[Federal Register Volume 65, Number 135 (Thursday, July 13, 2000)]
[Notices]
[Pages 43333-43349]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-17670]


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FEDERAL COMMUNICATIONS COMMISSION

[MM Docket No. 98-35; FCC 00-191]


Broadcast Services; Radio Stations, Television Stations

AGENCY: Federal Communications Commission.

ACTION: Notice.

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SUMMARY: This document is the Commission's Report in its 1998 biennial 
review of its broadcast ownership rules. Such biennial reviews are 
required by the Telecommunications Act of 1996. The intended effect of 
these reviews is to assure that the Commission's broadcast ownership 
rules are no more extensive than necessary in the public interest as 
the result of competition.

ADDRESSES: Federal Communications Commission, 445 12th Street, S.W., 
Washington, D.C. 20554.

FOR FURTHER INFORMATION CONTACT: Roger Holberg, Mass Media Bureau, 
Policy and Rules Division, (202) 418-2134 or Dan Bring, Mass Media 
Bureau, Policy and Rules Division, (202) 418-2170.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Report in MM 
Docket No. 98-35, FCC 00-191, adopted May 26, 2000, and released June 
20, 2000. The complete text of this Report is available for inspection 
and copying during normal business hours in the FCC Reference Center, 
Room CY-A257, 445 12th Street, SW, Washington, DC and may also be 
purchased from the Commission's copy contractor, International 
Transcription Service (202) 857-3800, 445 12th Street, SW, Room CY-
B402, Washington, DC. The NPRM is also available on the Internet at the 
Commission's website: http://www.fcc.gov.

Synopsis of Report

I. Introduction

    1. This Report reviews our broadcast ownership rules as required by 
section 202(h) of the Telecommunications Act of 1996 (Public Law 104-
104, 110 Stat. 56 (1996)) (``Telecom Act''). That section provides:

The Commission shall review its rules adopted pursuant to this 
section and all of its ownership rules biennially as part of its 
regulatory reform review under section 11 of the Communications Act 
of 1934 and shall determine whether any of such rules are necessary 
in the public interest as the result of competition. The Commission 
shall repeal or modify any regulation it determines to be no longer 
in the public interest.

Section 11(a) of the Communications Act of 1934, as amended, similarly 
provides that under the statutorily required review, the Commission 
``shall determine whether any such regulation is no longer necessary in 
the public interest as a result of meaningful economic competition'' 
and requires that the Commission ``shall repeal or modify any 
regulation it determines to be no longer necessary in the public 
interest.'' More recently, Congress has prescribed a period of 180 days 
from November 29, 1999, in which the Commission is to complete the 1998 
biennial review of its broadcast ownership rules. (Section 5003, Pub. 
L. 106-113, 113 Stat. 1501 (1999).) The Conference Report for this 1999 
Act states that within the subject period the Commission shall issue a 
report and if it concludes that it should retain any of the rules 
unchanged, it ``shall issue a report that includes a full justification 
of the basis for so finding.''
    2. Six rules are reviewed in this Report: (1) the national TV 
ownership rule (including the ``UHF discount''); (2) the local radio 
ownership rules; (3) the dual network rule; (4) the daily newspaper/
broadcast cross-ownership rule; (5) the cable/television cross-
ownership rule; and (6) an experimental broadcast station ownership 
rule. The Report provides a regulatory history of each rule, followed 
by a discussion of the competitive and diversity issues that justify 
our decision as to whether the rule remains in the public interest.
    3. On March 12, 1998, we adopted a Notice of Inquiry (``NOI'') in 
this proceeding seeking comment on the six rules included in this 
biennial ownership report. The NOI did not seek comment on the local 
television ownership rule or one-to-a-market ownership rule because 
these rules were already the subject of pending proceedings and we 
reasoned that their examination in those proceedings complied with 
Congress' mandate that we review all of our ownership rules biennially 
beginning in 1998. On August 5, 1999, we adopted a Report and Order 
(Report and Order in MM Docket Nos. 91-221 & 87-8), relaxing our local 
television ownership rule and one-to-a-market ownership rule. Those 
decisions provided broadcasters with expanded opportunities to realize 
the efficiencies of television duopolies and local radio/television 
combinations in markets where an essential level of competition and 
diversity would be preserved. More specifically, we narrowed the 
geographic scope of the television duopoly rule from the Grade B 
contour approach to a ``DMA'' test. This new approach allows the common 
ownership of two television stations without regard to contour overlap 
if the stations are in separate Nielsen Designated Market Areas 
(``DMAs''). Additionally, it allows the common ownership of two 
television stations in the same DMA if their Grade B contours do not 
overlap or if eight independently owned, full-power and operational 
television stations will remain post merger, and one of the stations is 
not among the top four ranked stations in the market based on audience 
share. Furthermore, we adopted waiver criteria presuming, under certain 
circumstances, that a waiver to allow common local television station 
ownership is in the public interest where one of the stations is a 
``failed station,'' is a ``failing station,'' or where the applicants 
can show that the combination will result in the construction and 
operation of an authorized but as yet ``unbuilt'' station. We also 
substantially relaxed the radio/television cross-ownership (``one-to-a-
market'') rule to permit more such combinations, including allowing a 
party to own as many as one TV station and seven radio stations under 
certain circumstances. These actions were taken in fulfillment of our 
obligations under section 202(h) of the Telecom Act and satisfy its 
requirements as to the subject rules.
    4. In the instant phase of our biennial review of broadcast 
ownership rules, we conclude that the local radio ownership rules, the 
national television ownership rule (including the UHF discount), and 
cable/TV cross-ownership rule continue to serve the public interest and 
so retain these rules. As noted, we have just recently substantially 
relaxed our local

[[Page 43334]]

television ownership and one-to-a-market rules. It is currently too 
soon to tell what effect this will have on consolidation, competition 
and diversity. Until we have further information in this regard we 
believe that these rules remain necessary in the public interest in 
their current form. However, we will issue--Notices of Proposed Rule 
Makings (NPRMs) proposing modification of the dual network rule (64 FR 
41393) and newspaper/broadcast cross-ownership rules. Additionally, in 
the case of the local radio ownership rule, we will issue an NPRM (65 
FR 41401) seeking comment on alternative methods of correcting certain 
anomalies in the way we currently define radio markets and the way we 
count the number of stations in a radio market and the number of radio 
stations that an entity owns in a market. Finally, we conclude that the 
experimental broadcast station multiple ownership rule may no longer be 
in the public interest and will issue an NPRM proposing its 
elimination.

II. Background

    5. For more than a half century, the Commission's regulation of 
broadcast service has been guided by the goals of promoting competition 
and diversity. These goals are separate and distinct, yet also related. 
Indeed, as recently as 1997, the Supreme Court noted that ``[f]ederal 
policy * * * has long favored preserving a multiplicity of broadcast 
outlets regardless of whether the conduct that threatens it is 
motivated by anticompetitive animus or rises to the level of an 
antitrust violation.'' (Turner Broadcasting System, Inc. v. FCC, 520 
U.S. 180, 117 S. Ct. 1174 (1997) (``Turner II''). (Citations omitted.)) 
The Supreme Court has also held that both of these goals are important 
and substantial public policies for First Amendment purposes. (Turner 
Broadcasting System v. FCC, 512 U.S. 622, 662 (1997) (``Turner I'').) 
Competition is an important part of the Commission's public interest 
mandate, because it promotes consumer welfare and the efficient use of 
resources and is a necessary component of diversity. Diversity of 
ownership fosters diversity of viewpoints, and thus advances core First 
Amendment principles. As the Supreme Court has said, the First 
Amendment ``rests on the assumption that the widest possible 
dissemination of information from diverse and antagonistic sources is 
essential to the welfare of the public * * * .'' (Associated Press v. 
United States, 326 U.S. 1, 20 (1945); accord Federal Communications 
Commission v. National Citizens Committee for Broadcasting, 436 U.S. 
775 (1978).) Promoting diversity in the number of separately owned 
outlets has contributed to our goal of viewpoint diversity by assuring 
that the programming and views available to the public are disseminated 
by a wide variety of speakers.
    6. This Report uses the framework for reviewing competition and 
diversity outlined in the NOI to evaluate, as required by the Telecom 
Act, whether the six rules included in this biennial review continue to 
be in the public interest. Thus, we assess current levels of 
competition in the market for delivered video programming, the 
advertising market, and the program production market to determine 
whether such competition has eliminated the need for the six rules. Our 
diversity analysis focuses upon the degree to which broadcast and non-
broadcast media, operating within the framework of our ownership rules, 
advance the three types of diversity (i.e., viewpoint, outlet and 
source) that our broadcast ownership rules have attempted to foster. 
Viewpoint diversity refers to the range of diverse and antagonistic 
opinions and interpretations presented by the media. Outlet diversity 
refers to a variety of delivery services (e.g., broadcast stations, 
cable and DBS) that select and present programming directly to the 
public. Source diversity refers to the variety of program or 
information producers and owners.

III. Status of Media Marketplace

    7. Our decision here concerning the broadcast ownership rules takes 
account of the ongoing changes in the structure of the broadcast 
industry. The UHF television discount, the daily newspaper/broadcast 
cross-ownership rule, the cable/television cross-ownership rule, and 
the experimental broadcast station ownership rule have not been 
examined for many years. In reviewing these rules, we recognize that 
there has been substantial growth in the number and variety of media 
outlets in local markets. In contrast, the national television 
ownership rule, the local radio ownership rules, and the dual network 
rule were modified in 1996 in accordance with section 202 of the 
Telecom Act. While there has been growth in the number and variety of 
media outlets since the Telecom Act, there have also been significant 
changes in the ownership structure of the broadcast industry during 
that period, chiefly consisting of extensive consolidation in the radio 
and television industries.
    8. Section 202(h) of the Telecom Act requires us to determine 
whether any of our broadcast ownership rules ``are necessary in the 
public interest as the result of competition.'' We note that some 
commenters express the belief that this limits our review only to 
competitive matters and that our analysis must be devoid of diversity 
considerations. Because the statutory language requires reference to 
the public interest standard, and because diversity and competition 
have both been critical components of that standard, (See, e.g., United 
States v. Storer Broadcasting Company, 351 U.S. 192, 203 (1956); FCC v. 
National Citizens Committee For Broadcasting, 346 U.S. 775, 780-81, 794 
(1978)). our review must consider diversity issues as well. Indeed, the 
United States Supreme court has identified as a ``governmental purpose 
of the highest order'' ensuring the public's access to ``a multiplicity 
of information sources.'' (Turner II, supra at 90.) Also, there is 
support for our consideration of diversity in this context in the 
legislative history of the Telecom Act itself. As discussed in our 
recent local television ownership decision, Congress expressed 
diversity concerns with regard to at least two of our rules and, with 
respect to our review of the radio/television cross-ownership rule, 
expressly instructed the Commission to take into account not only the 
increased competition facing broadcasters but also ``the need for 
diversity in today's radio marketplace.'' Finally in this regard, the 
statutory language appears to focus on whether the public interest 
basis for the rule has changed as a result of competition, and does not 
appear to be intended to limit the factors we should consider. 
Therefore, our public interest determination for each rule is based on 
an examination of both competition and diversity issues in light of 
competitive market conditions. The material below provides a brief 
overview of the number of outlets, ownership structure, and other 
information relevant to the current status of competition in the video, 
audio, and newspaper industries. The numbers alone, of course, are not 
sufficient to determine whether particular media compete with one 
another in relevant markets or whether different media are adequate 
substitutes for one another from a diversity perspective.

[[Page 43335]]

IV. Rules

A. National TV Ownership Rule and UHF Discount

1. Regulatory History
    9. Section 73.3555(e)(1) sets forth the current national TV 
ownership rule. That section states:

No license for a commercial TV broadcast station shall be granted, 
transferred or assigned to any party (including all parties under 
common control) if the grant, transfer, or assignment of such 
license would result in such party or any of its stockholders, 
partners, members, officers or directors, directly or indirectly, 
owning, operating or controlling, or having a cognizable interest in 
TV stations which have an aggregate national audience reach 
exceeding thirty-five (35) percent.

