argue that adoption 
of the EDP rule, as well as the existence of the other attribution 
rules, provides additional grounds for elimination of the cross-
interest policy.
    80. We note that the EDP rule directly covers concerns treated 
under the non-attributable interests prong of the cross-interest 
policy, as it would attribute a substantial nonattributable interest by 
a media entity in a second media outlet in the same market. We 
recognize, however, that the EDP rule does not cover all the areas 
encompassed by the cross-interest policy. It would not cover key 
employees, for example. We nonetheless believe, as commenters have 
pointed out, that internal conflict of interest policies, common law 
fiduciary duty, and contract remedies provide adequate substitutes for 
our administration of the policy with respect to key employees. In 
addition, many key employees are also officers and directors and are 
thus already covered by the attribution rules. In any event, we believe 
that the very small risk of harm to competition by a key employee in an 
instance not covered by any of these other regulations and remedies is 
greatly outweighed by the benefits of minimizing our case-by-case 
approach to transactions and applying bright line tests, such as the 
EDP test and our other attribution rules.
    81. With respect to joint ventures, we believe that application of 
a cross-interest policy is unwarranted. The ownership and attribution 
rules define the level of combined ownership that is permissible in the 
local market. Many joint ventures are already covered by the 
attribution/ownership rules, and they may also be covered to some 
extent by the EDP rule. Accordingly, a joint venture between two 
licensees in a market to acquire additional broadcast entities in the 
same market may be subject to the radio-television cross-ownership rule 
or the relevant duopoly rule. As CBS contended, to continue to regulate 
these interests under a separate policy when many are covered by the 
attribution rules is redundant. In addition, according to CBS, the ad 
hoc application of the cross-interest policy has ``clouded the future 
of potential joint ventures with uncertainty'' regarding their eventual 
approval by the Commission. We agree that the cross-interest policy as 
applied to joint ventures is largely subsumed by the application of the 
current multiple ownership rules. To the extent that the cross-interest 
policy is not so subsumed, we believe that it should be eliminated. We 
have made a judgment to limit combined local ownership to certain 
degrees, as delineated in our local ownership rules. Accordingly, it 
makes no sense to have a routine additional layer of case-by-case 
review for those joint ventures that fully comply with those rules. In 
these cases, the burdens of case-by-case review are not justified for 
transactions that already comply with the multiple ownership rules. 
Furthermore, as other commenters noted, the application of the 
antitrust laws should prevent or remedy any abuses of joint venture 
relationships not already subject to the multiple ownership rules.
    82. In sum, we believe that the regulatory costs and the chilling 
effects of the cross-interest policy and the benefits of applying a 
clear and discernable standard outweigh any risks of potential abuses 
in eliminating the policy. Moreover, many remaining aspects of the 
cross-interest policy are subsumed under our attribution rules, as 
revised herein.

E. Joint Sales Agreements (JSAs)

    83. Background. In the Attribution Notice, we requested comment on 
whether, through multiple cooperative arrangements or contractual 
agreements, broadcasters could so merge their operations as to 
implicate our diversity and competition concerns. We noted, however, 
that we did not intend to reopen our earlier decisions permitting joint 
sales practices in radio and television. These decisions had allowed 
joint sales agreements (``JSAs'') (i.e., agreements for the joint sales 
of broadcast commercial time), subject to compliance with the antitrust 
laws.

[[Page 50633]]

    84. After issuing the Attribution Notice, the staff was presented 
with cases involving joint sales agreements that raised diversity and 
competition concerns. These cases raised questions as to whether non-
ownership mechanisms such as JSAs that might convey influence or 
control over advertising shares should be considered attributable under 
certain circumstances. Accordingly, in the Attribution Further Notice 
we invited additional comments on the potential effects of JSAs among 
same-market broadcasters on diversity and competition. We also sought 
comment on whether we should attribute JSAs among licensees in the same 
market, including both radio and television licensees, irrespective of 
whether they are accompanied by the holding of debt or equity. In 
addition, we sought general information concerning the typical 
contractual terms of JSAs.
    85. Decision. We will not attribute JSAs. Based on the record in 
this proceeding, we do not believe that agreements which meet our 
definition of JSAs convey a degree of influence or control over station 
programming or core operations such that they should be attributed. We 
define JSAs as contracts that affect primarily the sales of advertising 
time, as distinguished from LMAs, which may affect programming, 
personnel, advertising, physical facilities, and other core operations 
of stations. We note that in our DTV 5R&O, we stated that we would look 
with favor upon joint business arrangements among broadcasters that 
would help them make the most productive and efficient uses of their 
channels to help facilitate the transition to digital technology. JSAs 
may be one such joint business arrangement. We recognize the 
significant competitive concerns about same-market radio JSAs raised by 
DOJ, but we also note that the factors considered by DOJ and the 
Commission in analyzing business arrangements may differ in some 
respects. Although both DOJ and the Commission are concerned about the 
competitive consequences of business agreements such as JSAs, our 
concerns are not identical. DOJ's comments explicitly recognize that in 
addition to competition issues, the Commission is also concerned with 
issues of diversity and reducing unnecessary administrative burdens. 
Some JSAs may actually help promote diversity by enabling smaller 
stations to stay on the air. Furthermore, to reduce administrative 
burdens, we will not require the routine filing of JSAs with the 
Commission.
    86. Accordingly, after weighing competition, diversity, and 
administrative concerns, we decline to impose new rules attributing 
JSAs as long as they deal primarily with the sale of advertising time 
and do not contain terms that affect programming or other core 
operations of the stations such that they are, in fact, substantively 
equivalent to LMAs. We will retain our current policies concerning 
JSAs. Furthermore, in the absence of specific evidence of widespread 
abuse of JSAs by broadcasters, we also decline to adopt the general 
disclosure and reporting requirement for radio JSAs recommended by DOJ 
in its comments. We will, however, require broadcasters who have 
entered into JSAs to place such agreements in their public inspection 
files, with confidential or proprietary information redacted where 
appropriate. This requirement will facilitate monitoring of JSAs by the 
public, competitors and regulatory agencies. We do, however, retain 
discretion, in any event, to review cases involving radio or television 
JSAs on a case by case basis in the public interest, where it appears 
that such JSAs do pose competition or other concerns. Finally, we 
emphasize that all JSAs are of course still subject to antitrust laws 
and independent antitrust review by the Department of Justice.

F. Partnership Interests

    87. Background. Under the Commission's current attribution rules 
governing partnership interests, general partners and non-insulated 
limited partnership interests are attributable, regardless of the 
amount or percentage of equity held. An exception from attribution 
applies only to those limited partners who meet the Commission's 
insulation criteria and certify that they are not materially involved 
in the management or operations of the partnership's media interests.
    88. The Attribution Notice asked for comment on whether the 
insulation criteria remain effective and specifically whether the 
insulation criteria needed to be tightened or relaxed to meet the needs 
of certain new types of business entities. For example, widely-held 
limited partnerships, and in particular business development companies, 
may be required by federal and state statutes to grant voting rights to 
limited partners in such matters as the selection and removal of 
general partners. However, the insulation criteria require that such 
voting rights be restricted, except under certain circumstances, in 
order to support a presumption of partner non-involvement in the 
management of the partnership. The Attribution Notice inquired whether 
the insulation criterion should be relaxed to remove this potential 
conflict with state law, or whether equity benchmarks combined with a 
more limited relaxation of the insulation criteria should be applied to 
these widely-held limited partnerships. We noted that commenters in 
response to the Capital Formation Notice had argued that allowing 
specific voting rights would not compromise our attribution rules 
since: (1) the remaining insulation criteria are sufficient to prevent 
material involvement of a partnership member in media operations; and 
(2) the dispersed interests in a widely-held limited partnership would 
preclude member involvement in management and operations.
    89. In addition, the Attribution Notice asked whether an equity 
benchmark, such as 5 percent, should be used to establish attribution 
with respect to all ``widely-held'' limited partnerships, and if so, 
how should the Commission define widely-held limited partnerships, and 
what factors could be used to guarantee that these entities remain 
widely-held. More generally, the Attribution Notice asked whether an 
equity benchmark, under which investments below the threshold would be 
exempted from the insulation criteria and would be held non-
attributable, should be applied to all partnership forms, widely-held 
or not. In this latter case, the Attribution Notice asked whether we 
should set the equity benchmarks for partnership interests along lines 
similar to those used for voting corporate equity interests. We stated, 
however, that, based on the record thus far, we were not inclined to 
apply an equity benchmark to limited partnerships but would instead 
retain the insulation criteria, and that parties that disagreed must 
provide us with more data and analysis to demonstrate that our earlier 
decision to apply the insulation criteria is no longer justified. We 
also asked for information on the financial and legal structures of 
limited partnerships to enable us to determine whether there is a 
uniform equity level below which we need not be concerned with the 
application of the insulation criteria.
    90. Comments. No commenters favored adding to the current list of 
insulation criteria.
    91. Decision. We see no reason to revise our previous decision to 
treat limited partnership interests as distinct from corporate voting 
equity interests, and therefore elect not to adopt equity benchmarks 
for limited partnership interests. As we stated in the Attribution 
Further Reconsideration, ``[t]he partners in a limited partnership, 
through contractual arrangements, largely have

[[Page 50634]]

the power themselves to determine the rights of the limited partners.'' 
Therefore, the insulation criteria adopted by the Commission serve to 
identify those situations within which it is safe to assume that a 
limited partner cannot be ``materially involved'' in the media 
management and operations of the partnership. As we also stated 
therein, the powers of a limited liability holder to exert influence or 
control are not necessarily proportional to their equity investment in 
the limited partnership, since the extent of these powers can be 
modified by the contractual arrangements of the limited partnership. In 
the Attribution Notice, we stated our disinclination to change our 
approach of applying insulation criteria in favor of an equity 
benchmark, and we have not been provided sufficient evidence to revise 
that view and to indicate that these original reasons for declining to 
adopt an equity benchmark for limited partnerships are no longer valid.
    92. We also see no need at this time to add to, relax, or otherwise 
revise our limited partnership insulation criteria. Some commenters 
suggested that the insulation criteria should be modified to eliminate 
conflicts with state law, or that RULPA or other relevant standards 
should be used in their place. However, in our Attribution 
Reconsideration, the Commission decided for several reasons to abandon 
the use of RULPA, combined with a no material involvement standard, as 
a standard for judging whether limited partners were exempt from 
attribution. First, we judged the joint use of these two disparate 
standards for determining limited partner exemptions from attribution 
to be unnecessarily complicated. Second, we noted that there was a lack 
of uniform interpretation of the RULPA provisions, and that the scope 
of permissible limited partner activities was not statutorily set by 
RULPA, but rather was determined by the limited partnership agreement 
itself. Third, we determined that reliance on the RULPA provisions did 
not provide sufficient assurance that limited partners would not 
significantly influence or control partnership affairs. We are 
convinced that these conclusions remain valid today, and therefore we 
see no reason to revise our insulation criterion in favor of a RULPA 
standard. We also feel that similar considerations apply to state laws 
that regulate limited partnership activities, since these statutes may 
vary significantly from state to state, and may fail to provide 
sufficient assurance that the limited partner will lack the ability to 
significantly influence or control the partnership's media activities.
    93. We will not create exceptions for widely-held limited 
partnerships, such as Business Development Companies, from the current 
insulation criteria applicable to limited partnerships or otherwise 
revise those insulation criteria. The essential character of these new 
business forms for determining attributable interests is the 
contractual flexibility they allow in setting up and managing the 
association. Therefore, we believe that the insulation criteria are 
needed for these business forms to insure ``lack of material 
involvement'' on the part of investors. This would imply that in some 
limited number of cases, interests may not be insulated because of 
state laws that require investor rights that conflict with the 
insulation criterion. However, commenters have not provided sufficient 
evidence concerning the number or importance of such instances that 
would compel the Commission to create special exemptions for these 
specialized business forms. Since these entities are allowed greater 
contractual flexibility under state law than are limited partnerships, 
we believe that greater caution is warranted in dealing with these 
novel forms. Further, we have not been presented with evidence to 
demonstrate that the current insulation criteria are no longer valid or 
effective in achieving their goals.
    94. A number of commenters have asked us to clarify certain issues 
with respect to the scope or other aspects of the insulation criteria. 
We do not believe that this is the proper forum for declaratory rulings 
as to the scope of the insulation criteria. Indeed, the questions 
raised by commenters as to the application of the criteria to specific 
activities are best resolved by the Commission on a case-by-case basis 
based on the facts of the case. In addition, some of the proposed 
clarifications would, in effect, amount to a relaxation of the 
criteria. For example, Capital Cities/ABC asked the Commission to 
confirm that an insulated limited partner's interest in a licensee does 
not preclude the interest holder from also holding an affiliation 
agreement with the licensee. However, a contractual arrangement to 
provide programming would be inconsistent with the insulation criterion 
that ``the limited partner may not perform any services for the 
partnership materially relating to its media activities,'' and 
therefore would not allow insulation of the limited partner's interest. 
As discussed, we decline to relax the insulation criteria. Moreover, we 
believe that the insulation criteria have worked effectively in the 
past, and that there is no need for further clarification on a general 
basis in this Report and Order. Any issues that may arise as to the 
application of the criteria to particular transactions will be resolved 
on a case-by-case basis.

