[Federal Register Volume 64, Number 180 (Friday, September 17, 1999)]
[Rules and Regulations]
[Pages 50647-50651]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-23695]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 73

[MM Docket Nos. 96-222, 91-221, 87-8; FCC 99-208]


Broadcast Television National Ownership Rules

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: This document amends the Commission's rules regarding how to 
calculate a group station owners national audience reach for purposes 
of determining compliance with the broadcast television national 
ownership rule. This action is necessary to respond to changes in the 
underlying rule mandated by the Telecommunications Act of 1996, as well 
as to changes in the Commission's satellite rules and changes in the 
broadcast television market.

DATES: Effective November 16, 1999.

FOR FURTHER INFORMATION CONTACT: Kim Matthews, (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 99-208, 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 12th 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 and Order

    1. On November 7, 1996, the Commission released a Notice of 
Proposed Rule Making (``Notice''), 61 FR 66987, December 19, 1996, in 
this proceeding, seeking comment on how to calculate a broadcast 
television station group owner's aggregate national audience reach for 
the purposes of determining compliance with the national broadcast 
television multiple ownership rule, which limits that reach to 35%. 
Based on the record before us, we conclude that the public interest 
would be served by counting a market only once when calculating an 
entity's national ownership reach, even if that entity has an 
attributable interest in more than one television station in that 
market. As specific applications of this policy, we are: (1) narrowing 
the application of the ``satellite exemption,'' under which we 
disregard satellite station ownership in measuring aggregate national 
ownership; (2) not incorporating same-market local marketing agreements 
(``LMAs'') into the calculation of the brokering station's national 
audience reach; and (3) replacing our use of Arbitron's Areas of 
Dominant Influence (``ADIs'') to define geographic television markets 
with the use of Nielsen's Designated Market Areas (``DMAs'').

Background

    2. Pursuant to section 202(c)(1) of the Telecommunications Act of 
1996 (the ``1996 Act''), the Commission amended its national broadcast 
television ownership rule. Before passage of the 1996 Act, the 
Commission generally prohibited entities from having an attributable 
interest in more than 12 broadcast television stations. Further, the 
Commission generally prohibited an entity from having an attributable 
interest in a station if it would result in that entity's having an 
attributable interest in television stations with an aggregate national 
audience reach exceeding 25%. However, pursuant to section 202(c)(1) of 
the 1996 Act, the Commission eliminated the 12-station cap and raised 
the 25% aggregate national audience reach limit to 35%.
    3. Pursuant to Sec. 73.3555(e)(2)(i) of the Commission's Rules, a 
station's audience reach is defined as consisting of the total number 
of television households within the television market for that station. 
The television market, in turn, is currently defined as the Area of 
Dominant Influence (ADI) used by Arbitron, a commercial audience-rating 
service, to analyze broadcast television station competition. For 
purposes of calculating this aggregate audience reach under the rules, 
UHF stations are attributed with only 50% of the audience within their 
ADI (the UHF discount), a policy that is under careful review in the 
biennial ownership review. In addition, satellite stations generally 
are not counted at all in the national audience reach calculation (the 
satellite exemption). Neither the 1996 Act nor our Order implementing 
its national television ownership provisions addressed how to measure a 
licensee's national audience reach, thus leaving undisturbed the 
process prescribed earlier in connection with the 25% limit. In light 
of the modified national ownership rule and the new competitive and 
regulatory structure of the video marketplace brought about by the 1996 
Act, we initiated this proceeding to update the record on measuring 
national television audience reach for purposes of the new national 
ownership limit.