    10. Section 73.3555(e)(2) sets forth the ``UHF discount.'' That 
section explains that ``national audience reach'' is based on the 
number of TV households in Nielsen Designated Market Areas (DMA), and 
that UHF TV stations are attributed with only 50% of the TV households 
in the DMA.
    11. The Commission first adopted a national ownership limit for 
television broadcast stations in the 1940s by imposing numerical caps 
on the number of stations that could be commonly owned, and originally 
limited common ownership to no more than three stations nationwide. 
Several years later this was expanded to allow ownership of no more 
than five stations. In retaining the five station rule in 1953, the 
Commission explained:

The purpose of the multiple ownership rules is to promote 
diversification of ownership in order to maximize diversification of 
program and service viewpoint as well as to prevent any undue 
concentration of economic power contrary to the public interest and 
thus to carry out the underlying purpose of the Communications Act 
to effectuate the policy against monopolization of broadcast 
facilities and the preservation of the broadcasting system on a free 
competitive basis.

    12. In 1954, the Commission adopted the ``Seven Station Rule'' by 
raising the multiple ownership limit from five stations to seven, with 
no more than five being VHF stations. The Commission believed that the 
more rapid and effective development of the UHF band warranted 
permitting the ownership of additional UHF stations. The Commission 
noted that it was aware of the serious problems confronting the 
development of the UHF service, especially in markets with VHF-only set 
saturation, and that it was in these areas particularly where the 
prestige, capital, and know-how of the networks and other multiple 
owners would be most effective in aiding UHF.
    13. In 1984, the Commission eliminated the Seven Station Rule and 
established a six-year transitional period during which common 
ownership of twelve television broadcast stations would be permitted. 
The Commission determined that repeal of the Seven Station Rule would 
not adversely affect the Commission's traditional policy objectives of 
promoting viewpoint diversity and preventing economic concentration. 
The Commission explained that: (1) Changes in the broadcasting and 
communications markets, (2) new evidence of the positive effects of 
group ownership on the quality and quantity of public affairs and other 
programming responsive to community needs, and (3) the lack of 
relevance of a national ownership rule to the availability of diverse 
and independently owned radio and TV voices to individual consumers in 
their respective local markets led to the conclusion that the rule was 
unnecessary to ensure diversity of viewpoints. The Commission 
determined that the better focus for addressing viewpoint diversity and 
economic competition concerns was the number and variety of information 
and advertising outlets in local markets. Nevertheless, the Commission 
recognized the concerns of some commenters that, if the rule were 
repealed immediately and in its entirety, a significant restructuring 
of the broadcast industry might occur before all ramifications of such 
a change became apparent. Therefore, the Commission established a 
transitional limit of twelve television broadcast stations. The 
transitional limit would automatically sunset in six years unless 
experience showed that continued Commission involvement was warranted.
    14. On reconsideration, the Commission, modified its decision. 
Specifically, the Commission (1) established an audience reach cap of 
25 percent (defined as 25 percent of the national audience, calculated 
as a percentage of all Arbitron ADI television households), in addition 
to the twelve station limit, to better account for the effect that 
relaxation of the rule would have on population penetration; (2) 
attributed owners of UHF stations with only 50 percent of their ADI 
audience reach to take cognizance of the limitations inherent in UHF 
broadcasting; (3) permitted common ownership of an additional two 
television stations, provided that they were minority controlled; and 
(4) eliminated the automatic sunset provision. The stated objective was 
to permit reasonable expansion so as to capture the benefits of group 
ownership while avoiding the possibility of potential disruptive 
restructuring of the national broadcast industry. The Commission 
explained that a numerical cap would prevent the acquisition of a 
tremendous number of stations in the smaller markets, thus reducing the 
possibility of disruptive restructuring in small markets, while an 
audience reach cap would temper dramatic changes in the ownership 
structure by the largest group owners in the largest markets. The 
Commission noted that its decision to use both a numerical cap and an 
audience reach cap was also predicated on concerns regarding the 
potential impact on industry structure. The Commission further 
explained that attributing UHF stations with 50 percent of an ADI 
market's audience reach was intended to address the fundamental 
disadvantage of UHF television in reaching viewers. The UHF 
Comparability Task Force found that: ``Due to the physical nature of 
the UHF and VHF bands, delivery of television signals is inherently 
more difficult at UHF. It should be recognized that actual equality 
between these two services cannot be expected because the laws of 
physics dictate that UHF signal strength will decrease more rapidly 
with distance than does VHF signal strength.'' The Commission found it 
inadvisable to terminate the multiple ownership rules for television 
broadcast stations automatically at the end of six years. The 
Commission explained that (1) it was appropriate to proceed cautiously 
in relaxing the rules and (2) an automatic sunset of the ownership 
rules was unnecessary to achieve the Commission's policy objectives.
    15. On March 7, 1996, the Commission amended the national 
television station multiple ownership rules to conform to the 
provisions in section 202(c)(1) of the Telecom Act. Specifically, the 
Commission eliminated the numerical limit on the number of broadcast 
television stations a person or entity could own nationwide and 
increased the audience reach cap on such ownership from 25 percent to 
35 percent of television households.
    16. In our Notice of Inquiry in this proceeding we sought comment 
on this rule. Particularly, we asked about its effect on competition in 
the national advertising market and the program production market at 
the national level. We also sought comment on the rule's effect on 
existing television networks and the formation of new networks and 
sought information on the economies of

[[Page 43336]]

scale that may have been realized as a result of the consolidation 
permitted by the Telecom Act. Finally, we asked whether the UHF 
discount should be retained, modified or eliminated in view of the 
decreasing disparity between VHF and UHF television and, in the event 
of a decision to modify the rule, whether and, if so, how group owners 
that exceed any new limits should be grandfathered.
2. Comments on National TV Ownership Rule
    17. All of the major networks (ABC, CBS, Fox, and NBC) support 
total repeal of the national television ownership rule. These networks 
argue that abolition of the rule would have no effect on the level of 
diversity and competition in local markets, and retention of the rule 
hinders broadcasters from achieving economic efficiencies. These 
networks maintain that group owned stations provide more news and 
public affairs programming than non-group owned stations. They also 
argue that removal of the audience reach cap would promote the 
development of new broadcast television networks. Finally, they argue 
that the only two markets that may be affected by elimination of the 
rule, the national advertising market and the market for national 
exhibition rights to video programming, would remain unconcentrated.
3. Discussion of National TV Ownership Rule
    18. We believe that the audience reach cap should be retained at 
its current level for the present. As an initial matter, Congress 
prescribed an increase in the cap from 25% to 35% in the Telecom Act. 
Several considerations motivate our decision not to change the national 
TV ownership rule. First, we believe that the effects of our recent 
change to the local television ownership rule should be observed and 
assessed before we make any alteration to the national limit. Second, 
the existing reach cap has already resulted in many group owners 
acquiring large numbers of stations nationwide since the cap was 
increased to 35 percent in 1996. We also believe that this trend needs 
further observation prior to any change in the cap. (We note, however, 
that on November 18, 1999, Fox Television Stations, Inc., filed an 
``Emergency Petition for Relief and Supplemental Comments'' in this 
proceeding seeking, among other things, repeal of the national 
broadcast ownership rule. Also, on November 19, 1999, Viacom Inc. filed 
``Comments'' in this proceeding seeking repeal of the same rule and, 
additionally, the dual network rule. The original deadline for filing 
comments in this proceeding was May 22, 1998, with June 22, 1998, being 
the reply comment deadline. These deadlines were later extended, 
pursuant to the request of the National Association of Broadcasters, to 
July 21, 1998, and August 21, 1998, for comments and reply comments, 
respectively. Order in MM Docket No. 98-35, DA 98-854 (released May 7, 
1998). The Fox and Viacom filings, having been submitted nearly 18 
months subsequent to these deadlines will not be considered in this 
proceeding. Simply, to do so would provide a precedent for subjecting 
our biennial review proceedings to unceasing comment cycles, and would 
deprive other parties of an ability to respond to these new matters 
absent establishment of new pleading cycles. Accordingly, they will not 
be considered herein but will be included in the record of our 2000 
biennial review of broadcast ownership issues.)
    19. One factor in our decision is the recent relaxation of our 
local television ownership rules. As noted above, those decisions 
provided increased flexibility for the creation of television duopolies 
and television/radio combinations in local markets while safeguarding 
an essential level of competition and diversity. We conclude that 
prudence dictates that we should monitor the impact of our recent 
decisions regarding local television ownership and any impact they may 
have on diversity and competition prior to relaxing the national reach 
cap. Commenters supporting relaxation or elimination of the cap make 
credible arguments in favor of their position. These arguments include 
the contention that elimination of, or increase in, the cap would allow 
additional economic efficiencies and more news and public affairs, 
increase minority ownership by removing the cap as an impediment to 
broadcasters obtaining attributable equity interests in minority-owned 
television stations, and promote the development of new broadcast 
television networks. We believe, however, that the competitive concerns 
of opponents of relaxation or elimination of the cap (i.e., are that 
eliminating or expanding the reach cap would increase the bargaining 
power of networks over their affiliates, reduce the number of 
viewpoints expressed nationally, increase concentration in the national 
advertising market, and enlarge the potential for monopsony power in 
the program production market) are more convincing under current 
circumstances. Until we gain experience under the new local television 
ownership rules we are disinclined to correspondingly relax them on the 
national level. While we will reexamine this decision in our future 
biennial reviews of broadcast ownership rules, we intend to proceed 
cautiously in this area at the present time.
    20. Also, elimination of the 12 station numerical cap has already 
permitted group owners to acquire a large number of stations. The 
current rule permits a group owner to acquire a VHF station in every 
market below DMA 47 (i.e., DMA 48 through DMA 210, a total of 163 
stations) and still remain below the 35 percent audience reach cap. By 
holding UHF stations only, a group owner could acquire a station in 
every market below DMA 10 (i.e., DMA 11 through DMA 210, a total of 200 
stations) and still remain below the 35 percent audience reach cap. 
Data show that many group owners have acquired additional stations and 
increased their audience reach since the Telecom Act's passage.
    21. Moreover, consolidation is a feature of other video media. In 
cable, the seven largest operators now serve almost 90 percent of all 
U.S. cable subscribers, which is up from 63 percent being served by the 
top 10 multiple system operators (``MSO'') in 1990. Thirty-seven 
percent of satellite-delivered national programming networks are now 
vertically integrated with a cable MSO. In 1999, for example, one or 
more of the top six cable MSOs held an ownership interest in each of 
101 vertically integrated national programming services. In addition, a 
significant percentage of the top national programming services are 
controlled by approximately eleven companies, including cable MSOs, 
broadcasters and other media entities. Of the top 50 programming 
services in terms of subscribership, 46 are owned by one or more of 
these 11 companies.
    22. The evidence suggests that the television broadcast industry is 
still adapting to the recent relaxation of the national and local 
ownership rules and we wish to avoid actions with the potential for 
disruptive restructuring. For example, applications for duopolies under 
our new local television ownership rule were only filed this past 
November and we believe that we should monitor developments under this 
new rule prior to making any changes to the national television 
ownership reach cap.
    23. We also intend to proceed cautiously because the Commission has 
previously recognized that a change in the audience reach cap may well 
influence the bargaining positions between broadcast television 
networks and their affiliates. We noted that in