G. LLCs and Other Hybrid Business Forms

    95. Background. In the Attribution Notice, we sought comment as to 
how we should treat, for attribution purposes, the equity interest of a 
member in a limited liability company or LLC, a then relatively new 
form of business association regulated by state law, or in other new 
business forms, such as Registered Limited Liability Partnerships 
(``RLLPs''). LLCs are, in general, unincorporated associations that 
possess attributes of both corporations and partnerships. The specific 
attributes of LLCs may vary, since their form is regulated by state 
statutes. LLCs are, however, generally intended to afford limited 
liability to members, similar to that afforded by the corporate 
structure, while also affording the management flexibility and flow-
through tax advantages of a partnership, without many of the 
organizational restrictions placed on corporations or limited 
partnerships. Depending on the requirements of the applicable state 
statute, LLCs afford their members broad flexibility in organizing the 
management structure and permit members to actively participate in the 
management of the entity without losing limited liability. Thus, with 
some variation depending on the applicable statute, LLCs may be 
organized with centralized management authority residing in one or a 
few managers (who may or may not be members) or decentralized 
management by members.
    96. In the Attribution Notice, we tentatively proposed to treat 
LLCs and RLLPs like limited partnerships and adopted that proposal as 
an interim processing policy. Thus, membership in an LLC or RLLP would 
be attributed unless the applicant certifies that the member is not 
materially involved, directly or indirectly, in the management or 
operation of the media-related activities of the LLC or RLLP. We 
proposed that such certification should be based on our limited 
partnership insulation criteria and invited comment on whether those 
insulation criteria developed with respect to limited partnerships are 
sufficient to insulate members of LLCs and RLLPs or whether other 
criteria would be more effective. We also tentatively concluded that we 
were not prepared to adopt an equity benchmark

[[Page 50635]]

for non-insulated LLC interests, but we invited comment on that 
conclusion. In addition, we invited comment on whether, if we adopt the 
certification approach, we should, either routinely or on a case-by-
case basis, require parties to file copies of the organizational 
filings and/or operating agreements with the Commission when an 
application is filed. Finally, we asked whether we should differentiate 
our treatment of LLCs based on whether their management form is 
centralized or decentralized.
    97. Decision. We adopt our tentative conclusion in the Attribution 
Notice to treat LLCs and other new business forms including RLLPs under 
the same attribution rules that currently apply to limited 
partnerships. The insulation criteria that currently apply to limited 
partnerships would apply without modification to these new business 
forms. Therefore, LLC or RLLP owners would be treated as attributable 
unless the owner can certify their lack of direct or indirect 
involvement in the management and operations of the media-related 
activities of the LLC or RLLP based on existing insulation criteria. We 
will not distinguish among LLCs based on whether they adopt a more 
centralized or decentralized form.
    98. We believe that this decision is justified for the reasons 
discussed in the Attribution Notice, which are supported by the record. 
State laws grant more liberal organizational powers to LLCs and RLLPs 
than to limited partnership forms. Thus, equity holders can retain 
their limited liability even though they participate in the management 
of the entity. Under these circumstances, we believe that it is 
important to apply the insulation criteria to assure that those equity 
holders that purport to be insulated from management are in fact so 
insulated. In addition, even when an LLC adopts a ``corporate form'' of 
organization, there is still sufficient discretion afforded by state 
law so that the owners of the enterprise may retain some level of 
operational control on their own part. The organizational restrictions 
applicable to corporations do not necessarily apply. The Commission 
could also apply a control test to determine attribution, or require 
these companies to incorporate insulation criteria directly into their 
governing documents. However, these case-by-case solutions would reduce 
regulatory certainty and delay processing of applications. We also 
believe that using equity benchmarks would be inappropriate for reasons 
similar to those discussed above in terms of limited partnerships. In 
addition, we have been applying the interim processing policy, it has 
worked well and effectively, and we see no reason to change it.
    99. We agree with those commenters who argued that business 
associations, such as LLCs, are similar to partnership forms in terms 
of organizational flexibility, and we will treat them comparably for 
attribution purposes. Indeed, the greater flexibility in governance 
granted such entities under state law, to elect either a ``corporate 
form'' or a ``partnership form'' of governance, underscores the need 
for caution in our approach to the attribution of new business forms. 
The current insulation criteria serve to directly address our concerns 
over the influence of an interest holder. Creating specialized 
attribution standards for new business forms as they arise will serve 
only to complicate the attribution rules, without better addressing our 
core concerns over the potential influence exerted by the owners of a 
particular entity, however organized.
    100. To reduce paperwork burdens, we will not routinely require the 
filing of organizational documents for LLCs. However, to remain 
consistent with our treatment of limited partnerships and insulation 
criteria, we will require the same ``non-involvement'' statement for 
LLC members who are attempting to insulate themselves from attribution 
that we require for limited partners who are attempting to insulate 
themselves. We will also require LLC members who submit the foregoing 
statement to submit a statement that the relevant state statute 
authorizing LLCs permits an LLC member to insulate itself/himself in 
the manner required by our criteria, since our experience shows that 
state laws vary considerably with respect to the obligations and 
responsibilities of LLC members. This policy will help us to avoid any 
potential confidentiality concerns, referred to in the Attribution 
Notice, that may arise if we require filing of organizational 
documents.

H. Cable/MDS Cross-Ownership Attribution

    101. Background. The Attribution Further Notice considered changes 
to the cable/Multipoint Distribution Service (``MDS'') cross-ownership 
attribution rule, For purposes of this item (MDS also includes single 
channel Multipoint Distribution Service (``MDS'') and Multichannel 
Multipoint Distribution Service (``MMDS'')). Section 21.912 of the 
rules, which implements Sec. 613(a) of the Communications Act, 
generally prohibits a cable operator from obtaining an MDS 
authorization if any portion of the MDS protected service area overlaps 
with the franchise area actually served by the cable operator's cable 
system. In addition, Sec. 21.912(b) prevents a cable operator from 
leasing MDS capacity if its franchise area being served overlaps with 
the MDS protected service area. For purposes of this rule, the 
attribution standard used to determine what entities constitute a 
``cable operator'' or an MDS licensee, is generally defined by the 
Notes to Sec. 76.501. In sum, we presently consider a cable operator to 
have an attributable interest in an MDS licensee if the cable operator 
holds five percent or more of the stock in that licensee, regardless of 
whether such stock is voting or non-voting. We also attribute all 
officer and director positions and general partnership interests. 
However, unlike the broadcast attribution standard, our current cable/
MDS standard contains no single majority shareholder exception, and 
attributes limited partnership interests of five percent or greater, 
notwithstanding insulation.
    102. As we recognized in the Attribution Further Notice, the 
strictness of the existing attribution standard severely limits 
investment opportunities that would advance our goals of strengthening 
wireless cable and providing meaningful competition to cable operators. 
We also saw no reason to have different attribution criteria for 
broadcasting and MDS, and reiterated our previous observation that the 
broadcast attribution criteria could be used for the purpose of 
determining attribution in the context of cable/MDS cross-ownership. 
Thus, in the Attribution Further Notice, we invited comment on whether 
we should apply broadcast attribution criteria, as modified by this 
proceeding, in determining cognizable interests in MDS licensees and 
cable systems. In addition, we sought comment as to whether we should 
add an equity/debt plus attribution rule where the competing entity's 
holding exceeds 33 percent or some other benchmark. We further stated 
our belief that these proposed modifications of our attribution rules 
would increase the potential for investment and further diversity, 
while preventing cable from warehousing its potential competition.
    103. Decision. After reviewing all of the comments submitted on our 
proposals to relax the cable/MDS attribution rules, we are persuaded 
that the broadcast attribution criteria, as modified by this 
proceeding, should be applied in determining what interests in MDS 
licensees and cable systems are cognizable. We continue to see no 
reason, and none has been suggested by

[[Page 50636]]

any of the commenters, that would warrant different attribution 
criteria for broadcasting and MDS. As we have discussed here and in the 
Attribution Further Notice, 60 FR 6483, February 2, 1995, investment 
opportunities critical to the development of MDS as a competitive 
service to cable have been severely limited by the current attribution 
standard.1 Therefore, continued application of the current 
cable/MDS attribution standard would frustrate our goals of 
strengthening wireless cable, providing meaningful competition to cable 
operators and benefitting the public interest by offering consumers 
more choice in their selection of video programming providers. In view 
of these considerations and the record before us, we conclude that the 
public interest would be better served if the modified broadcast 
attribution criteria were employed for the purpose of determining 
attribution in the context of cable/MDS cross-ownership. Such 
modification of our existing attribution standard will increase 
investment possibilities without adversely affecting competition. Thus, 
we believe this attribution standard will identify ownership interests 
with the potential to exert significant influence on a licensee's 
management and operations, and the cross-ownership provision by its 
very nature will address the concern that common ownership of different 
multichannel video programming distributors may reduce competition and 
limit diversity. We are persuaded, moreover, that relaxing our current 
attribution standard will have genuine meaning for institutional 
investors who, though not involved in the day-to-day activities of 
either cable or MDS companies, have been precluded from making 
investments in MDS due to pre-existing or anticipated investments in 
cable.
---------------------------------------------------------------------------

    \1\ We have recently taken additional steps to expand investment 
opportunities to further strengthen MDS. Amendment of Parts 21 and 
74 to Enable Multipoint Distribution Service and Instructional 
Television Fixed Service Licensees to Engage in Fixed Two-Way 
Transmissions, 13 FCC Rcd 19112 (1998), recon., FCC 99-178, released 
July 29, 1999.
---------------------------------------------------------------------------

    104. The Wireless Association also fails to persuade us that it 
would be unfair to impose a debt limitation on cable/MDS cross-
ownership when no such limitation has been placed on cable/LMDS cross-
ownership. We consider it significant that, unlike our recently adopted 
cable/LMDS cross-ownership rules, the cable/MDS cross-ownership rule 
implements a statutory prohibition, Section 613(a) of the Act. 
Therefore, in revisiting our cable/MDS attribution standard, we must 
consider both the rule and the statutory implications. As we 
tentatively concluded in the Attribution Further Notice, the potential 
exists:

    For certain substantial investors or creditors to have the 
ability to exert significant influence over key licensee decisions 
through their contract rights, even though they are not granted a 
direct voting interest or may only have a minority voting interest 
in a corporation with a single majority shareholder, which may 
undermine the diversity of voices we seek to promote. They may, 
through their contractual rights and their ongoing right to 
communicate freely with the licensee, exert as much or more 
influence or control over some corporate decisions as voting equity 
holders whose interests are attributable.