Discussion

The Satellite Exemption

    4. Background. A television satellite is a full-power terrestrial 
broadcast station authorized under part 73 of the Commission's Rules to 
retransmit all or part of the programming of another station (most 
commonly the parent station). Satellite stations are operated by the 
same party that operates the parent station. The Commission does not 
authorize satellite operation unless it is demonstrated that the 
frequency would likely go unused otherwise. As a result, satellite 
stations typically operate in areas that are likely to provide 
television broadcasters relatively little opportunity for growth and 
profit when compared with larger markets. Pursuant to 47 CFR 73.3555, 
Note 5, the Commission's multiple ownership rules do not apply to 
satellite stations. The Commission exempted TV satellites from the 
national multiple ownership rules when it adopted the 12-station cap 
and the 25% audience reach limitation. The Commission believed that 
this would encourage the provision of television service to smaller 
communities. It also noted that satellite stations and stations 
operating primarily as satellites were already exempt from the 
Commission's duopoly rule because they generally did not originate 
programming. In 1991, we abolished the 5% ``limit'' on the amount of 
local programming that a satellite could originate, which we had used 
as a benchmark for determining whether a station was still a satellite.
Same-Market Satellites
    5. Background. The national multiple ownership rule, as amended by 
the 1996 Act, is concerned with a station's potential audience rather 
than with its actual viewership. Also, we are not concerned with the 
specific number of television stations owned by a group owner, since 
the 1996 Act eliminated

[[Page 50648]]

the numerical limitations on station ownership formerly in the rule; 
rather, the national television ownership rule now focuses solely on 
national audience reach. In the Notice of Proposed Rule Making in this 
proceeding, we tentatively concluded that if a licensee acquires a 
satellite television station in a market within which it already 
operates a station, it has not extended its audience reach in that 
television market for purposes of the national audience reach limit; 
the television households in that market are already counted, given the 
existence of the licensee's parent station. Accordingly, we proposed to 
retain the exemption for satellites operating in the same market as 
their parents.
    6. Discussion. We shall retain the satellite exemption for same-
market satellites. We are not concerned with the specific number of 
television stations owned by a group owner, since the 1996 Act 
eliminated the numerical limitations on station ownership formerly in 
the rule. In addition, the national ownership rule is concerned with 
competition and diversity on a national scale, and dual station 
ownership in one market neither adds to national reach nor affects 
competition and diversity on a national basis. Also, even if a licensee 
increases the total number of its viewers by acquiring a second station 
in the market, the relevant measurement is of audience reach, not of 
actual viewership.
    7. Accordingly, we are amending Sec. 73.3555(e)(2)(ii) of our rules 
to clarify that we shall not double-count individual markets. In 
practice, this means that we are retaining the satellite exemption for 
those satellites that operate in the same television market as their 
parent stations. Counting the audience twice in such a situation would 
serve only to distort our calculation of how many potential viewers a 
group owner is able to reach nationwide.
Separate-Market Satellites
     8. In the Notice of Proposed Rule Making, we proposed to repeal 
the satellite exemption for satellites operating in separate markets 
from their parent stations. As discussed below, we are adopting the 
proposal.
    9. We conclude that the satellite exemption is no longer warranted 
for satellite stations operating in separate markets from their parent 
stations. Satellite stations are no longer limited as to the amount of 
local programming they may originate. Therefore, when a parent station 
operates a satellite in another market, the licensee's over-the-air 
audience reach is expanded into another market by the audience reach of 
the satellite station. Consequently, we shall treat separate-market 
satellites as we do other television stations, and we shall include 
them when calculating a group station owner's national aggregate 
audience reach.
    10. We believe that the benefits of inclusion of these stations, 
including a more accurate reflection of actual audience reach, outweigh 
any potential costs. The 1996 Act's elimination of the restriction on 
the absolute number of television stations that may be commonly owned 
has substantially reduced the disincentive to satellite operation. 
Also, because a satellite generally serves a sparsely populated area 
that is underserved, the population of the entire market in which the 
satellite is located should add relatively little to a group owner's 
aggregate national audience reach. The record does not indicate that 
the operation of a satellite station would generally put licensees over 
or so close to the 35% national aggregate audience reach limit as to 
dissuade them from operating the station at all.