[[Page 43337]]

some situations, relaxation of the national ownership limits could 
increase the bargaining power of networks by expanding their option to 
own rather than affiliate with broadcast television stations. In other 
situations, however, relaxation of the national ownership limits could 
increase the bargaining position of group-owned affiliates by creating 
larger, more powerful groups. In its comments, NASA (Network Affiliated 
Stations Alliance) asserts that the national ownership rule is the 
essential mechanism for maintaining the balance between networks and 
their affiliates to ensure that affiliates can program their stations 
in the interests of the communities they are licensed to serve. NASA 
argues that an increase in the audience reach cap will increase the 
bargaining power of networks. We believe that in considering relaxation 
of the national ownership rule we should act cautiously in light of the 
potential impact of this rule on the bargaining positions of networks 
and affiliates, particularly given the restructuring that may be taking 
place concurrently on the local level. We do not believe that 
consolidation of ownership of all or most of the television stations in 
the country in the hands of a few national networks would serve the 
public interest. The national networks have a strong economic interest 
in clearing all network programming, and we believe that independently 
owned affiliates play a valuable counterbalancing role because they 
have the right to decide whether to clear network programming or to air 
instead programming from other sources that they believe better serves 
the needs and interests of the local communities to which they are 
licensed. Independent ownership of stations also increases the 
diversity of programming by providing an outlet for non-network 
programming. We do not believe that the role played by independently 
owned affiliates is any less important today than it was four years ago 
when Congress determined that the public interest was served by 
maintaining a national ownership limit, albeit it at a slightly relaxed 
(35% rather than 25%) level.
4. Comments on the UHF Discount
    24. A number of commenters advocate elimination or substantial 
modification of the UHF discount. These groups argue that the original 
basis for the discount appears to have fallen away. Specifically, the 
deficiencies in UHF reception that existed in the early years of 
television have largely been ameliorated by improved television 
receiver design and the fact that more than two-thirds of all 
television homes now receive local signals via cable.
    25. A number of commenters, however, support retention of the UHF 
discount. These commenters argue that the original basis for the 
discount remains. Specifically, these commenters maintain that cable 
carriage, must-carry rules, and improved receiver design have not 
created a level playing field between UHF and VHF stations. They argue 
that economic and technical disparities between UHF and VHF stations 
continue to disadvantage UHF stations.
5. Discussion of the UHF Discount
    26. We believe that, for the present time, the UHF discount remains 
necessary in the public interest. As commenters note, there remains a 
UHF handicap that has not yet been overcome. Although roughly two-
thirds of American viewers obtain their local television stations over 
a cable television system, still roughly one third do not. They rely on 
over-the-air reception. UHF stations have greater difficulty in 
reaching these viewers and cable headends--thereby hindering their 
ability to obtain cable carriage--because of their weaker signal. While 
the Commission has observed in other contexts that this UHF signal 
disparity has been ameliorated over the years it has not yet been 
eliminated. Additionally, because of the higher operating costs of UHF 
stations, particularly due to their higher power requirements, even 
when they can reach these viewers they still incur greater expenses 
than VHF stations in doing so and, thus, remain under a competitive 
handicap warranting a 50 percent discount.
    27. As Univision points out in its comments, if there were no 
competitive disparity between VHF and UHF television, we would expect 
group owners to take advantage of the UHF discount by selling their 
VHFs and buying UHFs. The fact that few, if any, group owners have used 
this strategy suggests that the market recognizes a continuing 
competitive disparity between the two services. Accordingly, we cannot 
say the discount is no longer in the public interest as a result of 
competition.
    28. While the technical and engineering evidence submitted by 
commenters continues to support the UHF discount, we believe that it 
will likely not continue to do so in the future. The information 
received in the proceeding suggests that the reach disparity between 
VHF and UHF stations differs from market-to-market and station-to-
station. In addition, we agree with commenters arguing that advances in 
technology now provide us with the tools to more accurately measure the 
household reach for each UHF station.
    29. In this regard, we note that the existing UHF discount will 
likely not work well for DTV. Our efforts to replicate existing signal 
coverage provide DTV stations the ability to reach approximately the 
same number of television households they currently reach with NTSC 
stations. Thus, it is not clear that a VHF NTSC station assigned a UHF 
DTV channel should be permitted a UHF discount if the station reaches 
the same number of households as did its NTSC counterpart. Nor is it 
clear that a UHF NTSC station assigned a VHF DTV channel should lose 
the discount if the DTV station does not reach more households. In this 
regard, however, we note that, pursuant to section 5009(c) of Public 
Law 106-113, 113 Stat. 1501, Appendix I (1999), the Commission, on 
December 7, 1999, issued a Public Notice giving DTV licensees until 
December 31, 1999, in which to file notice that they intend to seek 
maximization of their DTV service area. One thousand three hundred and 
sixteen letters of notification manifesting the intent to file to 
maximize DTV stations' service areas were filed by that deadline. 
Accordingly, DTV licensees, including those operating on UHF channels, 
have been given the opportunity to maximize their DTV coverage areas, 
and not merely replicate their analog coverage. This should ameliorate 
at least some of the disparities between UHF and VHF stations' access 
to viewership in the digital context. Additionally, unlike analog 
signal reception, where picture quality gets progressively worse as 
distance from the antenna increases, digital reception is characterized 
by the so-called ``cliff effect.'' That effect is characterized by DTV 
television receivers obtaining the same quality of reception at a 
distance from the transmitting antenna as is obtained close to it until 
such a point as the data stream is no longer useable by the receiver. 
At that point reception ``falls off a cliff'' and no picture or sound 
is produced. In other words, the reception quality remains high when an 
adequate signal is available. Effectively, as the average DTV signal 
strength gets weaker at the edge of a station's service area, the 
picture and sound will be produced for smaller percentages of time, 
until reception is considered unacceptable. Generally, DTV UHF viewers 
should have better quality reception at greater distances from the 
station than is

[[Page 43338]]

currently the case with respect to analog UHF reception. This, too, 
should allow DTV UHF stations to obtain better access to off-the-air 
viewers and should rectify the VHF/UHF disparity to an extent. We 
believe that under these circumstances, the eventual modification or 
elimination of the discount for DTV will be appropriate. Accordingly, 
at such time near the completion of the transition to digital 
television we will issue a Notice of Proposed Rulemaking proposing a 
phased-in elimination of the discount. We previously stated that until 
the UHF discount was addressed in the proceedings where it was under 
review, any entity that acquired stations during the interim period 
between the revision of the national reach cap pursuant to the Telecom 
Act, and a Commission decision on the UHF discount, and which complied 
with the 35 percent reach cap only by virtue of the UHF discount, would 
be subject to our eventual decision on the discount. This has remained 
the case during the pendancy of the instant proceeding and we will 
continue to follow this policy until such time as the UHF discount is 
modified or eliminated.

B. Local Radio Ownership Rules

1. Regulatory History
    30. In 1996, the Commission amended the local radio ownership rules 
to conform to provisions in section 202(b) of the Telecommunications 
Act of 1996. Section 73.3555(a)(1) of the Commission's rules (47 CFR 
73.3555(a)(1) ) sets forth the current local radio ownership rules. 
These rules currently allow: (1) Combinations of up to 8 commercial 
radio stations, not more than 5 of which are in the same service (AM or 
FM), in markets with 45 or more commercial radio stations; (2) 
combinations of up to 7 commercial radio stations, not more than 4 of 
which are in the same service, in markets with between 30 and 44 
commercial radio stations; (3) combinations of up to 6 commercial radio 
stations, not more than 4 of which are in the same service, in markets 
with between 15 and 29 commercial radio stations; (4) combinations of 
up to 5 commercial radio stations, not more than 3 of which are in the 
same service, if no party controls more than 50 per cent of the 
stations in the radio market, in radio markets with 14 or fewer 
commercial radio stations.
    31. In 1938, the Commission adopted a strong presumption against 
granting radio licenses that would create duopolies (i.e., common 
ownership of more than one station in the same service in a particular 
community) based largely on the principle of ``diversification of 
service.'' In the early 1940s this presumption against duopoly 
ownership became an absolute prohibition when the Commission (1) 
adopted rules governing commercial FM service and (2) prohibited the 
licensing of two AM stations in the same area to a single network. The 
AM rule barred overlap of AM stations where a ``substantial portion of 
the applicant's existing station's primary service area'' would receive 
service from the station in question, except upon a showing that the 
public interest would be served through such multiple ownership; and 
the FM rule prohibited the licensing of a new station which would serve 
``substantially the same area'' as another station owned or operated by 
the same licensee. The Commission explained that the radio duopoly 
rules sought to promote economic competition and diversity of 
programming viewpoints through station-ownership diversity.
    32. In 1964, the Commission abandoned its case-by-case adjudication 
approach and barred common ownership of radio stations when the 
predicted 1 mV/m contours of the stations overlapped. In adopting the 
rule, the Commission stated: ``When two stations in the same broadcast 
service are close enough together so that a substantial number of 
people can receive both, it is highly desirable to have the stations 
owned by different people.'' The Commission explained that this 
objective flowed logically from two basic principles underlying the 
multiple ownership rules.

First, in a system of broadcasting based upon free competition, it is 
more reasonable to assume that stations owned by different people will 
compete with each other, for the same audience and advertisers, than 
stations under the control of a single person or group. Second, the 
greater the diversity of ownership in a particular area, the less 
chance there is that a single person or group can have an inordinate 
effect, in a political, editorial, or similar programming sense, on 
public opinion at the regional level.

The Commission concluded that the rules were based upon the view of the 
First Amendment to the Constitution articulated by the Supreme Court in 
the Associated Press case--i.e., a notion that the Amendment ``rests on 
the assumption that the widest possible dissemination of information 
from diverse and antagonistic sources is essential to the welfare of 
the public.''
    33. In 1988, the Commission replaced the 1 mV/m contour-overlap 
duopoly standard, which prohibited the common ownership of stations 
with overlapping 1 mV/m signal contours, with a more relaxed 
``principal city'' contour-overlap standard that prohibited common 
ownership of AM stations when the predicted 5 mV/m contours overlapped 
and common ownership of FM stations when the predicted 3.16 mV/m 
contours overlapped. As such, the rule prohibited combinations of 2 AM 
or 2 FM stations in the same ``principal city'' but permitted AM/FM 
combinations within the same community. The Commission explained that 
efficiencies of common ownership might be realized by allowing radio 
broadcasters to own two or more radio stations in the same geographic 
area, although not in the same principal city. The Commission also 
explained that the goals of the duopoly rule remained the same: to 
promote economic competition and diversity of programming and 
viewpoints through local ownership diversity. The Commission noted a 
changed marketplace, with an increased number of broadcast stations, 
the introduction of new services and technologies, and the abundance of 
competition in local markets, as the compelling reasons to relax the 
local ownership regulation.
    34. In 1992, the Commission again cited changed economic conditions 
in radio markets as a basis for further relaxing the local radio 
ownership rules. Specifically, the Commission permitted combinations of 
up to (i) 3 AM and 3 FM in markets with 40 or more stations, (ii) 3 AM 
and 2 FM in markets with 30 to 39 stations, (iii) 2 AM and 2 FM in 
markets with 15 to 29 stations and (iv) 3 stations (with no more than 2 
in the same service) in markets with 14 or fewer stations. The 
Commission based the count of radio stations on the number of 
commercial radio stations meeting minimum audience survey reporting 
standards within an Arbitron designated radio metro market, or on 
overlapping principal community contours outside designated radio 
markets. Under cases (i)-(iii), combinations were permitted if the 
combined audience share did not exceed 25 percent. In case (iv), the 
combination was permitted if it would not result in a single party 
controlling 50 percent or more of the stations in the market. The 
Commission noted growth in the number of radio stations and increased 
competition from non-radio outlets such as cable and MTV. The 
Commission noted that stations faced declining growth in radio revenues 
and concluded that economic circumstances threatened radio's ability to 
serve the

