[Federal Register Volume 66, Number 238 (Tuesday, December 11, 2001)]
[Proposed Rules]
[Pages 63986-63997]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-30526]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 73

[MM Docket No. 01-317 and 00-244; FCC 01-329]
RIN 4217


Rules and Policies Concerning Multiple Ownership of Radio 
Broadcast Stations in Local Markets, and Definition of Radio Markets

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: This document proposes changes to local ownership rules and 
policies concerning multiple ownership of radio broadcasting stations. 
The Commission examines the effect our current rules has had on the 
public and seeks comment to better serve our communities. This action 
is intended to consider possible changes to our current local market 
radio ownership rules and policies in accordance with the Commissions 
Telecommunications Act of 1996.

DATES: Comments are due February 11, 2002; Reply comments are due March 
11, 2002.

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

FOR FURTHER INFORMATION CONTACT: Joshi Nandan, Office of General 
Counsel, (202) 418-1755.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Notice of Proposed 
Rule Making (``NPRM'') in MM Docket No. 01-317, and Docket No. 00-244; 
FCC 01-329, adopted November 8, 2001, and released November 9, 2001. 
The complete text of this NPRM is available for inspection and copying 
during normal business hours in the FCC Reference Center, Room CY-A257, 
445 12th Street, S.W., Washington, D.C. and may also be purchased from 
the Commission's copy contractor, Qualex International, Portals II, 445 
12th Street SW, Room CY-B-402, Washington, DC 20554, telephone (202) 
863-2893, facsimile (202) 863-2898, or via email [email protected]. 
This document is also available in alternative formats (computer 
diskette, large print, audio cassette, and Braille). Persons who need 
documents in such formats may contact Martha Contee at (202) 4810-0260, 
TTY (202) 418-2555, or [email protected]. The NPRM can be found on the 
Internet at the Commission's website: http://www.fcc.gov.

I. Introduction

    1. In accordance with sections 309(a) and 310(d) of the 
Communications Act of 1934 (``the 1934 Act''), the Commission issues 
new radio broadcast licenses and approves the assignment and transfer 
of those licenses only when those actions are consistent with the 
public interest, convenience, and necessity. Pursuant to its public 
interest authority, the Commission historically has sought to promote 
diversity and competition in broadcasting by limiting by rule the 
number of radio stations a single party could own or acquire in a local 
market. In section 202(b) of the Telecommunications Act of 1996 (``the 
1996 Act''), Congress directed the Commission to revise its local radio 
ownership rule to relax the numerical station limits in the ownership 
rules. In the almost six years since the Commission implemented this 
congressional directive, the local radio market has been significantly 
transformed as many communities throughout the country have experienced 
increased consolidation of radio station ownership. In this proceeding, 
we seek to examine the effect that this consolidation has had on the 
public and to consider possible changes to our local radio ownership 
rules and policies to reflect the current radio marketplace.

II. Background

    2. To guide our evaluation of the regulatory policies that we 
should adopt in light of the current radio marketplace, we review the 
background of the local radio ownership rule and the traditional 
interests that the rule was intended to advance.