Local Marketing Agreements

    11. Background. An LMA generally involves the sale by a licensee of 
discrete blocks of time to a broker who then supplies the programming 
to fill that time and sells the commercial spot announcements to 
support it. Such agreements may enable separately owned stations to 
function cooperatively via joint advertising, shared technical 
facilities (including shared production facilities), and joint 
programming arrangements. In the Notice of Proposed Rule Making, we 
proposed not to count same-market LMAs towards the brokering station's 
national aggregate audience reach calculation.
    12. Discussion. In our companion Attribution R&O, FCC 99-207, we 
determine that same-market LMAs are attributable to the brokering 
station for the purposes of administering the local ownership rules 
when the brokering station programs more than 15% of the brokered 
station's weekly broadcast hours. However, as we concluded above in the 
context of same-market satellite stations, the national ownership rule 
limits audience reach on a national scale, and dual station influence 
or control in one market does not add to national audience reach. That 
is merely a specific application of our new general rule of not double-
counting markets. The record indicates no additional factors warranting 
a different analysis in this case. For these reasons, we find that 
same-market LMAs shall not be included in the brokering station's 
national aggregate audience reach calculation.
    13. We note that when the brokering station is located in a 
different market than the brokered or programmed station, the issue of 
double-counting does not arise. As discussed in the Attribution R&O, 
under our new equity/debt plus rule, we will attribute the interest of 
a program supplier in a station where it: (1) provides more than 15% of 
the station's weekly programming; and (2) it holds more than 33% of the 
licensee's total assets. Such an attributable interest will count 
towards the 35% national reach limit since the brokered and brokering 
stations are in different markets.

Market Definition

    14. We use the number of television households in each market in 
which an entity's stations are located to calculate that entity's 
national audience reach. The definition of the market for this purpose 
has remained unchanged since 1985, when the Commission first adopted a 
national audience cap:

[n]ational audience reach means the total number of television 
households in the Arbitron Area of Dominant Influence (ADI) markets 
in which the relevant stations are located divided by the total 
national television households as measured by ADI data at the time 
of a grant, transfer or assignment of a license. . . . Where the 
relevant application forms require a showing with respect to 
audience reach and the application relates to an area where Arbitron 
ADI market data are unavailable, then the applicant shall make a 
showing as to the number of television households in its market. 
Upon such a showing, the Commission shall make a determination as to 
the appropriate audience reach to be attributed to the applicant.

    15. However, because Arbitron no longer updates its county-by-
county determinations of each broadcast station's ADI, they are static 
and have become less reliable over time as market conditions change. 
Accordingly, as we proposed in the Notice, we shall now use Designated 
Market Areas (DMAs) as compiled by A.C. Nielsen Media Research--another 
commercial ratings service--where we previously relied on ADIs. We use 
DMAs to define markets in the context of cable must-carry and 
retransmission consent. Nielsen uses the term DMA to define a unique 
geographic area based on the TV viewing habits of its residents. In 
designating DMAs, Nielsen Media Research collects viewing data from 
diaries placed in television households four times a year. Nielsen 
assigns counties to DMAs annually on the basis of television audience 
viewership as

[[Page 50649]]

recorded in those diaries. Counties are assigned to a DMA if the 
majority or, in the absence of a majority, the preponderance, of 
viewing in the county is recorded for the programming of the television 
stations located in that DMA.
    16. In some instances the use of DMAs instead of ADIs might lead to 
small variations in the audience reach calculation of some stations, 
because in some instances Arbitron and Nielsen define markets somewhat 
differently. However, these variations would have only a minor effect 
on the calculation of licensees' national ownership reach.

Conclusion

    17. This document reforms how we calculate audience reach for 
purposes of the national television ownership rule in response to 
changes in the broadcast television marketplace and changes in the 
underlying rule itself required by the 1996 Act. The changes that we 
make are relatively minor. We see no need to adopt any transition 
policy to implement these relatively minor changes, which should not 
result in any existing group television station owner's exceeding the 
35% national aggregate audience reach cap set forth in the national 
television ownership rule.