[[Page 43339]]

public interest. The Commission explained that consolidation within the 
industry would allow radio broadcasters to realize economies of scale 
that would then generate greater programming investment and increase 
radio stations' competitiveness. In response to petitions for 
reconsideration, the Commission moderated the relaxation of its rules 
permitting combinations of up to (i) 2 AM/2 FM in markets with 15 or 
more stations, if the combined audience share did not exceed 25 
percent; and (ii) 3 stations in markets of 14 or fewer stations, with 
no more than 2 in the same service, if the combination would not 
control 50 percent or more of the stations in the market. The 
Commission decided to count radio stations with reference to a contour 
overlap standard in all situations, not just those outside of Arbitron 
designated radio markets. Thus, the Commission defined the radio market 
``as that area encompassed by the principal community contours * * * of 
the mutually overlapping stations proposing to have common ownership. 
The number of stations in the market will be determined based on the 
principal community contours of all commercial stations whose principal 
community contours overlap or intersect the principal community 
contours of the commonly-owned and mutually overlapping stations.'' The 
Commission concluded ``that adopting more moderate increases * * * in 
the permissible level of station ownership in certain local markets at 
this time will provide necessary relief while enabling us to monitor 
marketplace developments as they unfold.''
    35. Pursuant to the Telecommunications Act of 1996, the Commission 
further relaxed its local radio ownership rules in March 1996, as set 
forth. The Commission did not change from its 1992 reconsideration 
decision, however, how it defined the relevant radio market or which 
stations it counted.
    36. In our biennial review NOI, we asked for comment on how the 
relaxation of local radio ownership rules under the Telecom Act has 
impacted competition, diversity and economic efficiencies within local 
radio markets. We noted that since the passage of the Telecom Act, the 
radio industry has experienced an ongoing trend towards increasing 
ownership concentration, both in terms of local and national radio 
markets; although the number of radio stations has increased, the 
number of owners has decreased. The NOI asked for comment on whether 
this trend has had a significant impact on local market competition 
among radio stations, and with other local media outlets, in terms of 
the program delivery and local advertising markets. The NOI also asked 
for comment on whether radio ownership concentration has had a 
significant influence over the expression of viewpoint diversity and 
the level of news coverage within local radio markets. We noted in the 
NOI that the NTIA's 1997 annual report on minorities and broadcasting 
showed that there has been a drop in the number of minority-owned 
broadcast stations, and sought comment on the relationship between our 
ownership limits and the opportunities for minority and female 
broadcast station ownership. In addition, the NOI sought comment on 
whether our current counting method for purposes of applying the local 
radio ownership rules should be modified to more realistically account 
for the number of stations in a radio market.
2. Comments
    37. Commenters were divided on whether the current local radio 
ownership rules, mandated by the Telecommunications Act, have produced 
positive or negative results. Commenters concerned about the effects of 
the rules on the marketplace ask the Commission to maintain or 
strengthen, the current rules.
    38. Other commenters, however, rejoin that consolidation was the 
intent behind deregulation of local radio ownership restrictions, and 
that any resulting problems that may arise with market power should be 
left to antitrust authorities.
    39. Commenters also differed on the Commission's methodology for 
counting stations in determining compliance with the ownership rules. 
Commenters such as Air Virginia, Americans for Radio Diversity (ARD), 
Greater Media, Inc., Press Communications, LLC, and Gross 
Communications Corporation argue that too many stations are counted 
under the Commission's current methodology. These commenters proposed 
to use an Arbitron or other rating service market definition, taking 
into account listener audience and station power, and to include only 
those stations that place a 1mV/m (FM) or 2 mV/m (AM) primary service 
contour over the furthest city limit of the market's principal city, or 
using Department of Commerce MSA definitions in place of Arbitron.
    40. In contrast, some commenting parties urged the Commission to 
retain, or even expand, its current radio market definition and station 
count method.
3. Discussion
    41. Overview. We conclude that our current local radio ownership 
rules, as mandated by the Telecommunications Act of 1996, generally 
continue to serve the public interest. The longstanding goal of the 
Commission's local radio ownership restrictions has been to promote 
competition and viewpoint diversity within local radio markets. While 
some commenters argued that consolidation has had a positive impact on 
the economic viability of the radio industry, in terms of improved 
station profitability and increased value of radio ownership, and has 
also yielded potential benefits for both the listening public and 
advertisers, others raised significant concerns about the impact of 
radio ownership consolidation on both our competition and diversity 
goals.
    42. We recognize that the industry has undergone significant 
consolidation since 1996. Moreover, we expect further consolidation as 
a result of our recent ownership decisions relaxing the television 
duopoly and one-to-a-market rules. We intend to monitor the 
consolidation and gather information regarding the overall impact on 
competition and diversity. As discussed more fully below, although we 
will maintain our current local radio ownership rules for the time 
being, we are persuaded that further proceedings are warranted to 
address certain definitional and methodological issues affecting our 
local radio ownership rules. Specifically, we will commence a 
proceeding to seek comment on alternative means of defining radio 
markets and alternative methods of calculating the total number of 
stations ``in a market'' and the number owned by a particular party in 
a market to correct anomalies in our current methodology. We believe 
that proceeding will lead to rules and procedures that will be easier 
to apply, provide more certainty for entities contemplating 
acquisitions, and result in a more rational and consistent application 
of our multiple ownership limits.
    43. Competition. Relaxation of the ownership limits under the 
Telecom Act has produced financial benefits for the broadcast radio 
industry. Financial data indicate that the industry has made 
significant gains since passage of the Telecom Act. For the industry as 
a whole, station profitability has increased and station values have 
reached new heights. However, it is not clear whether these gains are 
the result of greater efficiencies, enhanced market power, or both.
    44. We are concerned that increasing consolidation may be having 
adverse effects on competition, especially in the local radio 
advertising market. Current data show that in 85 out of a total of 270 
Arbitron radio markets, two entities already control more than 80% of

[[Page 43340]]

advertising revenue; in 143 markets two entities control more than 70 
percent of such. We recognize that many advertisers consider 
alternative media to be good substitutes for radio advertising. 
However, the Department of Justice (DOJ) has concluded that there are a 
significant number of advertisers that do not. In distinguishing radio 
advertising as a distinct market from that of television and newspaper 
advertising, the DOJ explains that (1) radio advertising is unique in 
reaching a mobile broadcast audience; (2) radio has a greater ability 
to target particular audience segments; and (3) radio can be more cost 
effective and more flexible in responding to changes in local 
advertising conditions. Additionally, as we noted in our recent TV 
Ownership Order, ``[a] recent econometric study finds that other 
advertising media are not good substitutes for radio advertising and 
that radio advertising probably constitutes a separate antitrust 
market.'' Thus, for certain advertisers, newspapers, cable, and 
broadcast television stations do not constitute an effective substitute 
for radio stations. For these advertisers, the consolidation of local 
radio markets may raise significant competitive concerns.
    45. Diversity. Consolidation of radio stations under group 
ownership might allow owners to increase investment in news coverage, 
through the acquisition of more sophisticated news coverage equipment 
and by maintaining larger, more efficient news staffs. Some commenters 
thus suggest that ownership concentration has fostered viewpoint 
diversity. For example, Fuller-Jeffrey Broadcasting Companies, Inc. 
believes that viewpoint diversity is ``alive and well,'' and that pre-
Telecom Act ownership limits had placed a severe economic strain on 
small to medium-sized companies. It also believes that the present 
level of consolidation should allow the radio industry to enjoy 
unprecedented success and stability, which will allow it to better 
contribute to the public interest. One impact of consolidation, it 
argues, has been to reduce unnecessary format duplication and to 
minimize audience overlap. Commenters such as NAB assert that the 
Commission should look at all media, including television, radio, 
cable, DBS, Internet and newspapers, along with smaller services such 
as MMDS and SMATV, when judging program diversity. NAB also finds that 
group owners do not impose their views on audiences.
    46. The scale and scope efficiencies discussed above might in part 
arise from the consolidation of news coverage at commonly-owned 
stations, leading to a lessening of viewpoint diversity and to a 
smaller local market for news talent. If this were the case, this would 
conflict with the longstanding intent of the radio multiple ownership 
rules to promote viewpoint diversity through independently owned local 
stations. Viewpoint diversity has traditionally been viewed in terms of 
the number of independent viewpoints expressed in local markets, in 
which case ownership consolidation could have a negative impact on both 
viewpoint and source diversity. A related concern is that even without 
the loss of news staffs, viewpoint expression might become homogenized 
within a commonly owned group of radio stations as a result of the 
sharing of common news facilities and a common corporate culture.
    47. Several commenters lend support to these notions. Air Virginia 
notes a trend by large group-owned stations towards less news and 
public affairs and more revenue-generating entertainment programming, 
particularly with local marketing agreements (``LMAs''). Americans for 
Radio Diversity (ARD) believes that independent broadcasters are more 
likely to provide diverse and unbiased programming, and that group 
owners tend to ignore public service to demographic groups deemed to be 
small or unprofitable, which often impacts minorities and those of 
lower economic status. CME believes that consolidation has led to 
reduced public-affairs and local-news programming, since group owners 
increasingly use syndicated programming and out-sourcing to produce 
news and public affairs programs, often with the same production 
company as is used by competitors. It reports that, for example, Metro 
Networks Inc., a Houston-based company, provides all of the news 
programming to 10 Washington, D.C., radio stations. Metro, it states, 
is one of the fastest growing companies in the United States and its 
growth, according to one of its executives, has been due to the ``out-
sourcing'' his company has found at many radio stations. Similarly, CME 
reports that Capstar Broadcasting uses ten announcers based in Austin, 
Texas, to record all between-song breaks and weather and traffic breaks 
for 37 of its stations in Texas, Arkansas and Louisiana.
    48. In view of the large-scale consolidation in the radio industry, 
we believe that the existing local radio ownership limitations remain 
necessary to prevent further diminution of competition and diversity in 
the radio industry. It appears that while there may have been a number 
of salutary effects flowing from the consolidation that has taken place 
since 1996, largely in financial strength and enhanced efficiencies, it 
cannot be said that consolidation has enhanced competition or 
diversity, and, indeed, may be having the opposite effect. There 
currently are hundreds of fewer licensees than there were four years 
ago and, in many communities, far fewer radio licensees compete against 
each other.
    49. Our competition and diversity concerns outlined above lead us 
to conclude that the local radio ownership rules should not be further 
relaxed at this time. The industry is still adapting to the substantial 
relaxation of local ownership rules that followed enactment of the 1996 
Act, and we expect consolidation to continue under our current 
ownership limits. While some commenters argue that we should tighten 
the ownership limits, we do not believe this appropriate given that 
Congress directed the Commission to adopt these limits in 1996.
    50. Market Definition and Counting Methodology. Although we have 
decided to retain our ownership rule, our experience in administering 
the rule since its implementation in 1996 suggests several concerns 
that should be addressed, including our method of defining markets, 
counting the number of stations within them and counting the number of 
stations owned by a party in a radio market. These definitions and 
methodologies may be undermining Congress' intent in adopting the 1996 
Act.
    51. Our definition of a radio market and our method for counting 
the number of stations in a market were adopted in 1992. These were not 
altered when we amended our rules to implement section 202 of the 1996 
Act. To evaluate whether a proposed transaction complies with our 
ownership rules, we first determine the boundaries of each market 
created by the transaction. A transaction may create more than one 
radio market. Our rules define a radio market as the ``area encompassed 
by the principal community contours (i.e., predicted or measured 5 mV/m 
for AM stations and predicted 3.16 mV/m contour for FM stations) of the 
mutually overlapping stations proposed to have common ownership.'' 
Thus, we look to all stations that will be commonly owned after the 
proposed transaction is consummated and group these stations into 
``markets'' based on which stations have mutually overlapping signal 
contours. A market is defined as the area within the combined contours 
of the stations to be commonly owned that have a common overlap. For 
example, suppose an applicant proposes to own stations A, B, C and D. 
The contours of