That tentative conclusion has been affirmed here, and we believe 
applies with equal force to our competitive concerns underlying cable/
MDS cross-ownership. We have also determined that our broadcast 
attribution rules will be triggered when the aggregated debt and equity 
interests in a licensee exceed a 33 percent benchmark. Our EDP 
broadcast attribution provision is intended to address our concerns 
that multiple nonattributable interests could be combined to exert 
influence over licensees such that they should be attributable. Based 
on the same reasons, we likewise regard the 33 percent EDP provision as 
an appropriate addition to the modified cable/MDS attribution standard. 
Furthermore, by adopting the 33 percent EDP provision for cable/MDS 
attribution, we believe that we are acting in a manner consistent with 
the statutory directive by furthering congressional intent to promote 
competition among video providers.
    105. Accordingly, we will adopt the broadcast attribution criteria, 
as modified in this proceeding, for determining cognizable interests in 
MDS licensees and cable systems. The modified attribution criteria will 
also apply to the cable/MDS and cable/ITFS cross-leasing rules. A 
supplemental note will follow those cross-leasing rules and state that 
the attribution standard applicable to cable/MDS cross-ownership also 
applies to them. In addition, given the considerations discussed above, 
and for the same reasons we are adopting the 33 percent EDP provision 
for the broadcast attribution standard, we will adopt the 33 percent 
EDP provision as part of the cable/MDS attribution standard. A 
description of the resulting changes to our existing cable/MDS 
attribution standard follows.
    106. In assessing cable/MDS attribution, we will distinguish 
passive investors from non-passive investors, applying the voting stock 
attribution benchmark applicable to each. As a preliminary matter, the 
definition of ``passive investors'' will be identical to that used in 
the context of broadcast attribution, and thus limited to bank trust 
departments, insurance companies and mutual funds. Passive investors 
will be subject to the same 20 percent voting stock benchmark as we 
adopt today for broadcast passive investors. With regard to a non-
passive voting equity benchmark, we have already determined that 
shareholders with a five percent or greater ownership interest still 
have the ability to wield significant influence on the management and 
operations of the firms in which they invest. Therefore, we will 
continue to apply our five percent benchmark to determine the 
attributable interests of non-passive investors. We believe that 
employing a more liberal voting stock benchmark for passive investors 
than that used for non-passive investors will provide the MDS industry 
with increased access to much needed investment capital, while 
maintaining the Commission's ability to apply its ownership rules to 
influential interests.
    107. Though positions such as officers and directors will remain 
attributable interests, we will further relax the current cable/MDS 
standard by exempting from attribution minority stockholdings in 
corporations with a single majority shareholder and non-voting stock, 
to the extent permitted by the other rule changes made in this 
proceeding. However, here as in broadcasting, we will carefully 
scrutinize cases to ensure that nonattributable minority or non-voting 
shareholders are not able to exert greater influence than what their 
attribution status should allow.
    108. We further note that adoption of the EDP attribution rule for 
cable/MDS will limit, under certain circumstances, the availability of 
the single majority shareholder and non-voting stock exemptions from 
attribution. Under the EDP rule as adopted for cable/MDS attribution, 
where a cable franchise area and an MDS protected service area overlap, 
we will consider an investor (including a cable operator or MDS 
licensee) that has already invested in either the cable operator or MDS 
licensee, to have an attributable interest in the other entity if that 
interest exceeds 33 percent of the total assets of that entity. Thus, 
when the investor's total investment in the other entity, aggregating 
all debt and equity interests, exceeds 33 percent of all investment in 
that entity (the sum of all equity plus debt), attribution will be 
triggered. We

[[Page 50637]]

will use total assets as a base in aggregating the different classes of 
investment, equity and debt, and will presume that nonvoting stock 
should be treated as equity. We will set the threshold at 33 percent 
for the cable/MDS EDP rule because we see no reason to have a different 
benchmark than that which will be used for the broadcast EDP rule.
    109. We will also modify the existing cable/MDS attribution 
standard with respect to partnership interests and new business forms, 
such as LLCs and RLLPs, consistent with our treatment of such entities 
in the broadcast context. First, we will continue to hold all 
partnership interests attributable, regardless of the extent of their 
equity interests, unless they satisfy the insulation requirements. 
However, we will not attribute sufficiently insulated limited 
partnership interests when the limited partner certifies that it is not 
materially involved, directly or indirectly, in the management or 
operation of the partnership's cable or wireless cable activities. Nor 
will we adopt voting equity benchmarks for limited partnership 
interests. A limited partnership interest will not be attributable if 
the limited partner meets the Commission's insulation criteria and 
makes the requisite certification. Second, consistent with our earlier 
findings, we will subject widely-held limited partnerships, such as 
Business Development Companies, to the same set of attribution rules as 
limited partnerships. We will also treat LLCs and other new business 
forms, including RLLPs, under the same attribution rules that currently 
apply to limited partnerships. We believe that these changes, which 
generally relax our existing cable/MDS attribution standard and make 
them consistent with the broadcast attribution rules, will afford 
increased opportunities for investment in the wireless cable and cable 
industries.

I. Broadcast-Cable Cross-Ownership Attribution Rules

    110. In the Attribution Further Notice, we stated that we would 
address, in this proceeding, the attribution criteria applicable to the 
broadcast-cable cross-ownership rule, Sec. 76.501(a) of the 
Commission's rules. While we recognized that the attribution standards 
used in a number of other cable rules were implicitly or explicitly 
based on Sec. 76.501 of the Commission's rules, we stated that we were 
considering establishing a separate proceeding to modify the 
attribution criteria for the other cable multiple ownership rules.
    111. Accordingly, we will modify the attribution criteria 
applicable to the cable/broadcast cross-ownership rule to conform to 
the new broadcast attribution criteria adopted in this R&O. In this 
manner, all the broadcast attribution criteria will remain consistent. 
When we revised the cross-ownership attribution rules in 1984, we 
stated that there did not seem to be a justification for separate 
benchmarks as applicable to cable systems. We did not receive comments 
in this proceeding to justify treating the cable/broadcast cross-
ownership attribution rules differently from the other broadcast 
attribution rules at issue in this proceeding. We reiterate that the 
attribution revisions made herein apply only to the cable/broadcast and 
the cable/MDS cross-ownership rules (and cable/ITFS cross-leasing 
rules) and that revisions to the other cable attribution rules will be 
addressed CS Docket No. 98-82. We also note that because these cross-
ownership rules apply where the entities at issue are in the same 
market, these entities will always be subject to the EDP rule assuming 
that the requisite financial interest is held.

J. Transition Issues

    112. Background. In the Attribution Notice, we stated our concern 
that any action taken in this proceeding not disrupt existing financial 
arrangements, and accordingly invited comment as to whether we should 
grandfather existing situations or allow a transition period for 
licensees to come into compliance with the multiple ownership rules if 
we adopted more restrictive attribution rules. As we stated in the 
Attribution Further Notice, commenters who addressed this issue in 
response to the Attribution Notice overwhelmingly urged the Commission 
to grandfather existing interests indefinitely if it adopted more 
restrictive attribution rules because of the disruptive effect and the 
unfairness to the parties of mandatory divestiture.
    113. Decision. We conclude that any interests acquired on or after 
November 5, 1996, the date of adoption of the Attribution Further 
Notice in this proceeding, should be subject to the rules adopted in 
this R&O. We believe this cutoff date is reasonable and appropriate. We 
proposed the new EDP rule in the Attribution Further Notice, and it was 
therefore then that parties were on notice of the proposed new rule and 
that any interests acquired on or after that date could be subject to 
any rule changes. Thus, we believe that the November 5, 1996 
grandfathering date is more reasonable than the earlier grandfathering 
date we proposed. While we tentatively concluded in the Attribution 
Notice that any interests acquired on or after December 15, 1994 should 
be subject to the final rules adopted in the R&O in this proceeding, we 
have decided to use the date of adoption of the Attribution Further 
Notice as the grandfathering date. Accordingly, any interests (other 
than radio LMAs) newly attributable pursuant to this R&O that would 
result in violations of the ownership rules, will be grandfathered if 
the triggering interest was acquired before November 5, 1996. Except in 
the case of TV and radio LMAs, such grandfathering will be permanent 
until such time as the grandfathered interest is assigned or 
transferred.
    114. In this R&O, we have decided to count attributable radio LMAs 
for purposes of applying all applicable multiple ownership rules, 
including the one-to-a-market rule and the radio-newspaper cross-
ownership rule, not just the radio duopoly rules. As discussed, we will 
treat grandfathering of radio LMAs on case-by-case basis. The issue of 
grandfathering television LMAs is resolved in the television local 
ownership proceeding.
    115. We will apply the November 5, 1996 grandfathering date to 
interests, newly attributable under our EDP rule, that would result in 
new violations of the multiple ownership rules. Such grandfathering 
will be permanent so long as the interest is not transferred or 
renewed. Thus, if an inter-market LMA triggers the EDP rule, 
grandfathering will be for the term of the LMA, since the LMA cannot be 
renewed. Grandfathering will apply only to the current holder of the 
attributable interest. If the grandfathered interest is later assigned 
or transferred, the grandfathering will not transfer to the assignee or 
transferee. New owners cannot demonstrate the same equitable 
considerations that prompt us to grandfather existing owners whose 
current interests are now unavoidably placed in violation of the 
multiple ownership rules based on adoption of the EDP rule. Such new 
owners will be given a year to come into compliance with the multiple 
ownership rules.
    116. For non-grandfathered interests that are now attributable, 
i.e., those acquired on or after November 5, 1996, and which must be 
divested to comply with our multiple ownership rules, we believe that a 
twelve-month period should be sufficient for parties to identify 
buyers. Accordingly, parties holding such non-grandfathered interests 
must come into compliance, filing an appropriate application if 
necessary, within 12 months of the date

[[Page 50638]]

of adoption of this R&O. We recognize that we have specified a 
different divestiture period in some of the cases that have been 
conditioned on the outcome of this proceeding. In all of these cases, 
we will apply the one-year divestiture period. Thus, in a case 
conditioned on the outcome of this proceeding, where, for example, a 
six-month divestiture period is specified, the twelve-month period 
specified herein would nonetheless be operative.
    117. We note that grandfathering treatment of television LMAs that 
result in violations of the multiple ownership rules varies depending 
on whether they are intra-market LMAs that are attributable under the 
per se LMA attribution rule or inter-market LMAs that are attributable 
under the EDP rule because they are accompanied by a financial 
investment that exceeds the 33 percent threshold. For intra-market 
LMAs, the grandfathering period is as discussed in the TV Local 
Ownership R&O. Grandfathering for interests newly attributable under 
the EDP rule is permanent, and, accordingly, for inter-market LMAs 
attributable under EDP, grandfathering will last for the length of the 
LMA term since no renewal or transfer is permitted.