Administrative Matters

Final Paperwork Reduction Act of 1995 Analysis

    18. The rules adopted herein have been analyzed with respect to the 
Paperwork Reduction Act of 1995 and found to contain no new or modified 
form, information collection and/or record keeping, labeling, 
disclosure or record retention requirements. These rules will not 
increase or decrease burden hours imposed on the public.

Regulatory Flexibility Analysis

    19. Pursuant to the Regulatory Flexibility Act of 1980, as amended, 
5 U.S.C. 601 et seq., the Commission's Final Regulatory Flexibility 
Analysis in this R&O is below.

Ordering Clauses

    20. Accordingly, it is ordered that, pursuant to Secs. 4(i) and 
303(r) of the Commission's rules, 47 U.S.C.154(i) and 303(r), 47 CFR 
part 73 is amended as set forth as below.
    21. It is further ordered that, pursuant to the Contract with 
America Advancement Act of 1996, the amendment set forth set forth 
below shall be effective November 16, 1999.
    22. It is further ordered that the Commission's Office of Public 
Affairs, Reference Operations Division, shall send a copy of this R&O, 
including the Final Regulatory Flexibility Analysis, to the Chief 
Counsel for Advocacy of the Small Business Administration.
    23. It is further ordered that this proceeding is terminated.

Final Regulatory Flexibility Analysis

    24. As required by the Regulatory Flexibility Act (RFA), 5 U.S.C. 
603, an Initial Regulatory Flexibility Analysis (IRFA) was incorporated 
in the Notice of Proposed Rule Making, 61 FR 66987, December 19, 1996, 
in this proceeding. The Commission sought written public comment on the 
proposals in the Notice, including comment on the IRFA. This Final 
Regulatory Flexibility Analysis (FRFA) conforms to the RFA, 5 U.S.C. 
604.

I. Need For and Objectives of the National TV Ownership R&O

    25. The R&O modifies the method by which the Commission determines 
a group television station owner's national aggregate audience reach 
for compliance with the national television ownership rule. The 
modifications are necessary to reflect changes in the underlying 
national ownership limit adopted pursuant to the Telecommunications Act 
of 1996.

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

    26. No comments were received specifically in response to the IRFA 
contained in the Notice of Proposed Rule Making. However, some comments 
addressed issues relating to small businesses and businesses controlled 
by minorities and women, some of which may be small entities. Several 
commenters made general assertions that broadcast station ownership has 
consolidated since passage of the 1996 Act, and that the Commission 
should take businesses controlled by minorities and women into account 
in all of our pending broadcast ownership proceedings. CBS argued that 
the ownership rules were not designed to foster minority ownership in 
the broadcast industry, and that this goal should be pursued by other 
means.
    27. Turning to the specific rules that are the subject of this rule 
making proceeding, BET argued that if both a parent and a same-market 
satellite are allocated a second 6 MHz for DTV purposes, then the 
satellite station audience should be counted towards the 35% national 
ownership cap because the licensee of such a station will have 
increased its broadcasting power at least fourfold. It claims that 
incumbent broadcasters' market power will increase sufficiently to 
create insurmountable entry barriers against competing stations. 
However, the R&O concludes that such concerns involve competition and 
diversity on a local, not a national, scale and are not the focus of 
the national ownership rule.
    28. BET asserted that retention of the satellite exemption for 
separate-market satellites would ``squeeze out'' entrepreneurs and new 
entrants by enabling large group owners to transfer costs among 
stations and eliminate competition from small operators. However, the 
R&O adopts a rule whereby such separate-market satellite stations shall 
be attributed for the purposes of the national ownership rule.