[[Page 43341]]

stations A, B and C each overlap the contours of the other two 
stations--that is, there is some area which the contours of all three 
stations have in common. Station D, on the other hand, overlaps the 
principal community contour of station A, but not those of stations B 
or C. Under our current definitions, the area encompassed by the 
combined contours of stations A, B and C form one ``market'' and the 
area within the combined contours of stations A and D form another 
market. This example assumes that stations A and D are same-service 
stations, and that at least one other station, B or C, is also in the 
same service as station A.
    52. To determine the total number of stations ``in the market,'' as 
defined above, we count all stations whose principal community contours 
overlap the principal community contour of any one or more of the 
stations whose contours define the market. Thus, in the market formed 
by the contours of stations A, B and C, any station whose contour 
overlapped the contour of A, B or C would be counted as ``in the 
market.'' We use a different methodology, however, to determine the 
number of stations that any single entity is deemed to own in a given 
market. For this purpose, we only count those stations whose principal 
community contours overlap the common overlap area of all of the 
stations whose contours define the market. Thus, a station owned by the 
applicant that is counted as being ``in the market'' because its 
contour overlaps the contour of at least one of the stations that 
create the market will not be counted as a station owned by the 
applicant in the market unless its contour overlaps the area which the 
contours of all of the stations that define the market have in common. 
Referring to our example of the market formed by the contours of 
stations A, B and C, station D would be counted as ``in the market'' 
because its contour overlaps the contour of station A. But, station D 
would not be counted as a station owned by the applicant in the ABC 
market because station D's contour does not also overlap the contours 
of stations B and C. In short, the applicant's ownership of station D 
would not be counted against it in determining compliance with the 
ownership cap in the ABC market.
    53. These definitions and methodologies may be producing unintended 
results that are contrary to Congress' intent. In the 1996 Act, 
Congress directed us to adopt radio ownership limits that increase as 
the size of the market increases. Implicit in Congress' statutory 
directive is: (1) a rational definition of radio ``market'' that 
reflects the number of stations to which listeners in a particular 
community actually have access; and (2) a consistent definition of 
radio market when counting the number of stations in a market and when 
counting the number of stations an entity owns within that market.
    54. The Commission's current policies raise concerns on both 
counts. First, the Commission's use of overlapping signal contours to 
assess the number of stations in the market can produce unrealistic 
results. For example, in a recent case in Wichita, Kansas, a 24-station 
market according to the commercial Arbitron rating service, the contour 
overlap approach counted 52 radio stations in the market, including 
several Oklahoma stations whose signals did not even reach Kansas. In 
other contexts, such as our television duopoly and one-to-a-market 
rules, we recently opted for market definitions based on commercial 
reality--as measured by ratings services like Arbitron and Nielsen--
rather than contour overlaps. In changing our duopoly rule from a 
contour-based restriction to a DMA-based restriction, we stated that 
the DMAs ``are a better measure of actual television viewing patterns, 
and thus serve as a good measure of the economic marketplace in which 
broadcasters, program suppliers and advertisers buy and sell their 
services and products.'' We believe that the same reasoning could apply 
to radio markets. Arbitron markets reflect the number of stations that 
actually target listeners in a particular community because they are 
the listeners that advertisers pay to reach. We will issue an NPRM 
seeking comment on whether Arbitron markets (or a proxy in non-Arbitron 
areas) would be a more accurate measure of marketplace reality than our 
current approach.
    55. Second, our current methodology for counting the number of 
stations a party owns in a market may result, as in the example 
discussed above, in a station being counted in the market for purposes 
of establishing the number of stations in the market but not being 
counted against a licensee's cap on the number of stations it may own 
in that market. In one case, this would have led to a party being 
permitted, in effect, to own three stations in a four-station market 
because our method of counting the stations it owned in the market 
excluded one of its stations. See In re Application of Pine Bluff 
Radio, Inc., 14 FCC Rcd 6594 (1999). In Pine Bluff, a station that was 
logically in a market in terms of listenership and advertiser support, 
and, in fact, was counted for purposes of determining the total number 
of stations in that market was not counted against a party's ownership 
cap in that market because its principal city contour did not overlap 
the principal community contours of all stations that defined the 
market. In the 1996 Act, Congress provided that in markets with 14 or 
fewer commercial radio stations a party may own up to five commercial 
radio stations, but ``may not own, operate, or control more than 50 
percent of the stations in such market.'' (Section 202(b)(1)(D) of the 
Telecommunications Act of 1996.) Yet, in Pine Bluff, application of our 
established policies led to one party owning three stations in what 
could reasonably be considered a four-station market. In Pine Bluff we 
recognized that this may appear to be an anomalous result but pointed 
out that it was produced by a methodology that had been consistently 
utilized since 1992 and that subsequent events in the market had 
rendered harmless the impact of this anomaly in that case.
    56. This shifting market definition appears illogical and contrary 
to Congress' intent. For instance, in the 1996 Act, Congress provided 
that:

      [I]n a radio market with 14 or fewer commercial radio 
stations, a party may own, operate, or control up to 5 commercial 
radio stations, not more than 3 of which are in the same service (AM 
or FM), except that a party may not own, operate, or control more 
than 50 percent of the stations in such market.

Thus, the plain language of the statute seems to require us to look at 
the same market--i.e., to use the same definition of ``market''--when 
determining the number of radio stations in the market and when 
counting the number of stations that an entity owns, operates, or 
controls within that market. As a logical matter, if a station has 
sufficient presence that it should be counted as contributing to the 
number of stations ``in the market,'' it seems appropriate to count it 
as being ``in the market'' for purposes of calculating the ownership 
cap.
    57. We tentatively conclude that our definitions and methodologies 
in this area may be having effects inconsistent with what Congress 
intended. In addition, they may be undermining the legitimate 
expectations of broadcasters, advertisers and the public as to the size 
of their market, the number of stations in their market, and the number 
of stations that can be owned by an individual party in that market. To 
consider appropriate changes to our rules, we will issue an NPRM 
soliciting comment on proposed modifications of our rules in this area.

[[Page 43342]]

C. Dual Network Rule

1. Regulatory History
    58. Section 73.658(g) (47 CFR 73.658(g)) sets forth the 
Commission's current dual network rule. It directly reflects the 
provisions of section 202(e) of the Telecom Act, which permits a 
television broadcast station to affiliate with a person or entity that 
maintains two or more networks of television broadcast stations unless 
such networks are composed of: (1) Two or more persons or entities that 
were ``networks'' on the date the Telecom Act was enacted; or (2) any 
such network and an English-language program distribution service that 
on the date of the Telecom Act's enactment provided 4 or more hours of 
programming per week on a national basis pursuant to network 
affiliation arrangements with local television broadcast stations in 
markets reaching more than 75 percent of television households. The 
Conference Report identified with precision the networks to which these 
definitions were to apply. It stated that the Commission was being 
directed to revise its dual network rule,

to permit a television station to affiliate with a person or entity 
that maintains two or more networks unless such dual or multiple 
networks are composed of (1) two or more of the four existing 
networks (ABC, CBS, NBC, Fox) or, (2) any of the four existing 
networks and one of the two emerging networks (WBTN, UPN). The 
conferees do not intend these limitations to apply if such networks 
are not operated simultaneously, or if there is no substantial 
overlap in the territory served by the group of stations comprising 
each such networks.

    59. The Commission first adopted a dual network rule for broadcast 
radio networks in 1941 following an investigation to determine whether 
the public interest required ``special regulations'' for radio stations 
engaged in chain or other broadcasting. The rule provided that no 
license would be issued to a broadcast station affiliated with a 
network organization that maintained more than one broadcast network. 
The Commission extended the dual network rule to television networks in 
1946. The Commission believed that permitting an entity to operate more 
than one network might preclude new networks from developing and 
affiliating with desirable stations because those stations might 
already be tied up by the more powerful network entity. In addition, 
the Commission expressed concern that dual networking could give a 
network too much market power. The dual network prohibition, therefore, 
was intended to remove barriers that would inhibit the development of 
new networks, as well to serve the Commission's more general diversity 
and competition goals. The dual network rule for broadcast television 
remained unchanged until 1996, when the Commission amended the rule, as 
noted above, to conform with the provisions in Section 202(e) of the 
Telecom Act.
2. Comments
    60. Four parties (ABC, CBS, Paxson and WB) submitted comments 
regarding the dual network rule; all favored repeal. These four 
broadcast networks argue that the rule constrains their ability to 
restructure and achieve efficiencies of common ownership. They also 
argue that antitrust enforcement would be sufficient to address any 
anticompetitive concerns that might arise in the absence of the dual 
network rule.
3. Discussion
    61. The current dual network rule differs markedly from the dual 
network rule that remained unchanged from 1946 to 1996. The latter 
prohibited a broadcast station from affiliating with a network 
organization that maintained more than one broadcast network. In 
contrast, the current rule effectively permits a broadcast station to 
affiliate with a network organization that maintains more than one 
broadcast network, unless such networks are created by a merger between 
ABC, CBS, Fox, or NBC, or a merger between one of these four 
established networks and UPN or WB. Thus, the current rule supports 
common ownership of multiple broadcast networks created through 
internal growth and new entry, and discourages common ownership of 
multiple broadcast networks created by mergers between specific network 
organizations.
    62. Under the current dual network rule, all existing network 
organizations, and all new network organizations, may create and 
maintain multiple broadcast networks. There are no limits on the number 
of broadcast networks that may be maintained by a network organization, 
or the number of television stations that may affiliate with a network 
organization. As such, it is theoretically possible for a network 
organization with sufficient programming to enter into affiliation 
agreements with every broadcast television station, in every market, 
and supply all of their programming. The opportunity to create and 
maintain multiple broadcast networks places broadcast networks on more 
equal footing with cable, satellite and other multichannel video 
programming distributors.
    63. While the dual network rule gives all network organizations the 
opportunity to pursue any economic efficiencies that may arise from the 
maintenance of multiple broadcast networks, it restricts the manner in 
which specific network organizations become multiple broadcast 
networks. Specifically, the rule permits ABC, CBS, Fox and NBC to 
develop multiple broadcast networks by (1) creating new broadcast 
networks, (2) acquiring new broadcast networks created after passage of 
the Telecom Act, and (3) acquiring video networks from nonbroadcast 
media (e.g., cable or satellite) and moving them to broadcast, assuming 
they could find additional local stations with which to affiliate. 
However, the rule prohibits ABC, CBS, Fox, and NBC from developing 
multiple broadcast networks by merging with one another or UPN or WB.
    64. We believe that the rule as it applies to UPN and WB may no 
longer be necessary in the public interest. Accordingly, we will adopt 
an NPRM seeking comment on modifying the dual-network rule. We 
recognize that program production and broadcast networking are 
complementary inputs with economic characteristics (e.g., large sunk 
costs and large transaction costs) that make vertical integration 
desirable. Since UPN and WB are nascent subsidiaries of large, well-
established program producers, a merger of ABC or CBS or Fox or NBC 
with UPN or WB may be characterized as a merger of an established 
broadcast network with an established program producer. We believe that 
allowing such mergers may permit realization of substantial economic 
efficiencies without undue harm to our diversity and competition goals. 
However, because we are concerned about the effect of such a merger on 
our diversity goals, that NPRM seeks comment on what, if any, 
safeguards should be imposed to assure a minimal reduction in diversity 
assuming we alter the rule in some fashion.
    65. We do not, however, believe that, at the present time, the dual 
network rule should be eliminated in its entirety. While there may be 
some economic efficiencies associated with mergers between established 
broadcast networks, we believe such mergers would raise significant 
competition and diversity concerns. As such, our forthcoming NPRM 
concerning the dual network rule will not propose elimination of that 
portion of the rule that prevents mergers between ABC, CBS, Fox, and 
NBC.

[[Page 43343]]

D. Daily Newspaper/Broadcast Cross-Ownership Rule

1. Regulatory History
    66. Section 73.3555(d) of the Commission's rules sets forth the 
newspaper/broadcast cross-ownership rule. That section states:

No license for an AM, FM or TV broadcast station shall be granted to 
any party (including all parties under common control) if such party 
directly or indirectly owns, operates or controls a daily newspaper 
and the grant of such license will result in: (1) The predicted or 
measured 2 mV/m contour of an AM station, computed in accordance 
with Sec. 73.183 or Sec. 73.186, encompassing the entire community 
in which such newspaper is published; or (2) The predicted 1 mV/m 
contour for an FM station, computed in accordance with Sec. 73.313, 
encompassing the entire community in which such newspaper is 
published; or (3) The Grade A contour of a TV station, computed in 
accordance with Sec. 73.684, encompassing the entire community in 
which such newspaper is published.