A. Rules and Policies before 1992

    3. The Commission first limited local radio ownership in 1938, when 
it denied an application for a new AM station on the ground that the 
parties that controlled the applicant also controlled another AM 
station in the same community. The Commission found that the commonly 
owned, same service stations would not compete with each other and that 
granting the application could preclude a competitive station from 
entering the market. Accordingly, ``to assure a substantial equality of 
service to all interests in a community'' and ``to assure 
diversification of service and advancements in quality and 
effectiveness of service,'' the Commission held that it would allow 
commonly owned ``duplicate facilities'' only where it would fulfill a 
community need that otherwise could not be fulfilled. Based on this 
policy, the Commission found that the ``public convenience, interest or 
necessity'' would not be served by grant of the application.
    4. In the early 1940s, this policy was codified in the Commission's 
rules. AM licensees were prohibited from owning another AM station that 
would provide ``primary service'' to a ``substantial portion'' of the 
``primary service area'' of a commonly owned AM station, except where 
the public interest would be served by multiple ownership. FM licensees 
were prohibited from owning another FM station that served 
``substantially the same service area.'' Between 1940 and 1964, the 
Commission determined on a case-by-case basis whether two commonly 
owned, same service radio stations served substantially the same area.
    5. In 1964, the Commission replaced its case-by-case analysis with 
a ``fixed standard'' consisting of a contour-based test that looked 
solely to the overlap of the radio stations' signals. The new rule 
prohibited common ownership of same service stations when any overlap 
of contours occurred, not just the situation where there was a 
``substantial'' overlap. The Commission explained that the purpose of 
the multiple ownership rules was ``to promote maximum diversification 
of program and service viewpoints and to prevent undue concentration of 
economic power contrary to the public interest.'' The Commission found 
that the local radio ownership rule in particular was based on two 
principles: first, that ``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;'' and second, that ``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 cited, as support for the local 
ownership limits, the principle that 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.''
    6. In the early 1970s, the Commission briefly restricted local 
radio ownership further by prohibiting, with certain

[[Page 63987]]

exceptions, common ownership of different service broadcast stations in 
the same market. These limits were designed to advance diversity by 
maximizing the number of independent owners of broadcast media in a 
market, and the Commission rejected arguments that common ownership of 
local broadcast stations would enhance the ability of station owners to 
provide better quality, more responsive programming. The Commission 
also found that common ownership of local broadcast stations could 
``lessen the degree of competition for advertising among the 
alternative media'' and that common owners could ``use practices [such 
as special discounts] which exploit [their] advantage over the single 
station owner.'' On reconsideration, however, the Commission relaxed 
its new ownership restrictions to allow again, in all circumstances, a 
party to hold a single AM-FM combination.
    7. In 1989, the Commission relaxed certain technical aspects of the 
contour overlap test, which decreased the likelihood of contour overlap 
between closely located stations and thereby increased the ability of a 
single party to own those stations. In making this change, the 
Commission determined that ownership diversity was not an end in 
itself, but a means of ``promoting diversity of program sources and 
viewpoints.'' The Commission determined that its rule change would not 
adversely affect programming and viewpoint diversity because the number 
of media outlets had increased since the contour overlap test was 
developed in 1964 and because the efficiencies that common ownership 
would generate could lead to programming benefits. The Commission also 
cited the increase in media outlets and the competition that radio 
stations faced in the advertising market from television stations, 
cable systems, and newspapers to support its conclusion that relaxing 
the contour-based test would not harm competition.