K. Ownership Report, Form 323

    118. We intend to modify the Ownership Report form, Form 323, to 
reflect the addition of the EDP rule, as well as the other attribution 
changes adopted in this R&O. We direct the Mass Media Bureau to make 
the necessary modifications to the form to reflect these changes. 
Further, the Mass Media Bureau is delegated authority to revise the 
Ownership Report rule, Sec. 73.3615, to reflect the addition of the EDP 
rule, as well as the other attribution changes adopted in this R&O. 
Thereafter, we will issue a public notice with the revised Ownership 
Report Form and Ownership Report rule to reflect and incorporate these 
changes.

IV. Administrative Matters

    119. Paperwork Reduction Act of 1995 Analysis. This R&O contains 
either new or modified information collections. Therefore, the 
Commission, as part of its continuing effort to reduce paperwork 
burdens, invites the general public and the Office of Management and 
Budget (``OMB'') to comment on the information collections contained in 
this R&O as required by the Paperwork Reduction Act of 1995, Public Law 
104-13. Public and agency comments are due November 16, 1999. Comments 
should address: (a) whether the new or modified collection of 
information is necessary for the proper performance of the functions of 
the Commission, including whether the information shall have practical 
utility; (b) the accuracy of the Commission's burden estimates; (c) 
ways to enhance the quality, utility, and clarity of the information 
collected; and (d) ways to minimize the burden of the collection of 
information on the respondents, including the use of automated 
collection techniques or other forms of information technology. In 
addition to filing comments with the Secretary, a copy of any comments 
on the information collections contained herein should be submitted to 
Judy Boley, Federal Communications Commission, Room 1-C1804, 445 12th 
Street S.W., Washington, DC 20554, or via the Internet to 
[email protected] and to Timothy Fain, OMB Desk Officer, 10236 NEOB, 725-
17th Street, N.W., Washington, DC 20503, or via the Internet to 
fain__al.eop.gov.
    120. For additional information concerning the information 
collections contained in this R&O contact Judy Boley at 202-418-0217.
    121. Pursuant to the Regulatory Flexibility Act of 1980, as 
amended, 5 U.S.C. 601 et seq., the Commission's Final Regulatory 
Flexibility Analysis included in this R&O.

Final Regulatory Flexibility Analysis

    122. As required by the Regulatory Flexibility Act (RFA), 5 U.S.C. 
603, an Initial Regulatory Flexibility Analysis (IRFA) was incorporated 
in the FNPR in MM Docket Nos. 94-150, 92-51, & 87-154, 11 FCC Rcd 19895 
(1996) (``Attribution Further Notice''). The Commission sought written 
public comment on the proposals in the Attribution Further Notice, 
including comment on the IRFA. The comments received are discussed. 
This Final Regulatory Flexibility Analysis (FRFA) conforms to the RFA.

I. Need For, and Objectives of the Report and Order

    123. The attribution rules seek to identify those interests in or 
relationships to licensees or media entities that confer on their 
holders a degree of influence or control such that the holders have a 
realistic potential to affect the programming decisions of licensees or 
other core operating functions. The attribution rules are used to 
implement the Commission's broadcast multiple ownership rules. Our 
goals in this proceeding are to maximize the precision of the 
attribution rules, avoid disruption in the flow of capital to 
broadcasting, afford clarity and certainty to regulatees, ease 
application processing, and provide for the reporting of all the 
information we need in order to make our public interest finding with 
respect to broadcast applications. While our focus is on the issues of 
influence or control, at the same time, we must tailor the attribution 
rules to permit arrangements in which a particular ownership or 
positional interest involves minimal risk of influence, in order to 
avoid unduly restricting the means by which investment capital may be 
made available to the broadcast industry. The rules adopted meet these 
goals.

II. Summary of Significant Issues Raised by the Public in Response to 
the IRFA

    124. One comment, filed specifically in response to the IRFA 
contained in the Second Further Notice of Proposed Rulemaking in MM 
Dockets 91-221 and 87-8, 61 FR 66978, December 19, 1996, addressed an 
issue relevant to all the Commission's proceedings dealing with the 
mass media multiple ownership rules.
    125. Other commenters did not specifically respond to the IRFA, but 
did address small business issues.

III. Description and Estimate of the Number of Small Entities To Which 
Rules Will Apply

1. Definition of a ``Small Business''
    126. Under the RFA, small entities may include small organizations, 
small businesses, and small governmental jurisdictions. 5 U.S.C. 
601(6). The RFA, 5 U.S.C. 601(3), generally defines the term ``small 
business'' as having the same meaning as the term ``small business 
concern'' under the Small Business Act, 15 U.S.C. 632. A small business 
concern is one which: (1) is independently owned and operated; (2) is 
not dominant in its field of operation; and (3) satisfies any 
additional criteria established by the Small Business Administration 
(``SBA''). According to the SBA's regulations, entities engaged in 
television broadcasting Standard Industrial Classification (``SIC'') 
Code 4833--Television Broadcasting Stations, may have a maximum of 
$10.5 million in annual receipts in order to qualify as a small 
business concern. Similarly, entities engaged in radio broadcasting, 
SIC Code 4832--Radio Broadcasting Stations, have a maximum of $5 
million in annual receipts to qualify as a small business concern. 13 
CFR 121.101 et seq. This standard also applies in determining whether 
an entity is a small business for purposes of the RFA.
    127. Pursuant to 5 U.S.C. 601(3), the statutory definition of a 
small business applies ``unless an agency after consultation with the 
Office of Advocacy of the SBA and after

[[Page 50639]]

opportunity for public comment, establishes one or more definitions of 
such term which are appropriate to the activities of the agency and 
publishes such definition(s) in the Federal Register.'' While we 
tentatively believe that the foregoing definition of ``small business'' 
greatly overstates the number of radio and television broadcast 
stations that are small businesses and is not suitable for purposes of 
determining the impact of the new rules on small television and radio 
stations, we did not propose an alternative definition in the IRFA. 
Accordingly, for purposes of this R&O, we utilize the SBA's definition 
in determining the number of small businesses to which the rules apply, 
but we reserve the right to adopt a more suitable definition of ``small 
business'' as applied to radio and television broadcast stations and to 
consider further the issue of the number of small entities that are 
radio and television broadcasters in the future. Further, in this FRFA, 
we will identify the different classes of small radio and television 
stations that may be impacted by the rules adopted in this R&O.
2. Issues in Applying the Definition of a ``Small Business''
    128. As discussed, we could not precisely apply the foregoing 
definition of ``small business'' in developing our estimates of the 
number of small entities to which the rules will apply. Our estimates 
reflect our best judgments based on the data available to us.
    129. An element of the definition of ``small business'' is that the 
entity not be dominant in its field of operation. We were unable at 
this time to define or quantify the criteria that would establish 
whether a specific television or radio station is dominant in its field 
of operation. Accordingly, the following estimates of small businesses 
to which the new rules will apply do not exclude any television or 
radio station from the definition of a small business on this basis and 
are therefore overinclusive to that extent. An additional element of 
the definition of ``small business'' is that the entity must be 
independently owned and operated. We attempted to factor in this 
element by looking at revenue statistics for owners of television 
stations. However, as discussed further below, we could not fully apply 
this criterion, and our estimates of small businesses to which the 
rules may apply may be overinclusive to this extent. The SBA's general 
size standards are developed taking into account these two statutory 
criteria. This does not preclude us from taking these factors into 
account in making our estimates of the numbers of small entities.
    130. With respect to applying the revenue cap, the SBA has defined 
``annual receipts'' specifically in 13 CFR 121.104, and its 
calculations include an averaging process. We do not currently require 
submission of financial data from licensees that we could use in 
applying the SBA's definition of a small business. Thus, for purposes 
of estimating the number of small entities to which the rules apply, we 
are limited to considering the revenue data that are publicly 
available, and the revenue data on which we rely may not correspond 
completely with the SBA definition of annual receipts.
    131. Under SBA criteria for determining annual receipts, if a 
concern has acquired an affiliate or been acquired as an affiliate 
during the applicable averaging period for determining annual receipts, 
the annual receipts in determining size status include the receipts of 
both firms. 13 CFR 121.104(d)(1). The SBA defines affiliation in 13 CFR 
121.103. In this context, the SBA's definition of affiliate is 
analogous to our attribution rules. Generally, under the SBA's 
definition, concerns are affiliates of each other when one concern 
controls or has the power to control the other, or a third party or 
parties controls or has the power to control both. 13 CFR 
121.103(a)(1). The SBA considers factors such as ownership, management, 
previous relationships with or ties to another concern, and contractual 
relationships, in determining whether affiliation exists. 13 CFR 
121.103(a)(2). Instead of making an independent determination of 
whether radio and television stations were affiliated based on SBA's 
definitions, we relied on the data bases available to us to provide us 
with that information.
3. Estimates Based on Census Data
    132. The rules amended by this R&O will apply to full service 
television and radio licensees and permittees, potential licensees and 
permittees, cable services or systems, MDS and ITFS, and newspapers.
Radio and Television Stations
    133. The rules adopted in this R&O will apply to full service 
television and radio stations. The Small Business Administration 
defines a television broadcasting station that has no more than $10.5 
million in annual receipts as a small business. Television broadcasting 
stations consist of establishments primarily engaged in broadcasting 
visual programs by television to the public, except cable and other pay 
television services. Included in this industry are commercial, 
religious, educational, and other television stations. Also included 
are establishments primarily engaged in television broadcasting and 
which produce taped television program materials. Separate 
establishments primarily engaged in producing taped television program 
materials are classified under another SIC number.
    134. There were 1,509 television stations operating in the nation 
in 1992. That number has remained fairly constant as indicated by the 
approximately 1,594 operating television broadcasting stations in the 
nation as of June 1999. For 1992 the number of television stations that 
produced less than $10.0 million in revenue was 1,155 establishments. 
The amount of $10 million was used to estimate the number of small 
business establishments because the relevant Census categories stopped 
at $9,999,999 and began at $10,000,000. No category for $10.5 million 
existed. Thus, the number is as accurate as it is possible to calculate 
with the available information.
    135. The rule changes will also affect radio stations. The SBA 
defines a radio broadcasting station that has no more than $5 million 
in annual receipts as a small business. A radio broadcasting station is 
an establishment primarily engaged in broadcasting aural programs by 
radio to the public. Included in this industry are commercial, 
religious, educational, and other radio stations. Radio broadcasting 
stations which primarily are engaged in radio broadcasting and which 
produce radio program materials are similarly included. However, radio 
stations which are separate establishments and are primarily engaged in 
producing radio program material are classified under another SIC 
number. The 1992 Census indicates that 96 percent (5,861 of 6,127) of 
radio station establishments produced less than $5 million in revenue 
in 1992. Official Commission records indicate that 11,334 individual 
radio stations were operating in 1992. As of June 1999, official 
Commission records indicate that 12,560 radio stations are currently 
operating.
    136. Thus, the rule changes will affect approximately 1,594 
television stations, approximately 1,227 of which are considered small 
businesses. Additionally, the rule changes will affect 12,560 radio 
stations, approximately 12,057 of which are small businesses. These 
estimates may overstate the number of small entities since the revenue 
figures on which they are based do not include or aggregate revenues 
from non-television or non-radio affiliated companies.