    67. The Commission adopted the newspaper/broadcast cross-ownership 
rule in 1975. Like all of the Commission's cross-ownership and multiple 
ownership rules in the broadcast context, the newspaper/broadcast 
cross-ownership rule rests on ``the twin goals of promoting diversity 
of viewpoints and economic competition.'' In adopting the rule, the 
Commission made clear that its diversity goal is paramount; sometimes 
competition must ``yield . . . to the even higher goals of diversity 
and the delivery of quality broadcasting service to the American 
people.'' The Commission explained that diversification of ownership 
promoted diversification of viewpoint in that ``it is unrealistic to 
expect true diversity from a commonly owned station-newspaper 
combination. The divergence of their viewpoints cannot be expected to 
be the same as if they were antagonistically run.'' Thus, the 
Commission determined that, as a general rule, granting a broadcast 
license to an entity in the same community in which the entity also 
publishes a newspaper would harm local diversity, and should be 
prohibited. The Commission did not foreclose, however, waiver requests 
under certain circumstances, although it has only granted three waiver 
requests on a permanent basis. (The circumstances are: (1) where there 
is an inability to dispose of an interest in order to conform to the 
rules; (2) where the only sale possible is at an artificially depressed 
price; (3) where separate ownership and operation of the newspaper and 
the station cannot be supported in the locality; and (4) where, for 
whatever reason, the purposes of the rule would be disserved by 
divestiture.)
    68. In 1978, the Supreme Court, in FCC v. National Citizens 
Committee for Broadcasting, upheld the Commission's rules and waiver 
policies in their entirety. The Supreme Court found the Commission's 
diversity goal an important public policy that furthered the First 
Amendment values of public access to diverse and antagonistic sources 
of information. Although the Supreme Court noted the arguments of 
opponents of the rule to the contrary, it stated that ``notwithstanding 
the inconclusiveness of the rulemaking record, the Commission acted 
rationally in finding that diversification of ownership would enhance 
the possibility of achieving greater diversity of viewpoints.'' The 
Supreme Court approvingly cited the lower court's observation that 
``[d]iversity and its effects are . . . elusive concepts, not easily 
defined let alone measured without making qualitative judgments 
objectionable on both policy and First Amendment grounds.'' It also 
confirmed the Commission's opinion in the Second Report and Order in 
Docket 18110 that ``it is unrealistic to expect true diversity from a 
commonly-owned station-newspaper combination. The divergency of their 
viewpoint cannot be expected to be the same as if they were 
antagonistically run.'' The Supreme Court noted the availability of 
waivers to underscore the reasonableness of the rule.
    69. For several years in the 1980s and early 1990s, Congress 
precluded the Commission from spending authorized funds ``to repeal, 
retroactively apply changes in, or to begin or continue a reexamination 
of the rules and the policies established to administer'' the 
newspaper/broadcast cross-ownership rule. In the Commission's 1994 
appropriation, however, Congress provided that the Commission could 
amend policies with respect to waivers of the newspaper/broadcast 
cross-ownership rule as it applied to radio. Subsequently, Congress 
dropped all restrictive language concerning the rule from the 
Commission's appropriations, and thus removed the statutory ban on the 
Commission's review of the rule itself.
    70. Although the Telecommunications Act of 1996 addresses various 
broadcast cross-ownership issues, it does not address newspaper/
broadcast cross-ownership issues; indeed, the legislative history of 
that Act reveals that the House of Representatives explicitly 
considered and rejected changes to the newspaper/broadcast cross-
ownership rule. Thus, while the Commission now has the authority and 
obligation to reevaluate the newspaper/broadcast cross-ownership rule, 
and its policy regarding waivers thereof, there is no explicit 
Congressional guidance on how that authority should be exercised. 
However, we believe that there may be certain circumstances in which 
the rule may not be necessary to achieve the rule's public interest 
benefits. We, therefore, will initiate a rulemaking proceeding to 
consider tailoring the rule accordingly.
    71. As a result of issues raised in the merger of The Walt Disney 
Company and Capital Cities/ABC, Inc., in September 1996 we issued an 
NOI soliciting comment on the possible revision of our waiver policy as 
to newspaper/radio combinations. In that NOI we asked whether we should 
revise our waiver policy in ways that might make it less stringent and/
or more objective, such as by adopting a voice count test. 
Subsequently, in the instant proceeding, we solicited comment on 
whether the overall newspaper/broadcast cross-ownership rule should be 
retained, modified or eliminated. (During the pendency of the 
newspaper/radio waiver policy proceeding, the Newspaper Association of 
America filed a petition for rulemaking to eliminate the newspaper/
broadcast cross-ownership rule. In our NOI in the instant proceeding, 
we stated that we would incorporate NAA's petition in this proceeding, 
and invited comment on it. Additionally, on August 23, 1999, NAA filed 
an Emergency Petition for Relief. This petition, like NAA's prior 
Petition for Rulemaking, argues in favor of repeal of the newspaper/
broadcast cross-ownership rule, although in this pleading NAA's 
arguments are based in part on the Commission's action in the TV 
Ownership Order. As with the pleadings filed by Fox and Viacom, this 
pleading will be treated as a late-filed comment and not considered in 
this proceeding. Rather, we will include these comments in the record 
of the 2000 biennial review.) In the biennial review NOI we expressed 
the view that permitting the owner of a broadcast TV or radio station 
to own a newspaper, or visa versa, could give a common owner the market 
power to unilaterally raise local radio, television, and/or newspaper 
advertising rates. However, we also expressed the belief that the 
broadcast media and newspapers were not likely to compete in the 
markets for delivered programming or program production and, 
accordingly, elimination of the rule would likely not have adverse 
competitive impact in these markets. We asked for comment

[[Page 43344]]

on alternatives to elimination of the rule and other possible economic 
effects from such elimination (e.g., benefits to the public from 
efficiencies to be realized from joint operations). Finally, we 
solicited comment on the effects elimination of the rule might have on 
our diversity concerns and specifically solicited comment on the 
arguments made in a Petition for Rulemaking filed by the Newspaper 
Association of America seeking repeal of the rule.
2. Comments
    72. Opponents of the rule claim that the Commission has never 
empirically demonstrated that the rule furthers its competition and 
diversity objectives. In any event, they assert, media markets are 
dramatically more competitive and diverse now than when the Commission 
adopted the rule, such that the rule is no longer in the public 
interest, and perhaps is even unconstitutional on First Amendment or 
other grounds.
    73. Proponents of the rule counter that many of the new media 
outlets, such as the Internet, OVS and DBS, do not add to viewpoint 
diversity on the local level. They also point out that new programs by 
the same broadcasters do not add to viewpoint diversity. Rule 
proponents also state that the rule does not prohibit all combinations, 
but rather only those in the same market; moreover, existing waiver 
policies allow combinations where a broadcaster or newspaper publisher 
is failing and cannot survive but for the combination.
3. Discussion
    74. We believe the newspaper/broadcast cross-ownership rule 
continues to serve the public interest because it furthers our 
important and substantial policy of viewpoint diversity. We therefore 
conclude that, as a general matter, the rule should be retained. 
However, we believe that there may be circumstances in which the rule 
may not be necessary to achieve its intended public interest benefits. 
We, therefore, will initiate a rulemaking proceeding to consider 
tailoring the rule accordingly.
    75. Effects on Diversity. While the media marketplace has changed 
since we adopted the rule, we find that the changes are insufficient to 
justify repeal and we will need to gather a more complete record to 
determine what modifications may be appropriate. First, many of the new 
media outlets do not yet appear to be substitutes for broadcast 
stations and newspapers on the local level for diversity purposes. As 
we have stated in the biennial review NOI and elsewhere, we are most 
concerned with viewpoint diversity at the local level. This is because 
``[m]onopolization on the means of mass communication in a locality 
assures the monopolist control of information received by the public 
and based upon which it makes elective, economic, and other choices.'' 
New outlets such as DBS and MMDS, however, typically do not provide 
locally originated programming. In addition, even though cable systems 
may originate local programming, they are required to dedicate PEG 
channels only if their franchise authorities require them to do so, and 
to provide leased access channels only as a function of their activated 
channels. There is no requirement that the material offered on cable 
access channels be locally originated or oriented. By contrast, as part 
of their public interest obligations, broadcasters are required to air 
programming that is responsive to issues facing their communities of 
license, and, although they are not required to do so, local daily 
newspapers typically cover local issues, endorse local candidates, and 
provide a platform for the presentation of local opinion. Thus, the 
fact remains that broadcast services, in particular broadcast 
television, and newspapers have been and continue to be the dominant 
sources of local news and public affairs information in any given 
market. The Commission has distinguished broadcast television from 
radio as having more visual impact and serving more people as a primary 
source of news. Almost 70% of American adults surveyed indicated that 
they use television as their primary source of news. Importantly, while 
the number of broadcast stations has increased in the past several 
years, the number of daily newspapers has decreased. On one hand, some 
commenters argue that this warrants the Commission allowing newspapers 
to combine with local broadcast stations in order to realize the 
economies of joint operation, helping them to preserve their newspaper. 
On the other hand, to the extent that this suggests that the survival 
of some newspapers may depend on their joint operation with local 
broadcast stations, we have a waiver standard that can accommodate such 
instances.
    76. Second, we note that not all of the new media in a given market 
are available to all consumers in the market to the same extent as 
broadcast services and newspapers. Broadcast radio and TV are available 
free of charge to anyone who makes an investment in receiving 
equipment, and much of the public have such equipment; for example, 
98.2% of Americans own a TV set. Similarly, newspapers are available to 
anyone for a nominal charge. DBS, MMDS, and the Internet, however, are 
available only to those who both purchase or rent equipment and, except 
in the case of the Internet where some Internet Service Providers offer 
Internet connections free of direct charge, subscribe to a service, the 
monthly fees for which services are typically several times the cost of 
a newspaper subscription. In addition, in the case of the Internet, the 
sunk cost of a computer and the software necessary to browse the 
Internet is typically several times that of a radio or TV.
    77. Third, although some grandfathered combinations report that 
efficiencies they have derived therefrom have enabled them to air more 
news and public affairs programming than their competitors such 
additional programming does not necessarily enhance our policy goal of 
viewpoint diversity if the additional programs all come from the same 
source. The Commission has previously explained that its cross-
ownership and multiple ownership rules encourage ``outlet'' and 
``source'' diversity as an indirect means to achieve viewpoint 
diversity:

The Commission has felt that without a diversity of outlets, there 
would be no real viewpoint diversity--if all programming passed 
through the same filter, the material and views presented to the 
public would not be diverse. Similarly, the Commission has felt that 
without diversity of sources, the variety of views would necessarily 
be circumscribed.