B. The 1992 Radio Ownership Proceeding

    8. In a 1992 proceeding, the Commission found that increases in the 
number and types of media outlets warranted further relaxation of the 
rule. Citing greater numbers of radio and television stations and the 
growth of cable, particularly cable radio networks, the Commission 
determined that relaxing the local radio ownership rule would not harm 
diversity or competition. Specifically with respect to competition, the 
Commission found that the radio industry's share of the local 
advertising market, in which the Commission included television 
stations and cable systems, had remained flat. The Commission found 
that the inability of radio stations to realize the efficiencies 
arising from common ownership harmed diversity and competition by 
making it more difficult for radio stations to compete and to provide 
valuable programming services. Accordingly, the Commission decided to 
relax its ownership rules to permit greater consolidation of radio 
stations in the local market.
    9. The Commission initially adopted a tiered approach, similar to 
the approach that would be adopted in the 1996 Act. Under the 
Commission's framework, although common ownership of stations with 
overlapping signals technically remained prohibited, an exception was 
created to allow common ownership of a specified number of radio 
stations based on the number of radio stations in the market. To 
determine the number of stations that could be commonly owned, radio 
markets were divided into four tiers, and the maximum number of radio 
stations that a single party could own was 3 AM and 3 FM stations in 
the top tier, i.e., markets having 40 or more radio stations. In 
markets with more than 15 radio stations (the top 3 tiers), the 
numerical limits were also subject to an audience share cap of 25 
percent. Although the Commission recognized that the 25 percent limit 
was ``substantially more restrictive than ordinary antitrust concerns 
would mandate,'' the Commission ``decline[d] to base [the] common 
ownership restrictions solely on economic concentration 
considerations'' because the restrictions also were ``designed to 
protect and promote a diversity of voices--a concern distinct from 
antitrust objectives.'' Both the market size and the audience share 
were calculated based on the relevant Arbitron market. In adopting this 
framework, the Commission reserved the right to ``implement a full 
range of remedies'' where ``ownership levels in a particular market 
might threaten the public interest.''
    10. On reconsideration, the Commission again modified its local 
radio ownership rule. The rule still generally prohibited common 
ownership of overlapping stations, but the Commission revised the 
exception to allow common ownership of up to only 2 AM and 2 FM 
stations in all markets with 15 or more radio stations. In smaller 
markets, a single party could own up to 3 stations, of which no more 
than 2 could be in the same service. The Commission also replaced the 
audience share cap with a provision that, in markets with 15 or more 
radio stations, ``evidence that grant of any application will result in 
a combined audience share exceeding 25 percent will be considered prima 
facie inconsistent with the public interest.'' The Commission explained 
that this provision was designed to prevent ``excessive concentration'' 
even if the combination complied with the 2 AM-2 FM limit. The language 
of the rule indicated that the excessive concentration determination 
would be made under the public interest standard.
    11. The Commission also altered the market definition for 
calculating the numerical caps; instead of Arbitron markets, the 
Commission adopted a contour overlap market definition. To determine 
audience share, the Commission retained use of Arbitron markets, or, if 
Arbitron data was unavailable, the market created by the counties 
covered by the contours of the stations to be combined. In certain 
cases, the Commission permitted applicants to make alternative showings 
to demonstrate that the proposed combination would not lead to 
excessive concentration.

C. The 1996 Act

    12. In the 1996 Act, Congress directed the Commission to revise its 
local ownership rule. Specifically, section 202(b)(1) of the 1996 Act, 
entitled ``Local Radio Diversity--Applicable Caps,'' required the 
Commission to revise its local radio ownership rule to provide that:
    (a) In a radio market with 45 or more commercial radio stations, a 
party may own, operate, or control up to 8 commercial radio stations, 
not more than 5 of which are in the same service (AM or FM);
    (b) In a radio market with between 30 and 44 (inclusive) commercial 
radio stations, a party may own, operate, or control up to 7 commercial 
radio stations, not more than 4 of which are in the same service (AM or 
FM);
    (c) In a radio market with between 15 and 29 (inclusive) commercial 
radio stations, a party may own, operate, or control up to 6 commercial 
radio stations, not more than 4 of which are in the same service (AM or 
FM); and
    (d) In a radio market with 14 or fewer commercial radio stations, a 
party may own, operate, or control up to 5 commercial radio stations, 
not more than 3 of which are in the same service (AM or FM), except 
that a party may not own, operate, or control more than 50 percent of 
the stations in such market. The Conference Report provides little 
additional detail concerning section 202(b), stating merely that 
``[n]ew

[[Page 63988]]

paragraph NPRM 202](b) directs the Commission to further modify its 
rules with respect to the number of radio stations a party may own, 
operate or control in a local market.'' In particular, neither the 1996 
Act nor the legislative history elaborates on the intended interplay 
between section 202(b) and the public interest standard contained in 
sections 309(a) and 310(d) of the 1934 Act.
    13. In addition to section 202(b), Congress enacted section 202(h) 
in the 1996 Act. Section 202(h) directs the Commission to ``review its 
rules adopted pursuant to this section and all of its ownership rules 
biennially * * * and [to] determine whether any of such rules are 
necessary in the public interest as the result of competition.'' 
Section 202(h) further directs the Commission to ``repeal or modify'' 
any ownership rules that it finds to be ``no longer in the public 
interest.'' The legislative history provides little additional 
discussion concerning the implementation of section 202(h).