[[Page 50640]]

Cable Services or Systems
    137. SBA has developed a definition of small entities for cable and 
other pay television services (SIC 4841), which includes all such 
companies generating $11 million or less in revenue annually. This 
definition includes cable systems operators, closed circuit television 
services, direct broadcast satellite services, multipoint distribution 
systems, satellite master antenna systems and subscription television 
services. According to the Census Bureau data from 1992, there were 
1,788 total cable and other pay television services, and 1,423 had less 
than $11 million in revenue.
    138. The Commission has developed its own definition of a small 
cable company for the purposes of rate regulation. Under the 
Commission's rules, a ``small cable company,'' is one serving fewer 
than 400,000 subscribers nationwide. Based on our most recent 
information, we estimate that there were 1439 cable operators that 
qualified as small cable companies at the end of 1995. Since then, some 
of those companies may have grown to serve over 400,000 subscribers, 
and others may have been involved in transactions that caused them to 
be combined with other cable operators. Consequently, we estimate that 
there are fewer than 1439 small entity cable system operators that may 
be affected by the decisions and rules proposed in this R&O. The 
Commission's rules also define a ``small system,'' for the purposes of 
cable rate regulation, as a cable system with 15,000 or fewer 
subscribers. We do not request nor do we collect information concerning 
cable systems serving 15,000 or fewer subscribers and thus are unable 
to estimate at this time the number of small cable systems nationwide.
    139. The Communications Act also contains a definition of a small 
cable system operator, which is ``a cable operator that, directly or 
through an affiliate, serves in the aggregate fewer than 1 percent of 
all subscribers in the United States and is not affiliated with any 
entity or entities whose gross annual revenues in the aggregate exceed 
$250,000,000.'' Section 76.1403(b) of the Commissions' rules defines a 
small cable system operator as one which serves in the aggregate fewer 
than 617,000 subscribers, and whose total annual revenues, when 
combined with the total annual revenues of all of its affiliates, do 
not exceed $250 million in the aggregate. Based on available data, we 
find that the number of cable operators serving 617,000 subscribers or 
less totals 1450. Although it seems certain that some of these cable 
system operators are affiliated with entities whose gross annual 
revenues exceed $250,000,000, we are unable at this time to estimate 
with greater precision the number of cable system operators that would 
qualify as small cable operators under the definition in the 
Communications Act.
MDS and ITFS
    140. Other pay television services are also classified under 
Standard Industrial Classification (SIC) 4841, which includes cable 
systems operators, closed circuit television services, direct broadcast 
satellite services (DBS), multipoint distribution systems (MDS), 
satellite master antenna systems (SMATV), and subscription television 
services.
    141. The Commission refined the definition of ``small entity'' for 
the auction of MDS as an entity that together with its affiliates has 
average gross annual revenues that are not more than $40 million for 
the preceding three calendar years. This definition of a small entity 
in the context of the Commission's R&O concerning MDS auctions that has 
been approved by the SBA.
    142. The Commission completed its MDS auction in March 1996 for 
authorizations in 493 basic trading areas (``BTAs''). Of 67 winning 
bidders, 61 qualified as small entities. Five bidders indicated that 
they were minority-owned and four winners indicated that they were 
women-owned businesses. MDS is an especially competitive service, with 
approximately 1573 previously authorized and proposed MDS facilities as 
of 1996. Information available to us indicates that no MDS facility 
generates revenue in excess of $11 million annually. We tentatively 
conclude that for purposes of this IRFA, there are approximately 1634 
small MDS providers as defined by the SBA and the Commission's auction 
rules.
Newspapers
    143. Some of the rule changes may also apply to daily newspapers 
that hold or seek to acquire an interest in a broadcast station that 
would be treated as attributable under the rules. A newspaper is an 
establishment that is primarily engaged in publishing newspapers, or in 
publishing and printing newspapers. The SBA defines a newspaper that 
has 500 or fewer employees as a small business. Based on data from the 
U.S. Census Bureau, there are a total of approximately 6,715 
newspapers, and 6,578 of those meet the SBA's size definition. However, 
we recognize that some of these newspapers may not be independently 
owned and operated and, therefore, would not be considered a ``small 
business concern'' under the Small Business Act. We are unable to 
estimate at this time how many newspapers are affiliated with larger 
entities. Moreover, the rule changes would apply only to daily 
newspapers, and we are unable to estimate how many newspapers that meet 
the SBA's size definition are daily newspapers. Consequently, we 
estimate that there are fewer than 6,578 newspapers that may be 
affected by the rule changes in this R&O.

IV. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements

    144. The R&O imposes compliance with the amended attribution rules 
set forth in the R&O. Compliance will require licensees to file with 
the Commission amended Ownership Report Forms (FCC Form 323) to reflect 
interests attributable under the amended attribution rules. Compliance 
will also require licensees that have entered into Joint Sales 
Agreements (JSAs) to place such agreements in their public inspection 
files with confidential or proprietary information redacted where 
appropriate. In addition, pursuant to the new rules, certain television 
time brokerage agreements will be required to be filed with the 
Commission where they are intra-market agreements or are inter-market 
agreements that come under the equity/debt plus attribution standard 
adopted by the R&O. Finally, compliance may require some licensees 
whose ownership interests under the amended attribution rules violate 
the multiple ownership rules, to divest the prohibited interests within 
the time periods specified in the R&O.

V. Steps Taken To Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered

    145. The R&O retains the current 5 percent active voting stock 
attribution benchmark. We believe that our original decision to set a 5 
percent benchmark to capture influential interests remains valid and 
will not unduly restrict capital availability. Further, we note that 
our concerns over capital availability that originally prompted the 
proposal to increase the active voting stock benchmark have eased 
somewhat, particularly in light of the increasing strength shown by the 
communications sector and financial markets in general over the past 
several years. This increase in capital spending occurred within the 
context of our current attribution rules, and therefore provides us 
with strong evidence of the continued availability of capital in the

[[Page 50641]]

communications industry. And, to the extent that there are still 
concerns about not impeding capital flow to broadcasting, we believe 
that they will be adequately addressed since the increases the passive 
investor benchmark.
    146. The R&O increases the voting stock benchmark from 10 to 20 
percent for passive investors. We believe that increasing the passive 
investor benchmark to 20 percent will give broadcasters increased 
access to investment capital, while preserving the Commission's ability 
to effectively enforce its ownership rules. This decision takes into 
account the special nature of the passive investor category, in terms 
of the legal and fiduciary requirements that constrain passive 
investors' involvement in the management and operational affairs of the 
firms in which they invest. In addition, passive investors have become 
an increasingly important source of investment capital to the corporate 
sector. Finally, the Commission recognizes that the pace of 
technological change within broadcasting, particularly the transition 
to DTV, might require access to such new sources of investment capital.
    147. Further, we note that the record strongly supports an increase 
in the passive investor benchmark and supports our belief that such an 
increase will help assure that the attribution changes adopted herein 
will reinforce the trends in broadcast investment and growth in passive 
investment levels noted above, particularly at a time when television 
broadcasters are undertaking the conversion to digital television. We 
believe that increasing the passive investor benchmark is a relatively 
safe way to increase capital flows into broadcasting, without 
compromising the ability of our attribution rules to capture 
influential interests. The R&O retains the current definition of 
``passive investors,'' which is limited to bank trust departments, 
insurance companies and mutual funds.
    148. The R&O does not eliminate the single majority shareholder or 
nonvoting stock exemptions, but, rather, to address the concerns that 
we raised in the Attribution Notice and Attribution Further Notice, we 
will adopt our equity and/or debt plus (``EDP'') attribution proposal, 
as a new rule that would function in addition to the other attribution 
rules. Under this new EDP rule, where the investor is either (1) a 
``major program supplier,'' as defined herein to include all 
programming entities (including networks and time brokers) that supply 
over 15 percent of a station's total weekly broadcast programming 
hours, or (2) a same-market media entity subject to the broadcast 
multiple ownership rules (including broadcasters, cable operators, and 
newspapers), its interest in a licensee will be attributed if that 
interest exceeds 33 percent of the total asset value (equity plus debt) 
of the licensee. The R&O refers to total asset value as ``total 
assets.'' In the case of a major program supplier, the investment will 
be attributable only if the investment is in a licensee to which the 
requisite triggering amount of programming is provided.
    149. The targeted approach embodied in the EDP rule reflects our 
current judgment as to the appropriate balance between our goal of 
maximizing the precision of the attribution rules by attributing all 
interests that are of concern, and only those interests, and our 
equally significant goals of not unduly disrupting capital flow and of 
affording ease of administrative processing and reasonable certainty to 
regulatees in planning their transactions. The bright-line EDP test 
will provide more regulatory certainty than a case-by-case approach 
that requires review of contract language. Thus, the EDP rule will 
permit planning of financial transactions, would also ease application 
processing, and would minimize regulatory costs.
    150. In the Attribution Further Notice, we invited comment on the 
impact of a 33 percent EDP threshold on small business entities, 
particularly on whether there would be a disproportionate impact on 
small or minority entities. While some parties have argued that 
adoption of an equity/debt plus proposal would deter capital flow to 
broadcasting generally and, in particular, for digital television, 
others have argued strongly that this is not the case. We have no basis 
to conclude or reason to believe that the EDP rule would unduly deter 
investment. The equity/debt plus proposal does not preclude investment 
by any entity; rather, it caps nonattributable investment levels for 
entities that have the potential to influence licensees. The limit does 
not apply to all entities that might invest or help fund the transition 
to digital television or otherwise invest in licensees. Additionally, 
to help assure that our actions today do not unduly impede capital flow 
to broadcasting, we have raised the passive investor benchmark. As 
discussed above, we believe that because of the nature of passive 
investors, we may raise that benchmark consistent with our goal of 
maximizing the precision of the attribution rules. In addition, we will 
consider individual rule waivers in particular cases where compelling 
evidence is presented that the conversion to digital television would 
otherwise be unduly impeded or that a waiver would significantly 
expedite DTV implementation in that particular case.
    151. While some commenters strongly argued that applying the EDP 
rule to program suppliers would curb investment in broadcast stations 
and possibly hurt weaker UHF stations and might deter investment that 
would facilitate the conversion to DTV, they do not provide empirical 
evidence to support this argument. We also note that the rule does not 
preclude investment, but merely provides that investments over a 
certain level will be deemed presumptively attributable. Networks are 
therefore free to invest in their affiliates, subject of course to the 
applicable multiple ownership rules. Moreover, the EDP rule does not 
attribute investments, even those by networks in their affiliates, 
which fall below the 33 percent threshold. Thus, a major program 
supplier may hold 32 percent of the total assets of a station to which 
it supplies programming in excess of the 15 percent standard. This 
would comply with all EDP limits and the interests would not be 
attributable. In addition, the EDP rule does not affect investments by 
entities other than major program suppliers or same-market media 
entities. Under these circumstances, we believe that the EDP rule will 
not curb investment, deter new entry, or curb the conversion to DTV.
    152. The R&O also adopts a new rule to attribute television LMAs, 
or time brokerage of another television station in the same market, for 
more than fifteen percent of the brokered station's broadcast hours per 
week and to count such LMAs toward the brokering licensee's local 
ownership limits. We believe that the rationale for attributing LMAs 
set forth in the Radio Ownership Order,--i.e., to prevent the use of 
time brokerage agreements to circumvent our ownership limits--applies 
equally to same-market television LMAs.
    153. The record in this proceeding supports our decisions to 
attribute television LMAs and to count attributed radio LMAs toward all 
applicable radio ownership limits. We agree with most commenters, 
representing a variety of interests ranging from ABC to the public 
interest group MAP, that television LMAs, like radio LMAs, represent a 
degree of influence and control that warrants ownership attribution and 
that, to decide otherwise, based on the precedent of the attribution of 
radio LMAs, would be inconsistent.