    78. Thus, as the Commission stated when it adopted the newspaper/
broadcast cross-ownership rule: ``it is unrealistic to expect true 
diversity from a commonly-owned newspaper combination. The divergence 
of their viewpoints cannot be expected to be the same as if they were 
antagonistically run.''
    79. We also emphasize that media markets are undergoing significant 
changes, occasioned by the Telecommunications Act of 1996 and our 
decision to relax other cross-ownership and multiple ownership rules 
and waiver policies. The Telecommunications Act directed the Commission 
to modify its radio ownership rules. Between the enactment of the 
Telecom Act and March 2000, the number of radio station owners declined 
by 22 percent from approximately 5,100 owners in March 1996, to about 
4,000 in March 2000. In addition, we have recently amended our ``TV 
duopoly'' and ``one-to-a-market'' rules and waiver policies and we 
propose other changes to still other broadcast ownership rules or 
policies as a result of this biennial review. The response of the 
market to these rule

[[Page 43345]]

changes will provide us concrete, empirical information about their 
impact on our public policy goals for use in our future biennial 
reviews. Therefore, the dominance of broadcast services and newspapers 
in providing local news and public affairs information, may suggest 
that a measured approach to modifying the newspaper/broadcast cross-
ownership rule is appropriate at this time.
    80. Effects on Competition. With respect to competition, we also 
emphasize that the record was not clear on several points. First, it 
was not clear that grandfathered combinations derived efficiencies only 
from co-located combinations. For example, Chronicle provided 
information that its combination aired more news and public affairs 
programming than its competitors in a given market, but the combination 
that produced these benefits included both co-located and non-co-
located broadcast stations and newspapers. The newspaper/broadcast 
cross-ownership rule only prohibits combinations in the same market. 
Second, it was not clear that the efficiencies grandfathered 
combinations derived could not be realized from non-attributable joint 
ventures. Managers of existing newspaper/broadcast combinations, as 
well as other commenters, report that the broadcast station and the 
newspaper keep separate news staffs in combination situations because 
the combination does not derive efficiencies from consolidation of such 
staff. Accordingly, it does not appear that mergers of newspapers and 
broadcast stations would produce such efficiencies. Third, it was not 
clear that the efficiencies of newspaper/broadcast combinations 
produced any meaningful benefits for advertisers, and therefore for 
viewers as consumers of the advertisers' goods. As indicated above, 
some commenters explain that grandfathered combinations have provided 
more news and public affairs programming, and one could extrapolate 
that this translates into more advertising and viewing options. There 
was no evidence, however, that any of these additional options 
translated into benefits for advertisers in the form of reduced rates, 
or corresponding benefit for viewers in the form of reduced prices for 
advertised products and services. Accordingly, we conclude that the 
newspaper/broadcast cross-ownership rule continues to provide important 
public interest benefits and that its elimination would not necessarily 
provide any offsetting benefits to competition.
    81. Notwithstanding our general conclusion that the rule should be 
retained, we recognize that there may be situations in which the rule 
may not be necessary to protect the public interest in diversity and 
competition. We wish to examine in greater detail such situations. 
There may be instances, for example, in which, given the size of the 
market and the size and type of the newspaper and broadcast outlet 
involved, sufficient diversity and competition would remain if a 
newspaper/broadcast combination were allowed. While the record contains 
several proposals for tailoring the rule to address this issue, we 
believe that a more complete record can and should be developed 
regarding the circumstances in which the rule may not be necessary to 
achieve its intended public interest benefits. We will examine whether 
the rule needs to be tailored to address contemporary market 
conditions. We will issue a notice of proposed rulemaking seeking 
comment on these and other potential modifications of our rule. While 
we generally believe that the newspaper/broadcast cross-ownership rule 
should be retained, this rulemaking will ensure that the rule is 
tailored to cover only those circumstances in which it is necessary to 
protect the public interest.
    82. Additional Matter. In 1996, the Tribune Company, which 
publishes a newspaper in Fort Lauderdale, Florida, agreed to merge with 
Renaissance Communications Corporation, which owned six television 
stations including one in Miami, Florida. Although Tribune sought a 
permanent waiver of the newspaper/broadcast cross-ownership rule to 
permit this combination, the Commission granted the license transfer 
subject to the condition that Tribune divest itself of either the Ft. 
Lauderdale newspaper or the Miami television station within one year, 
expiring March 22, 1998. On March 6, 1998, Commission staff granted an 
extension of Tribune's temporary waiver subject to the review of the 
newspaper/broadcast cross-ownership in the instant proceeding and 
required that it come into compliance within six months of the 
completion of the 1998 biennial review (unless, of course, Tribune's 
combination was in compliance with any new cross-ownership rule adopted 
as a consequence of that review). We explained that an extension was 
appropriate because it would be unduly harsh for Tribune not to receive 
further interim relief given the confusion that may have resulted from 
the Commission's initial waiver decision with respect to its policy on 
interim waivers pending rulemaking. We also stated that an extension 
would not so compromise our diversity and competition interests as to 
outweigh the substantial equitable considerations favoring the grant. 
Given our decision here to issue an NPRM seeking comment on possible 
modifications of the newspaper/broadcast cross-ownership rule, and the 
unusual circumstances that led to the prior extension of Tribune's 
waiver, including the withdrawal of the waiver opponent's opposition to 
the joint operation as long as Tribune continues to operate the 
newspaper and television station separately and the fact that we have 
found the joint operation does not so compromise our diversity and 
competition interests as to outweigh the substantial equitable 
considerations favoring the grant of an interim waiver, we will extend 
that temporary waiver, under the same terms and conditions now 
applicable, until the completion of the rulemaking.

E. Cable/Television Cross-Ownership Rule

1. Regulatory History
    83. Section 76.501(a) of the Commission's rules sets forth the 
``cable/TV cross-ownership rule.'' That section states:

No cable television system (including all parties under common 
control) shall carry the signal of any television broadcast station 
if such system directly or indirectly owns, operates, controls, or 
has an interest in a TV broadcast station whose predicted Grade B 
contour . . . overlaps in whole or in part the service area of such 
system (i.e., the area within which the system is serving 
subscribers).

The Commission adopted the cable/TV cross-ownership rule in 1970. In 
doing so, the Commission noted its concerns about concentration in the 
broadcast industry, and stated that the rule would further the 
Commission's policy favoring diversity of control over local mass 
communications media, and thereby lead to diverse sources of 
programming. The Commission noted that it wished to avoid over-
concentration of media control. On reconsideration, the Commission 
reiterated that its ``adoption of these provisions--designed to foster 
diversification of control of the channels of mass communication--was 
guided by two principal goals, both of which have long been established 
as basic legislative policies. One of these goals is increased 
competition in the economic marketplace; the other is increased 
competition in the marketplace of ideas.''
    84. Congress codified and then repealed a statutory prohibition on

[[Page 43346]]

cable/TV cross-ownership. On October 30, 1984, the Cable Communications 
Policy Act of 1984 became law. Section 613(a)(1) of the Cable Act of 
1984 codified the cable/TV cross-ownership rule. Section 202(i) of the 
Telecommunications Act of 1996, however, eliminated section 613(a)(1) 
of the Cable Act of 1984, thereby ending the statutory bar to cable/TV 
cross-ownership. In eliminating the bar, however, Congress stated: 
``The conferees do not intend that this repeal of the statutory 
prohibition should prejudge the outcome of any review by the Commission 
of its rules.'' The instant proceeding is the first one in which the 
Commission has reviewed the rule since its adoption.
    85. In the Biennial Review NOI we solicited comment on the cable/TV 
cross-ownership rule. Specifically we asked for comment on the possible 
effects that repeal or relaxation of the rule might have on various 
markets, including the market for delivered programming, on the 
appropriate scope of the product and geographic advertising markets in 
which cable and broadcast television compete, and on whether cable/
broadcast television combinations could exercise monopoly power in the 
program production markets. We defined this power in this context as 
the ability of the cable/television combination to artificially 
restrict the price paid for programming. Additionally, we sought 
comment on the impact on diversity of both the increased number of 
video outlets and allowing cable/television cross-ownership.
2. Comments
    86. Twelve parties commented on the cable/TV cross-ownership rule; 
seven supported retention of the rule, and five supported repeal or 
modification. Opponents of the rule note that relevant markets are more 
competitive and diverse than when the Commission adopted the rule, and 
state that the rule no longer serves the public interest, and perhaps 
is even unconstitutional.
    87. Proponents of the rule claim that the rule continues to serve 
the public interest because cable is the dominant competitor in the 
multichannel video programming distribution market, and thus serves as 
a ``gatekeeper'' to the delivered programming market. Proponents also 
contend that a cable/TV combination could harm competition in the 
advertising market by discriminating in favor of its television station 
and cable programming services, manipulating carriage and channel 
positioning and offering joint advertising rates, realizing economies 
of scale, driving competitors out of the market and frustrating new 
entrants.
3. Discussion
    88. As explained more fully below, we agree with proponents of the 
rule that it continues to serve the public interest because it furthers 
our important public policies of fostering competition and viewpoint 
diversity. The cable/TV cross-ownership rule promotes competition and 
diversity and prevents unfair discrimination against competitors, 
including in forms not covered by existing law. We therefore retain the 
rule.
    89. Effects on Competition. We conclude that the rule continues to 
serve the public interest because it furthers our goal of competition 
in the delivered video programming market. This market includes an 
array of participants, such as operators or providers of broadcast 
television, cable systems, DBS, MMDS, OVS, SMATV, and possibly even the 
Internet and videocassettes for VCRs. Sixty-seven percent of American 
television households, however, subscribe to cable. In the context of 
discussing the status of competition in the market for the delivery of 
multichannel video programming, the Commission stated in its most 
recent Cable Competition Report that ``[t]he market for the delivery of 
video programming to households continues to be highly concentrated and 
characterized by substantial barriers to entry.'' Under these 
circumstances, we agree with proponents of the rule that cable, in many 
instances, functions as the ``gatekeeper'' to local markets for 
delivered video programming. As commenters point out, this status gives 
cable system operators both the incentive and the means to discriminate 
against their competitors with respect to such core issues as carriage 
and channel positioning as well as in areas not covered by statute or 
Commission rule such as joint advertising rates and promotions. As 
commenters also point out, a cable/TV combination would have even 
greater incentive and means to discriminate against others and in favor 
of its own broadcast affiliate in this fashion, and both the broadcast 
station and the cable system would stand to unfairly benefit.
    90. The record indicates that current carriage and channel position 
rules prevent some of the discrimination problems, but not all of them. 
For example, opponents of relaxing the rule note that current law would 
not prevent discrimination through joint advertising sales and rates 
practices and joint promotions unavailable to competitors. 
Additionally, although section 614(b)(6) of the Communications Act 
entitles a local commercial television station to be carried by a cable 
system on the same channel as it broadcasts over the air, Univision 
describes protracted disputes with a cable system in securing its ``on 
air'' channel, with one cable system shuffling Univision's channel 
position four times in four years. Univision also claims that a cable 
system abruptly changed the channel position of one of Univision's 
stations in order to provide that position to the cable system's own 
local news channel. Univision further claims that cable system 
operators sometimes otherwise delay carriage by denying that they 
receive an adequate signal from a station, which forces the broadcast 
station to divert resources away from obtaining quality programming and 
toward obtaining carriage and channel position. Other commenters also 
emphasize that cable systems can delete broadcasters from carriage 
through waiver, and that cable/TV combinations will be unlikely to 
offer retransmission consent agreements. Univision emphasizes that all 
of this anti-competitive behavior occurred in spite of the cable/TV 
cross-ownership rule, and claims that such behavior will only be 
exacerbated by cable/TV combinations that seek to favor their own 
broadcast affiliate over others.
    91. Although, as we noted in the NOI, DTV holds the potential to 
enable broadcasters to compete better with cable in the multichannel 
video programming distribution market, the reality is that DTV is now 
nascent. In addition, because of the advent of DTV, our DTV must-carry 
rules are the subject of a pending proceeding. Modification of the 
cable/TV cross-ownership rule at this time could frustrate and 
undermine the potential that DTV holds for broadcasters if, as 
suggested by ALTV, a cable/TV combination, in order to give its own 
broadcast station a competitive advantage, denied carriage to a 
competitor and inhibited its DTV roll-out. We believe that it is 
particularly important to ensure stability and a level playing field as 
the technology of DTV reaches the marketplace and competitive forces 
determine its fate in the marketplace. Cable/DTV competition may 
ultimately provide a basis for some modification of the cable/TV cross-
ownership rule, but we believe that time has not yet arrived.
    92. Effects on Diversity. We also conclude that the cable/TV cross-
ownership rule is necessary to further our goal of diversity at the 
local level. As we noted above, current media markets include a variety 
of

[[Page 43347]]

participants; as we also noted above in our discussion of the 
newspaper/broadcast cross-ownership rule, however, many new media do 
not contribute to diversity at the local level. Broadcasters contribute 
to local diversity through the fulfillment of their public interest 
obligations to air programming responsive to the issues facing their 
communities of license; cable contributes through PEG and leased access 
channels and to some degree through origination of local cable news 
channels. In the TV Further Ownership Notice, the Commission thus 
tentatively concluded that broadcast television and cable are to a 
certain extent substitutes for diversity purposes, but also stated:

[w]e tentatively see no reason to include in our diversity analysis 
the other electronic video media [beyond cable], such as MMDS, VCRs, 
and VDT, as substitutable for a broadcast television station. None 
of these has nearly the ubiquity of cable and most do not have the 
capability for local origination that cable has. All provide similar 
entertainment programming; however, our core concern with respect to 
diversity is news and public affairs programming especially with 
regard to local issues and events.