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

    29. The amended rules will affect entities that have attributable 
interests in numerous full power commercial television stations 
reaching a substantial portion of the national viewing public. These 
multiple station owners are not likely to be small businesses.
1. Definition of a ``Small Business''
    30. 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. This standard also applies in determining whether an 
entity is a small business for purposes of the RFA.
    31. 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 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

[[Page 50650]]

not suitable for purposes of determining the impact of the new rules on 
small television and radio stations, and auxiliary services, 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 television stations that may be 
impacted by the rules adopted in this R&O.
2. Issues in Applying the Definition of a ``Small Business''
    32. As discussed below, 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.
    33. An element of the definition of ``small business'' is that the 
entity not be dominant in its field of operation. We are unable at this 
time to define or quantify the criteria that would establish whether a 
specific television 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.
    34. 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.
    35. 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
    36. The rules amended by this R&O will apply to full power 
commercial broadcast television licensees, permittees, and potential 
licensees.
    37. 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.
    38. Thus, the rule changes will affect approximately 1,594 
television stations, approximately 77% (or 1,227) of which are 
considered 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 affiliated 
companies.
    39. We recognize that the rule changes may also affect minority and 
women-owned stations, some of which may be small entities. In 1995, 
minorities owned and controlled 37 (3.0 percent) of 1,221 commercial 
television stations in the United States. According to the U.S. Bureau 
of the Census, in 1987 women owned and controlled 27 (1.9 percent) of 
1,342 commercial and non-commercial television stations in the United 
States.

IV. Projected Compliance Requirements of the Rule

    40. No new recording, recordkeeping or other compliance 
requirements are adopted.

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

    41. The modified rules would apply to full power broadcast 
television licensees, permittees, and potential licensees. No entity 
that is near the 35% national aggregate audience reach limit can be 
classified as a ``small entity.'' As a result, the counting methodology 
adopted in this R&O will not have a direct effect on any small entity.
    42. We have decided not to double-count LMAs or commonly owned 
stations in the same market for the purpose of calculating a licensee's 
national audience reach. We also eliminate the satellite exemption for 
licensees that operate a satellite station in a separate market from 
the parent station. In addition, we have decided to use A.C. Nielsen's 
Designated Market Areas (DMAs) rather than Arbitron's Areas of Dominant 
Influence to calculate national audience reach. A.C. Nielsen, like 
Arbitron, is another commercial ratings service. They are analytically 
similar. In each of these cases, we have determined that to do 
otherwise would not be consistent with the objective of the national 
television ownership rule as modified by the 1996 Act: to promote 
competition and diversity on a national level by limiting an entity's 
national audience reach. We expect that such additional competition and 
diversity will benefit commercial television entities, including small 
entities.

Report to Congress

    43. The Commission will send a copy of the National TV Ownership 
R&O, including this FRFA, in a report to Congress pursuant to the Small 
Business Regulatory Enforcement Fairness Act of 1996, codified at 5 
U.S.C. 801(a)(1)(A). In addition, the Commission will send a copy of 
the National TV Ownership R&O, including this FRFA, to the Chief 
Counsel for Advocacy of the Small Business Administration. A copy of 
the National TV Ownership R&O and FRFA (or summaries thereof) will also 
be published in the Federal Register, 5 U.S.C. 604(b).

[[Page 50651]]

List of Subjects in 47 CFR Part 73

    Television broadcasting.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.

Rule Changes

    For the reasons discussed in the preample, the Federal 
Communication Commission amends 47 CFR part 73 as follows:

PART 73--RADIO BROADCAST SERVICES

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

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

    2. Sec. 73.3555 is amended by revising paragraphs (e)(2)(i), 
(e)(2)(ii) and the first sentence of Note 5 to read as follows:


Sec. 73.3555  Multiple ownership.

* * * * *
    (e) * * *
    (2) * * *
    (i) National audience reach means the total number of television 
households in the Nielsen Designated Market Area (DMA) markets in which 
the relevant stations are located divided by the total national 
television households as measured by DMA data at the time of a grant, 
transfer, or assignment of a license. For purposes of making this 
calculation, UHF television stations shall be attributed with 50 
percent of the television households in their DMA market.
    (ii) No market shall be counted more than once in making this 
calculation.
* * * * *
    Note 5: Paragraphs (a) through (d) of this section will not be 
applied to cases involving television stations that are 
``satellite'' operations. * * *
* * * * *
[FR Doc. 99-23695 Filed 9-16-99; 8:45 am]
BILLING CODE 6712-01-P