[[Page 50642]]

    154. We will require stations involved in television time brokerage 
agreements (inter-market as well as intra-market agreements) to keep 
copies of those agreements in their local public inspection files, with 
confidential or proprietary information redacted where appropriate, and 
to file, with the Commission, within 30 days of execution, a copy of 
any local time brokerage agreements that would result in the 
arrangement being counted in determining the brokering licensee's 
compliance with the multiple ownership rules. We note that these 
provisions impose an affirmative obligation on licensees to determine, 
in the first instance, whether a particular LMA is attributable (either 
under the per se rule or the EDP rule), and to file the agreement with 
the Commission if it is.
    155. This also eliminates the cross interest policy. Our goals in 
initiating this proceeding include maximizing the clarity of the 
attribution rules, providing reasonable certainty and predictability to 
parties to allow transactions to be planned, and easing application 
processing. Commenters have argued that the vagueness and uncertainty 
imposed by the ad hoc application of the cross-interest policy have 
chilled investment. As CalPERS argues, this uncertainty impedes the 
ability of broadcasters to enter into transactions because the policy 
can be invoked to prohibit a seemingly permissible transaction.
    156. We note that the EDP rule directly covers concerns treated 
under the non-attributable interests prong of the cross-interest 
policy. In adopting that rule, we will reach those situations involving 
formerly nonattributable interests that raised the most concern with 
respect to issues of competition and diversity, some of which were 
previously addressed in administering the cross-interest policy. We 
recognize, however, that the EDP rule does not cover all the areas 
encompassed by the cross-interest policy. It would not cover key 
employees, for example. We nonetheless believe, as commenters have 
pointed out, that internal conflict of interest policies and common law 
fiduciary duty and contract remedies provide adequate substitutes for 
our administration of the policy with respect to key employees. In 
addition, many key employees are also officers and directors and thus 
already covered by the attribution rules. In any event, we believe that 
the very small risk of harm to competition by a key employee in an 
instance not covered by any of these other regulations and remedies is 
greatly outweighed by the benefits of minimizing our case-by-case 
approach to transactions and applying bright line tests, such as the 
EDP test and our other attribution rules.
    157. With respect to joint ventures, we believe that application of 
a cross-interest policy is unwarranted. The ownership and attribution 
rules define the level of combined ownership that is permissible in the 
local market. We recognize that the cross-interest policy as applied to 
joint ventures is mostly, if not completely, subsumed by the 
application of the current multiple ownership rules. To the extent that 
it is not so subsumed, we believe that it should be eliminated. We 
agree that the burdens of case-by-case review are not justified for 
transactions that already comply with the multiple ownership rules. 
Furthermore, as other commenters noted, the application of the 
antitrust laws should prevent or remedy any abuses of joint venture 
relationships not already subject to the multiple ownership rules.
    158. The R&O declines to attribute JSAs. Based on the record in 
this proceeding, we do not believe that agreements which meet our 
definition of JSAs convey a degree of influence or control over station 
programming or core operations such that they should be fully 
attributed. We define JSAs as contracts that affect primarily the sales 
of advertising time, as distinguished from LMAs, which may affect 
programming, personnel, physical facilities, and core operations of 
stations. We note that in our DTV 5R&O, we stated that we would look 
with favor upon joint business arrangements among broadcasters that 
would help them make the most productive and efficient uses of their 
channels to help facilitate the transition to digital technology. JSAs 
may be one such joint business arrangement. Although both DOJ and the 
Commission are concerned about the competitive consequences of business 
agreements such as JSAs, our concerns are not necessarily identical. 
DOJ's comments explicitly recognize that in addition to competition 
issues, the Commission is also concerned with issues of diversity and 
reducing unnecessary administrative burdens.
    159. Accordingly, upon considering and weighing competition, 
diversity, and administrative concerns, we decline to impose new rules 
attributing JSAs as long as they are truly JSAs that deal with the sale 
of advertising time and do not contain terms that affect programming or 
other core operations of the stations such that they are, in fact, 
substantively equivalent to LMAs. We will retain our current policies 
concerning JSAs. Furthermore, in the absence of specific evidence of 
widespread abuse of JSAs by broadcasters, we also decline to adopt the 
general disclosure and reporting requirement for radio JSAs recommended 
by DOJ in its comments. We will, however, require broadcasters who have 
entered into JSAs to place such agreements in their public inspection 
files, pursuant to 47 CFR 73.3526 and 73.3613(e) of the Commission's 
Rules, with confidential or proprietary information redacted where 
appropriate. This requirement will facilitate monitoring of JSAs by the 
public, competitors and regulatory agencies. We do, however, retain 
discretion, in all events, to review cases involving radio or 
television JSAs on a case-by-case basis in the public interest, where 
it appears that such JSAs do pose competition, diversity, or 
administrative concerns. Finally, we emphasize that all JSAs are of 
course still subject to antitrust laws and independent antitrust review 
by the Department of Justice.
    160. We see no reason to revise our previous decision to treat 
limited partnership interests as distinct from corporate voting equity 
interests, and therefore elect not to adopt equity benchmarks for 
limited partnership interests. As we stated in the Attribution Further 
Reconsideration, ``[t]he partners in a limited partnership, through 
contractual arrangements, largely have the power themselves to 
determine the rights of the limited partners.'' Therefore, the 
insulation criteria adopted by the Commission serve to identify those 
situations within which it is safe to assume that a limited partner 
cannot be ``materially involved'' in the media management and 
operations of the partnership. As we also stated therein, the powers of 
a limited liability holder to exert influence or control are not 
proportional to their equity investment in the limited partnership, 
since the extent of these powers can be modified by the contractual 
arrangements of the limited partnership. In the Attribution Notice, we 
stated our disinclination to change our approach of applying insulation 
criteria in favor of an equity benchmark, and we have not been provided 
sufficient evidence to revise that view and to indicate that these 
original reasons for declining to adopt an equity benchmark for limited 
partnerships are no longer valid.
    161. We also see no need at this time to add to, relax, or 
otherwise revise our limited partnership insulation criteria. Some 
commenters suggested that the insulation criteria should be modified to 
eliminate conflicts with state law, or that RULPA or other relevant 
standards should be used in their place. However,

[[Page 50643]]

in our Attribution Reconsideration, the Commission decided for several 
reasons to abandon the use of RULPA, combined with a no material 
involvement standard, as a standard for judging whether limited 
partners were exempt from attribution. First, we judged the joint use 
of these two disparate standards for determining limited partner 
exemptions from attribution to be unnecessarily complicated. Second, we 
noted that there was a lack of uniform interpretation of the RULPA 
provisions, and that the scope of permissible limited partner 
activities was not statutorily set by RULPA, but rather was determined 
by the limited partnership agreement itself. Third, we determined that 
reliance on the RULPA provisions did not provide sufficient assurance 
that limited partners would not significantly influence or control 
partnership affairs. We are convinced that these conclusions remain 
valid today, and therefore we see no reason to revise our insulation 
criterion in the direction of a RULPA standard. We also feel that 
similar considerations apply to state laws that regulate limited 
partnership activities, since these statutes may vary significantly 
from state to state, and may fail to provide sufficient assurance that 
the limited partner will lack the ability to significantly influence or 
control the partnership's media activities.
    162. We will not create exceptions for widely-held limited 
partnerships, such as Business Development Companies, from the current 
insulation criteria applicable to limited partnerships or otherwise 
revise those insulation criteria. The essential character of these new 
business forms for determining attributable interests is the 
contractual flexibility they allow in setting up and managing the 
association. Therefore, we believe that the insulation criteria are 
needed for these business forms to insure the ``lack of material 
involvement'' on the part of investors. This would imply that in some 
limited number of cases, interests may not be insulated because of 
state laws that require investor rights that conflict with the 
insulation criterion. However, commenters have not provided sufficient 
evidence concerning the number or importance of such instances that 
would compel the Commission to create specialized exemptions for these 
specialized business forms. Since these entities are allowed greater 
contractual flexibility under state law than are limited partnerships, 
we believe that greater caution is warranted in dealing with these 
novel forms. Further, we have not been presented with evidence to 
demonstrate that the current insulation criteria are no longer valid or 
effective in achieving their goals.
    163. We adopt our tentative conclusion in the Attribution Notice to 
treat LLCs and other new business forms including RLLPs under the same 
attribution rules that currently apply to limited partnerships. The 
insulation criteria that currently apply to limited partnerships would 
apply without modification to these new business forms. Therefore, LLC 
or RLLP owners would be treated as attributable unless the owner can 
certify their lack of direct or indirect involvement in the management 
and operations of the media-related activities of the LLC or RLLP. We 
will not distinguish among LLCs based on whether they adopt a more 
centralized or decentralized form.
    164. We believe that this decision is justified for the reasons 
discussed in the Attribution Notice, which were also supported in the 
record and fully discussed in the R&O. In addition, we have been 
applying the interim processing policy, and it has worked well and 
effectively, and we see no reason to change it.
    165. We will not routinely require the filing of organizational 
documents for LLCs. However, to remain consistent with our treatment of 
limited partnerships and insulation criteria, we will require the same 
``non-involvement'' statement for LLC members who are attempting to 
insulate themselves. We will also require LLC members who submit the 
foregoing statement to submit a statement that the relevant state 
enabling statute authorizing LLCs permits an LLC member to insulate 
itself/himself in the manner required by our criteria, since our 
experience shows that state laws vary considerably with respect to the 
obligations and responsibilities of LLC members. This policy will help 
us to avoid any potential confidentiality concerns, referred to in the 
Attribution Notice, that may arise if we require filing of 
organizational documents.
    166. After reviewing all of the comments submitted on our proposals 
to relax the cable/MDS attribution rules, we are persuaded that the 
broadcast attribution criteria, as modified by this proceeding, should 
be applied in determining cognizable interests in MDS licensees and 
cable systems. We continue to see no reason, and none has been 
suggested by any of the commenters, to warrant different attribution 
criteria for broadcasting and MDS. As we have discussed here and in the 
Attribution Further Notice, investment opportunities critical to the 
development of MDS as a competitive service to cable have been severely 
limited by the current attribution standard. Therefore, continued 
application of the current cable/MDS attribution standard would 
frustrate our goals of strengthening wireless cable, providing 
meaningful competition to cable operators and benefitting the public 
interest by offering consumers more choice in their selection of video 
programming providers. In view of these considerations and the record 
before us, we conclude that the public interest would be better served 
if the modified broadcast attribution criteria were employed for the 
purpose of determining attribution in the context of cable/MDS cross-
ownership. Such modification of our existing attribution standard will 
increase investment possibilities and further diversity, while 
preventing cable from warehousing its potential competition. We are 
persuaded, moreover, that relaxation of our current attribution 
standard will have genuine meaning for institutional investors who, 
though not involved in the day-to-day activities of either cable or MDS 
companies, have been precluded from making investments in MDS due to 
pre-existing or desired investments in cable.
    167. The R&O also adopts a 33 percent equity or debt provision as 
an appropriate addition to the modified cable/MDS attribution standard. 
Furthermore, by adopting the 33 percent ``equity or debt plus'' 
provision for cable/MDS attribution, we believe that we are acting in a 
manner consistent with the statutory directive, as well as furthering 
congressional intent to promote competition and prevent warehousing by 
cable operators. Accordingly, we will adopt the broadcast attribution 
criteria, as modified in this proceeding, for determining cognizable 
interests in MDS licensees and cable systems. The modified attribution 
criteria will also apply to the cable/MDS and cable/ITFS cross-leasing 
rules.
    168. The R&O adopts grandfathering and transition measures for 
interests that become newly attributable pursuant to the new rules 
adopted. Grandfathering and transition measures for TV LMAs are 
discussed in the TV Local Ownership Order.
    169. We intend to modify the Ownership Report form, Form 323, to 
reflect the addition of the EDP rule, as well as the other attribution 
changes adopted in this R&O.