    93. More recently, we reaffirmed this view in the TV Ownership 
Order where we stated that many of these alternative video delivery 
systems ``are still establishing themselves in the marketplace and 
generally do not provide an independent source of local news and 
informational programming.'' While newspapers and radio contribute to 
local diversity, broadcast television and cable television are the only 
participants in the market for delivered news and public affairs video 
programming at the local level. The Commission has distinguished the 
influence of television from that of newspapers as being more 
immediate, and from that of both newspapers and radio as having more 
visual impact and serving more people as a primary source of news. The 
Commission has also noted that the public receives more news from 
television than from any other source; while broadcast television is 
the more dominant source of local news and public affairs programming, 
cable functions as the ``gatekeeper'' to broadcast television, as we 
have noted above. (In the TV Ownership Order we concluded that cable 
would not count as an independent local voice for the duopoly rule 
because there was an absence of factual data in the record indicating 
that cable is a substitute for broadcast television.) Cable/TV 
combinations thus would represent the consolidation of the only 
participants in the video market for local news and public affairs 
programming, and would therefore compromise diversity.
    94. Opponents of rule retention argue that cable does not control 
the content of its PEG channels and, therefore, contend that cable/TV 
combinations do not threaten diversity at the local level. However, PEG 
programming typically is not the cable programming that provides the 
closest substitute for broadcast local news and public affairs 
programming. The cable programming that is the closest substitute for 
such broadcast programming is originated by local cable systems. NCTA 
suggests that it is the efficiencies and synergies that could be 
derived from combining just this type of programming that makes the 
combinations desirable, and, in fact, contends that these efficiencies 
and synergies would enable combinations to produce more local news and 
public affairs programming, perhaps targeted at niche markets. Such 
cable/TV combinations, however, would erode the number of independent 
local news and public affairs voices in the market. As CME explains, 
``[e]ven if the common owner created a local cable news station, it 
would not be providing a diverse source of local news programming 
because of the common ownership.''
    95. The television industry has just begun adapting to the recent 
relaxation of our local television ownership rule. Further 
consolidation of local television broadcast stations will reduce the 
number of independent voices providing local news and public affairs 
programming. Prudence dictates that we monitor and ascertain the impact 
of these changes on diversity and competition before relaxing the 
cable/TV cross-ownership rule.

F. Experimental Broadcast Stations

1. Regulatory History
    96. The multiple ownership rule for experimental broadcast stations 
was initially adopted in 1946. It generally limited ownership to one 
station. An exception is allowed when a showing is made that the 
program of research requires the licensing of two or more separate 
stations. In 1963 this rule was redesignated as 47 CFR 74.134. The rule 
currently reads:

      Sec. 74.134  Multiple ownership. No persons (including all 
persons under common control) shall control, directly or indirectly, 
two or more experimental broadcast stations unless a showing is made 
that the program of research requires a licensing of two or more 
separate stations.
2. Comments
    97. Only one comment was filed. NAB recommends repeal of this rule 
stating that broadcast auxiliary facilities are facing regulatory 
change and dislocation and, accordingly, there is now ever greater need 
for responsible use of experimental stations to develop solutions to 
these problems. While supporting elimination of what it characterizes 
as ``this arbitrary restriction,'' it urges the Commission to ensure 
that such stations not endanger the interference-free service provided 
by other broadcasters.
3. Discussion
    98. The rules authorizing experimental broadcast facilities seek to 
encourage experimentation and innovation in the provision of broadcast 
service to the public. A license for an experimental broadcast station 
will be issued for the purposes of carrying on research and 
experimentation for the development and advancement of new broadcast 
technology, equipment, systems or services which are more extensive or 
require other modes of transmission than can be accomplished by using a 
licensed broadcast station under an experimental authorization (47 CFR 
74.102) Uses of experimental broadcast stations.). Most of the related 
rules are intended to prevent interference to existing services.
    99. Experimental broadcast licenses are also subject to a broad 
variety of operating and reporting requirements, as well as a 
requirement that prohibits their commercial use. The licensee of an 
experimental broadcast station may make no charges nor ask for any 
payment, directly or indirectly, for the production or transmission of 
any programming or information used for experimental broadcast purposes 
(47 CFR 74.182(b)). Nor may it transmit program material unless it is 
necessary to the experiments being conducted, and no regular program 
service may be broadcast unless specifically authorized (47 CFR 
74.182(a)). These commercial restrictions prevent entities from 
exploiting an experimental broadcast station for commercial purposes 
while functioning under the guise of an experimental authorization. The 
supplementary statement to be filed with an application for a 
construction permit (47 CFR 74.112), supplementary reports filed with 
an application for renewal of license (47 CFR 74.113), and the 
requirement to make a satisfactory showing of compliance with the 
general requirements of the Communications Act of 1934, as amended, to 
satisfy the licensing requirement (47 CFR 74.131),

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allow for the oversight necessary to protect the goals of competition 
and diversity.
    100. We find that elimination of the rule will have no adverse 
impact on our diversity and competition goals. Repeal of this multiple 
ownership rule would not affect the Commission's ability to ensure that 
experimental stations are used solely for their avowed purposes, which 
is separately covered under 47 CFR 74.102. Neither would it imply that 
any petitioner will necessarily be able to control multiple 
frequencies, since a license of an experimental broadcast station will 
not authorize the exclusive use of any frequency, under 47 CFR 74.131. 
The multiple ownership rule for experimental broadcast stations appears 
to have been originally adopted to limit the opportunities for the 
commercial use of experimental stations. The early history of the 
Federal Radio Commission and, later, the Federal Communications 
Commission with regard to commercial use of experimental stations 
demonstrates an ambivalence with regard to such use of these stations. 
The FRC initially permitted commercial use but, in 1933, prohibited any 
further commercial use of such stations. The FCC also initially 
prohibited their commercial use, then, in 1935, permitted some 
commercial use, and, still later (1936) again prohibited their 
commercial use. Rules for experimental stations adopted in the late 
1930s, were intended to prevent commercial operations from 
predominating and interfering with experimentation. Our current rules 
prohibit the licensee of an experimental broadcast station from making 
charges or asking for payment, directly or indirectly, for the 
production or transmission of any programming or information used for 
experimental broadcast purposes.
    101. We believe that the current requirement that such stations 
operate for research purposes and the proscriptions on the broadcast of 
a regular program service and the imposition of charges for the 
transmission of programming or information on experimental broadcast 
stations are sufficient to assure that, even absent the multiple 
ownership rule, licensees do not, under the guise of experimentation, 
obtain sufficient experimental stations to create, sub rosa, commercial 
broadcast services. These stations operate for research purposes and, 
thus, do not compete in the marketplace for programming or advertising 
and existing rules will provides safeguards against abuse in the 
absence of the experimental station multiple ownership rule. There 
existing no competitive bar to the elimination of the multiple 
ownership rule applicable to them, we believe that the multiple 
ownership rule governing experimental broadcast stations may no longer 
be in the public interest. We will issue an NPRM proposing elimination 
of the rule.

V. Constitutional Issues

    102. Commenters raised Constitutional arguments with respect to two 
of our rules. The newspaper/broadcast cross-ownership rule is objected 
to by several commenters on the grounds that it violates the First 
Amendment. Additionally, both that rule and the dual network rule are 
said to discriminate. In the case of the newspaper/broadcast cross-
ownership rule, the discrimination is alleged to be between newspaper 
owners and other media owners. The dual network rule is claimed to 
discriminate against broadcast networks as opposed to cable networks as 
it allows mergers between broadcast and cable networks but not between 
broadcast networks themselves.
    As an initial matter, our newspaper/broadcast cross-ownership rule 
has already been sustained by the Supreme Court. FCC v. National 
Citizens Committee for Broadcasting, 436 U.S. 775 (1978). Beyond that, 
it is well-established that a content-neutral regulation, such as the 
subject rule, will be sustained against claims that it violates the 
First Amendment if: (1) It advances important governmental interests 
unrelated to the suppression of free speech; and (2) does not burden 
substantially more speech than necessary to further those interests 
(the ``O'Brien test''). Turner II, 520 U.S. at 189, citing U.S. v. 
O'Brien, 391 U.S. 367, 377 (1968).
    As we noted previously, the Supreme Court has determined that the 
preservation of media diversity is a government interest that is not 
only important, but is of the highest order (Turner I, 512 U.S. at 663; 
Turner II, 520 U.S. at 190), and is unrelated to the suppression of 
free speech. Therefore, the rule meets the first prong of the O'Brien 
test. Even were one to conclude that it confines free speech of 
newspaper owners by limiting their ownership of co-located broadcast 
stations, that burden is the minimum necessary to accomplish the 
diversity goal. It does not prevent newspaper publishers from owning 
broadcast outlets. It does not prevent them from entering into joint 
venture agreements with broadcasters in their community. Rather, it 
simply precludes them from owning--and therefore having ultimate 
editorial control over--broadcast and newspaper outlets in the same 
community due to the impact of such common ownership on, especially, 
local viewpoint diversity. Accordingly, we believe that the newspaper/
broadcast cross-ownership rule, to the extent it burdens free speech at 
all, does so to the minimum extent necessary. It therefore passes the 
constitutional test for such rules.
    As to commenters' claims of discrimination, the Supreme Court has 
repeatedly held that ``a classification neither involving fundamental 
rights nor proceeding along suspect lines * * * cannot run afoul of the 
Equal Protection Clause if there is a rational relationship between 
disparity of treatment and some legitimate governmental purpose.'' 
Central State University v. American Association of University 
Professors, Central State University, (per curiam), 526 U.S. 124. 119 
S.Ct. 1162, 1163 (1999), citing Heller v. Doe, 509 U.S. 312, 319-321, 
(1993), FCC v. Beach Communications, Inc., 508 U.S. 307, 313-314 
(1993), Nordlinger v. Hahn, 505 U.S. 1, 11 (1992). We do not concede 
that a fundamental right is involved in the instant matter. It is well 
established that there is no unabridgeable First Amendment right to a 
broadcast license. See, e.g., FCC v. National Citizens Committee for 
Broadcasting, 436 U.S. 775, 798-802 (1978); Columbia Broadcasting 
System v. Democratic National Committee, 412 U.S. 94, 101 (1973); 
United States v. Weiner, 701 F.Supp. 14 (U.S.D.C. Mass., 1988). As we 
noted above, protecting media diversity has been determined by the 
Supreme Court to be a governmental interest of the ``highest order.'' 
We believe that the classifications inherent in both the newspaper/
broadcast and cable/television cross-ownership restrictions are, under 
current conditions, necessary to promote that governmental interest 
and, therefore, do not violate the rights of any party to equal 
protection of the law.

VI. Conclusion

    103. In this, the first of our biennial reviews of our broadcast 
ownership rules, we conclude that some regulations are no longer in the 
public interest in their current forms as a result of competition. 
These are: The dual network rule and the limitation on the multiple 
ownership of experimental broadcast stations. We will also adopt an 
NPRM to explore the manner in which we define radio markets and 
determine both the number of stations in a radio market and the number 
of radio stations owned by a party in such a market. We are, therefore, 
proposing to

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modify or eliminate these rules in NPRMs we will issue. We also 
conclude, however, that, for now, the other ownership rules considered 
in this proceeding warrant retention. We will, of course, revisit our 
ownership rules biennially, as directed by the 1996 Act. Our future 
biennial reviews will be informed by the impact of the substantial 
changes we made to our television ``duopoly'' and ``one-to-a-market'' 
rules this past August.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.
[FR Doc. 00-17670 Filed 7-12-00; 8:45 am]
BILLING CODE 6712-01-U