VI. Report to Congress

    170. The Commission shall send a copy of the R&O in MM Docket Nos. 
94-150, 92-51, and 87-154, including this

[[Page 50644]]

FRFA, in a report to be sent to Congress pursuant to the Small Business 
Regulatory Enforcement Fairness Act of 1996, see 5 U.S.C. 801(a)(1)(A). 
In addition, the Commission shall send a copy of the R&O in MM Docket 
Nos. 94-150, 92-51, and 87-154, including FRFA, to the Chief Counsel 
for Advocacy of the Small Business Administration. A copy of the R&O in 
MM Docket Nos. 94-150, 92-51, and 87-154 and FRFA (or summaries 
thereof) will also be published in the Federal Register. See 5 U.S.C. 
604(b).

Ordering Clauses

    171. Accordingly, it is ordered that, pursuant to sections 4(i) & 
(j), 303(r), 307, 308 and 309 of the Communications Act of 1934 as 
amended, 47 U.S.C. 154(i), (j) 303(r), 307, 308, and 309, part 73 of 
the Commission's rules is amended as set forth.
    172. It is further ordered that, pursuant to the Contract with 
America Advancement Act of 1996.
    173. It is further ordered that the Commission's Office of Public 
Affairs, Reference Operations Division, shall send a copy of this R&O 
in MM Docket Nos. 94-150, 92-51, and 87-154, including the Final 
Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of 
the Small Business Administration.
    174. It is further ordered that the new or modified paperwork 
requirements contained in this R&O.
    175. It is further ordered that this proceeding is hereby 
terminated.

List of Subjects

47 CFR Parts 21, 73 and 74

    Television broadcasting; radio broadcasting.

47 CFR Part 76

    Cable television.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.

Rule Changes

    For the reasons discussed in the preamble, the Federal 
Communications Commission amends 47 CFR parts 21, 73, 74 and 76 as 
follows:

PART 21--DOMESTIC PUBLIC FIXED RADIO SERVICES

    1. The authority citation for Part 21 continues to read as follows:

    Authority: Secs. 1, 2, 4, 201-205, 208, 215, 218, 303, 307, 313, 
403, 404, 410, 602, 48 Stat. as amended, 1064, 1066, 1070-1073, 
1076, 1077, 1080, 1082, 1083, 1087, 1094, 1098, 1102; 47 U.S.C. 151, 
154, 201-205, 208, 215, 218, 303, 307, 313, 314, 403, 404, 602; 47 
U.S.C. 552, 554.

    2. Section 21.912 is amended by revising the section heading and 
Note 1 to Sec. 21.912 to read as follows:


Sec. 21.912  Cable television company eligibility requirements and MDS/
cable cross-ownership.

* * * * *
    Note 1: In applying the provisions of this section, ownership 
and other interests in MDS licensees or cable television systems 
will be attributed to their holders and deemed cognizable pursuant 
to the following criteria:

    (a) Except as otherwise provided herein, partnership and direct 
ownership interests and any voting stock interest amounting to 5% or 
more of the outstanding voting stock of a corporate MDS licensee or 
cable television system will be cognizable;
    (b) No minority voting stock interest will be cognizable if 
there is a single holder of more than 50% of the outstanding voting 
stock of the corporate MDS licensee or cable television system in 
which the minority interest is held;
    (c) Investment companies, as defined in 15 U.S.C. 80a-3, 
insurance companies and banks holding stock through their trust 
departments in trust accounts will be considered to have a 
cognizable interest only if they hold 20% or more of the outstanding 
voting stock of a corporate MDS licensee or cable television system, 
or if any of the officers or directors of the MDS licensee or cable 
television system are representatives of the investment company, 
insurance company or bank concerned. Holdings by a bank or insurance 
company will be aggregated if the bank or insurance company has any 
right to determine how the stock will be voted. Holdings by 
investment companies will be aggregated if under common management.
    (d) Attribution of ownership interests in an MDS licensee or 
cable television system that are held indirectly by any party 
through one or more intervening corporations will be determined by 
successive multiplication of the ownership percentages for each link 
in the vertical ownership chain and application of the relevant 
attribution benchmark to the resulting product, except that wherever 
the ownership percentage for any link in the chain exceeds 50%, it 
shall not be included for purposes of this multiplication. [For 
example, if A owns 10% of company X, which owns 60% of company Y, 
which owns 25% of ``Licensee,'' then X's interest in ``Licensee'' 
would be 25% (the same as Y's interest since X's interest in Y 
exceeds 50%), and A's interest in ``Licensee'' would be 2.5% (0.1 x 
0.25). Under the 5% attribution benchmark, X's interest in 
``Licensee'' would be cognizable, while A's interest would not be 
cognizable.]
    (e) Voting stock interests held in trust shall be attributed to 
any person who holds or shares the power to vote such stock, to any 
person who has the sole power to sell such stock, and to any person 
who has the right to revoke the trust at will or to replace the 
trustee at will. If the trustee has a familial, personal or extra-
trust business relationship to the grantor or the beneficiary, the 
grantor or beneficiary, as appropriate, will be attributed with the 
stock interests held in trust. An otherwise qualified trust will be 
ineffective to insulate the grantor or beneficiary from attribution 
with the trust's assets unless all voting stock interests held by 
the grantor or beneficiary in the relevant MDS licensee or cable 
television system are subject to said trust.
    (f) Subject to paragraph (j) of this Note, holders of non-voting 
stock shall not be attributed an interest in the issuing entity. 
Subject to paragraph (j) of this Note, holders of debt and 
instruments such as warrants, convertible debentures, options or 
other non-voting interests with rights of conversion to voting 
interests shall not be attributed unless and until conversion is 
effected.
    (g)(1) A limited partnership interest shall be attributed to a 
limited partner unless that partner is not materially involved, 
directly or indirectly, in the management or operation of the MDS or 
cable television activities of the partnership and the licensee or 
system so certifies. An interest in a Limited Liability Company 
(``LLC'') or Registered Limited Liability Partnership (``RLLP'') 
shall be attributed to the interest holder unless that interest 
holder is not materially involved, directly or indirectly, in the 
management or operation of the MDS or cable television activities of 
the partnership and the licensee or system so certifies.
    (2) In order for a licensee or system that is a limited 
partnership to make the certification set forth in paragraph (g)(1) 
of this Note, it must verify that the partnership agreement or 
certificate of limited partnership, with respect to the particular 
limited partner exempt from attribution, establishes that the exempt 
limited partner has no material involvement, directly or indirectly, 
in the management or operation of the MDS or cable television 
activities of the partnership. In order for a licensee or system 
that is an LLC or RLLP to make the certification set forth in 
paragraph (g)(2) of this Note, it must verify that the 
organizational document, with respect to the particular interest 
holder exempt from attribution, establishes that the exempt interest 
holder has no material involvement, directly or indirectly, in the 
management or operation of the MDS or cable television activities of 
the LLC or RLLP. The criteria which would assume adequate insulation 
for purposes of this certification are described in the Memorandum 
Opinion and Order in MM Docket No. 83-46, 50 FR 27438, July 3, 1985, 
as modified on reconsideration in the Memorandum Opinion and Order 
in MM Docket No. 83-46, 52 FR 1630, January 15, 1987. Irrespective 
of the terms of the certificate of limited partnership or 
partnership agreement, or other organizational document in the case 
of an LLC or RLLP, however, no such certification shall be made if 
the individual or entity making the certification has actual 
knowledge of any material involvement of the limited partners, or 
other interest holders in the case of an LLC or RLLP, in the 
management or operation of the MDS or cable television businesses of 
the partnership or LLC or RLLP.

[[Page 50645]]

    (3) In the case of an LLC or RLLP, the licensee or system 
seeking installation shall certify, in addition, that the relevant 
state statute authorizing LLCs permits an LLC member to insulate 
itself as required by our criteria.
    (h) Officers and directors of an MDS licensee or cable 
television system are considered to have a cognizable interest in 
the entity with which they are so associated. If any such entity 
engages in businesses in addition to its primary business of MDS or 
cable television service, it may request the Commission to waive 
attribution for any officer or director whose duties and 
responsibilities are wholly unrelated to its primary business. The 
officers and directors of a parent company of an MDS licensee or 
cable television system, with an attributable interest in any such 
subsidiary entity, shall be deemed to have a cognizable interest in 
the subsidiary unless the duties and responsibilities of the officer 
or director involved are wholly unrelated to the MDS licensee or 
cable television system subsidiary, and a statement properly 
documenting this fact is submitted to the Commission. [This 
statement may be included on the Licensee Qualification Report.] The 
officers and directors of a sister corporation of an MDS licensee or 
cable television system shall not be attributed with ownership of 
these entities by virtue of such status.
    (i) Discrete ownership interests will be aggregated in 
determining whether or not an interest is cognizable under this 
section. An individual or entity will be deemed to have a cognizable 
investment if:
    (1) The sum of the interests held by or through ``passive 
investors'' is equal to or exceeds 20 percent; or
    (2) The sum of the interests other than those held by or through 
``passive investors'' is equal to or exceeds 5 percent; or
    (3) The sum of the interests computed under paragraph (i)(1) of 
this Note plus the sum of the interests computed under paragraph 
(i)(2) of this Note is equal to or exceeds 20 percent.
    (j) Notwithstanding paragraphs (b), (f), and (g) of this Note, 
the holder of an equity or debt interest or interests in an MDS 
licensee or cable television system subject to the MDS/cable cross-
ownership rule (``interest holder'') shall have that interest 
attributed if:
    (1) the equity (including all stockholdings, whether voting or 
nonvoting, common or preferred) and debt interest or interests, in 
the aggregate, exceed 33 percent of the total asset value (all 
equity plus all debt) of that MDS licensee or cable television 
system; and
    (2) the interest holder also holds an interest in an MDS 
licensee or cable television system that is attributable under 
paragraphs of this Note other than this paragraph (j) and which 
operates in any portion of the franchise area served by that cable 
operator's cable system.
    (k) The term ``area served by a cable system'' means any area 
actually passed by the cable operator's cable system and which can 
be connected for a standard connection fee.
    (l) As used in this section ``cable operator'' shall have the 
same definition as in Sec. 76.5 of this chapter.
* * * * *

PART 73--BROADCAST RADIO SERVICES

    3. The authority citation for Part 73 continues to read as follows:

    Authority: 47 U.S.C. 154, 303, 334 and 336.

    4. Section 73.3526 is amended by revising paragraph (e)(14) and 
adding (e)(16) to read as follows:


Sec. 73.3526  Local public inspection file of commercial stations.

* * * * *
    (e) * * *
    (14) Radio and television time brokerage agreements. For commercial 
radio and television stations, a copy of every agreement or contract 
involving time brokerage of the licensee's station or of another 
station by the licensee, whether the agreement involves stations in the 
same markets or in differing markets, with confidential or proprietary 
information redacted where appropriate. These records shall be retained 
as long as the contract or agreement is in force.
* * * * *
    (16) Radio and television joint sales agreements. For commercial 
radio and commercial television stations, a copy of agreement for the 
joint sale of advertising time involving the station, whether the 
agreement involves stations in the same markets or in differing 
markets, with confidential or proprietary information redacted where 
appropriate.
    5. Section 73.3555 is amended by removing paragraphs (a)(3) and 
(a)(4)(iii), redesignating paragraph (a)(4) as paragraph (a)(3), by 
revising Notes 2(b), 2(c), 2(f), 2(g), and 2(i) and by adding Notes 
2(j) and 2(k) to read as follows:


Sec. 73.3555  Multiple ownership.

* * * * *
    Note 2:
* * * * *
    (b) Subject to paragraph (j) of this Note, no minority voting 
stock interest will be cognizable if there is a single holder of 
more than 50% of the outstanding voting stock of the corporate 
broadcast licensee, cable television system or daily newspaper in 
which the minority interest is held;
    (c) Investment companies, as defined in 15 U.S.C. 80a-3, 
insurance companies and banks holding stock through their trust 
departments in trust accounts will be considered to have a 
cognizable interest only if they hold 20% or more of the outstanding 
voting stock of a corporate broadcast licensee, cable television 
system or daily newspaper, or if any of the officers or directors of 
the broadcast licensee, cable television system or daily newspaper 
are representatives of the investment company, insurance company or 
bank concerned. * * *
* * * * *
    (f) Subject to paragraph (j) of this Note, holders of non-voting 
stock shall not be attributed an interest in the issuing entity. 
Subject to paragraph (j) of this Note, holders of debt and 
instruments such as warrants, convertible debentures, options or 
other non-voting interests with rights of conversion to voting 
interests shall not be attributed unless and until conversion is 
effected.
    (g)(1) A limited partnership interest shall be attributed to a 
limited partner unless that partner is not materially involved, 
directly or indirectly, in the management or operation of the media-
related activities of the partnership and the licensee or system so 
certifies. An interest in a Limited Liability Company (``LLC'') or 
Registered Limited Liability Partnership (``RLLP'') shall be 
attributed to the interest holder unless that interest holder is not 
materially involved, directly or indirectly, in the management or 
operation of the media-related activities of the partnership and the 
licensee or system so certifies.
    (2) In order for a licensee or system that is a limited 
partnership to make the certification set forth in paragraph (g)(1) 
of this section, it must verify that the partnership agreement or 
certificate of limited partnership, with respect to the particular 
limited partner exempt from attribution, establishes that the exempt 
limited partner has no material involvement, directly or indirectly, 
in the management or operation of the media activities of the 
partnership. In order for a licensee or system that is an LLC or 
RLLP to make the certification set forth in paragraph (g)(1) of this 
section, it must verify that the organizational document, with 
respect to the particular interest holder exempt from attribution, 
establishes that the exempt interest holder has no material 
involvement, directly or indirectly, in the management or operation 
of the media activities of the LLC or RLLP. The criteria which would 
assume adequate insulation for purposes of this certification are 
described in the Memorandum Opinion and Order in MM Docket No. 83-
46, FCC 85-252 (released June 24, 1985), as modified on 
reconsideration in the Memorandum Opinion and Order in MM Docket No. 
83-46, FCC 86-410 (released November 28, 1986). Irrespective of the 
terms of the certificate of limited partnership or partnership 
agreement, or other organizational document in the case of an LLC or 
RLLP, however, no such certification shall be made if the individual 
or entity making the certification has actual knowledge of any 
material involvement of the limited partners, or other interest 
holders in the case of an LLC or RLLP, in the management or 
operation of the media-related businesses of the partnership or LLC 
or RLLP.
    (3) In the case of an LLC or RLLP, the licensee or system 
seeking insulation shall certify, in addition, that the relevant 
state statute authorizing LLCs permits an LLC member to insulate 
itself as required by our criteria.
* * * * *

[[Page 50646]]

    (i) Discrete ownership interests will be aggregated in 
determining whether or not an interest is cognizable under this 
section. An individual or entity will be deemed to have a cognizable 
investment if:
    (1) The sum of the interests held by or through ``passive 
investors'' is equal to or exceeds 20 percent; or
    (2) The sum of the interests other than those held by or through 
``passive investors'' is equal to or exceeds 5 percent; or
    (3) The sum of the interests computed under paragraph (i)(1) of 
this section plus the sum of the interests computed under paragraph 
(i)(2) of this section is equal to or exceeds 20 percent.
    (j) Notwithstanding paragraphs (b), (f), and (g) of this Note, 
the holder of an equity or debt interest or interests in a broadcast 
licensee, cable television system, daily newspaper, or other media 
outlet subject to the broadcast multiple ownership or cross-
ownership rules (``interest holder'') shall have that interest 
attributed if:
    (1) The equity (including all stockholdings, whether voting or 
nonvoting, common or preferred) and debt interest or interests, in 
the aggregate, exceed 33 percent of the total asset value, defined 
as the aggregate of all equity plus all debt, of that media outlet; 
and
    (2)(i) The interest holder also holds an interest in a broadcast 
licensee, cable television system, newspaper, or other media outlet 
operating in the same market that is subject to the broadcast 
multiple ownership or cross-ownership rules and is attributable 
under paragraphs of this Note other than this paragraph (j); or
    (ii) The interest holder supplies over fifteen percent of the 
total weekly broadcast programming hours of the station in which the 
interest is held. For purposes of applying this paragraph, the term, 
``market,'' will be defined as it is defined under the specific 
multiple or cross-ownership rule that is being applied, except that 
for television stations, the term ``market,'' will be defined by 
reference to the definition contained in the television duopoly rule 
contained in paragraph (b) of this section.
    (k) ``Time brokerage'' is the sale by a licensee of discrete 
blocks of time to a ``broker'' that supplies the programming to fill 
that time and sells the commercial spot announcements in it.
    (1) Where the principal community contours (predicted or 
measured 5 mV/m groundwave contour for AM stations computed in 
accordance with Sec. 73.183 or Sec. 73.186 and predicted 3.16 mV/m 
contour for FM stations computed in accordance with Sec. 73.313) of 
two radio stations overlap and a party (including all parties under 
common control) with an attributable ownership interest in one such 
station brokers more than 15 percent of the broadcast time per week 
of the other such station, that party shall be treated as if it has 
an interest in the brokered station subject to the limitations set 
forth in paragraphs (a), (c), and (d) of this section. This 
limitation shall apply regardless of the source of the brokered 
programming supplied by the party to the brokered station.
    (2) Where two television stations are both licensed to the same 
market, as defined in the television duopoly rule contained in 
paragraph (b) of this section, and a party (including all parties 
under common control) with an attributable ownership interest in one 
such station brokers more than 15 percent of the broadcast time per 
week of the other such station, that party shall be treated as if it 
has an interest in the brokered station subject to the limitations 
set forth in paragraphs (b), (c), (d) and (e) of this section. This 
limitation shall apply regardless of the source of the brokered 
programming supplied by the party to the brokered station.
    (3) Every time brokerage agreement of the type described in this 
Note shall be undertaken only pursuant to a signed written agreement 
that shall contain a certification by the licensee or permittee of 
the brokered station verifying that it maintains ultimate control 
over the station's facilities, including specifically control over 
station finances, personnel and programming, and by the brokering 
station that the agreement complies with the provisions of 
paragraphs (b) through (d) of this section if the brokering station 
is a television station or with paragraphs (a), (c), and (d) if the 
brokering station is a radio station.

    6. Section 73.3613 is amended by revising paragraphs (d) and (e) to 
read as follows:


Sec. 73.3613  Filing of contracts.

* * * * *
    (d) Time brokerage agreements: Time brokerage agreements involving 
radio stations, where the licensee (including all parties under common 
control) is the brokering entity, there is a principal community 
contour overlap (predicted or measured 5 mV/m groundwave for AM 
stations and predicted 3.16 mV/m for FM stations) overlap with the 
brokered station, and more than 15 percent of the time of the brokered 
station, on a weekly basis, is brokered by that licensee; time 
brokerage agreements involving television stations where licensee 
(including all parties under common control) is the brokering entity, 
the brokering and brokered stations are both licensed to the same 
market as defined in the television duopoly rule contained in 
Sec. 73.3555(b), and more than 15 percent of the time of the brokered 
station, on a weekly basis, is brokered by that licensee; time 
brokerage agreements involving radio or television stations that would 
be attributable to the licensee under Sec. 73.3555 Note 2(j). 
Confidential or proprietary information may be redacted where 
appropriate but such information shall be made available for inspection 
upon request by the FCC.
    (e) The following contracts, agreements or understandings need not 
be filed but shall be kept at the station and made available for 
inspection upon request by the FCC: contracts relating to the joint 
sale of broadcast advertising time that do not constitute time 
brokerage agreements pursuant to Sec. 73.3555 Note 2(k); subchannel 
leasing agreements for Subsidiary Communications Authorization 
operation; franchise/leasing agreements for operation of 
telecommunications services on the TV vertical blanking interval and in 
the visual signal; time sales contracts with the same sponsor for 4 or 
more hours per day, except where the length of the events (such as 
athletic contests, musical programs and special events) broadcast 
pursuant to the contract is not under control of the station; and 
contracts with chief operators.

PART 74--EXPERIMENTAL RADIO, AUXILIARY, SPECIAL BROADCAST AND OTHER 
PROGRAM DISTRIBUTIONAL SERVICES

    6. The authority citation for Part 74 continues to read as follows:

    Authority: 47 U.S.C. 154, 303, 307, and 554.

    7. Section 74.931 is amended by adding Note 1 to Sec. 74.931(i) to 
read as follows:


Sec. 74.931  [Amended]

    Note 1: In applying the provisions of paragraphs (h) and (i) of 
this section, an attributable ownership interest shall be defined by 
reference to the Notes contained in Sec. 21.912.
* * * * *

PART 76--MULTICHANNEL VIDEO AND CABLE TELEVISION SERVICE

    8. The authority citation for Part 76 continues to read as follows:

    Authority: 47 U.S.C. 151, 152, 153, 154, 301, 302, 303, 303a, 
307, 308, 309, 312, 315, 317, 325, 503, 521, 522, 531, 532, 534, 
535, 536, 537, 543, 544, 544a, 545, 548, 549, 552, 554, 556, 558, 
560, 561, 571, 572, 573.

    9. Section 76.501 is amended by adding Note 6 to read as follows:


Sec. 76.501  Cross-ownership.

* * * * *
    Note 6: In applying the provisions of paragraph (a) of this 
section, Notes 1 through 4 shall apply, provided however that:
    (a) The attribution benchmark for passive investors in paragraph 
(c) of Note 2 shall be 20 percent and the benchmarks in paragraph 
(i)(1) and (i)(3) of Note 2 shall be 20 percent;
    (b) An interest holder in a Limited Liability Company or 
Registered Limited Liability Partnership shall be subject to the 
provisions of paragraph (g) of Note 2 in determining whether its 
interest is attributable; and
    (c) Notwithstanding paragraphs (b), (f), and (g) of Note 2, the 
holder of an equity or debt interest or interests in a broadcast 
licensee or cable television system (``interest holder'') shall have 
that interest attributed if:
    (1) The equity (including all stockholdings, whether voting or 
nonvoting, common or

[[Page 50647]]

preferred) and debt interest or interests, in the aggregate, exceed 
33 percent of the total asset value (defined as the aggregate of all 
equity plus all debt) of that media outlet; and
    (2)(i) The interest holder also holds an interest in another 
broadcast licensee or cable television system which operates in the 
same market and is attributable without reference to this paragraph 
(c); or
    (ii) The interest holder supplies over fifteen percent of the 
total weekly broadcast programming hours of the station in which the 
interest is held.

[FR Doc. 99-23694 Filed 9-16-99; 8:45 am]
BILLING CODE 6712-01-P