D. The Commission's Implementation of Section 202(b) and Subsequent 
Decisions

    14. The Commission responded to Congress's directive in section 
202(b) by issuing an order in March, 1996 replacing a portion of the 
local radio ownership rule, including both the numerical station limits 
and the presumption that an audience share of greater than 25% was 
prima facie inconsistent with the public interest, with the language 
set forth in section 202(b). The Commission found that prior notice and 
an opportunity for public comment were unnecessary because the ``rule 
changes [did] not involve discretionary action on the part of the 
Commission, [but] simply implement[ed] provisions of the Telecom Act 
that direct the Commission to revise its rules according to the 
specific terms set forth in the legislation.''
    15. In 1998, the Commission commenced a biennial review to examine 
whether the local radio ownership rule was ``necessary in the public 
interest as a result of competition (NOI, 63 FR 15353, March 31, 
1998).'' In its biennial review final report, the Commission concluded 
that the rule continued to serve the public interest. Although the 
Commission noted that consolidation had produced financial benefits for 
the radio broadcast industry, the Commission expressed concern that 
consolidation could be having an adverse affect on local advertising 
rates. The Commission also expressed concern that consolidation could 
reduce diversity of viewpoint and source diversity. Accordingly, the 
Commission decided to retain the local radio ownership rule without 
modification.
    16. In the 1998 biennial review proceeding, the Commission also 
decided to examine the method by which it defined the relevant 
geographic market and counted the number of commonly owned and 
independent commercial radio stations for purposes of applying the 
rule. The Commission expressed concern that its current method of 
defining radio markets might be achieving results that frustrate the 
Congress' intent and that, together with its method of counting 
stations in a market for various purposes, might be undermining 
legitimate expectations of broadcasters, advertisers and the public as 
to the size of the market and the number of stations in it. The 
Commission accordingly initiated a rulemaking proceeding in December 
2000 to examine possible revisions to its methodology for defining the 
market and counting the number of commonly owned and independent radio 
stations.
    17. The 1996 revisions to the local radio ownership rule enabled 
greater consolidation of radio station ownership at the local level, 
and, since 1996, thousands of assignment and transfer of control 
applications have been filed to effectuate this consolidation. Although 
most of these applications were granted summarily, the Commission in 
certain instances faced concerns regarding the competitive impact of 
proposed transactions. In response to these concerns, the Commission 
concluded in a written decision that it had ``an independent obligation 
[under the statute] to consider whether a proposed pattern of radio 
ownership that complies with the local radio ownership limits would 
otherwise have an adverse competitive effect in a particular local 
radio market and[,] thus, would be inconsistent with the public 
interest.'' In several written decisions since 1996, the Commission 
engaged in public interest analyses that considered the potential 
competitive impact of the proposed transaction.
    18. In addition to competitive analyses, in August 1998 the 
Commission began ``flagging'' public notices of radio station 
transactions that, based on an initial analysis by the staff, proposed 
a level of local radio concentration that implicated the Commission's 
public interest concern for maintaining diversity and competition. 
Under this policy, the Commission flagged proposed transactions that 
would result in one entity controlling 50% or more of the advertising 
revenues in the relevant Arbitron radio market or two entities 
controlling 70% or more of the advertising revenues in that market. 
Most of these flagged applications that proposed radio concentration 
levels that were consistent with Commission precedent were granted on 
delegated authority. A number of applications that remain pending 
propose concentration levels that would exceed the levels previously 
approved in Commission-level decisions.

III. Discussion

    19. We propose to undertake a comprehensive examination of our 
rules and policies concerning local radio ownership. The radio industry 
has undergone substantial changes since 1996, and we are concerned that 
our current policies on local radio ownership do not adequately reflect 
current industry conditions. Our framework for analyzing proposed radio 
combinations particularly has led to unfortunate delays that do not 
serve well the interests of the agency, the parties, or the public. Our 
goal in this proceeding is to develop a new framework that will be more 
responsive to current marketplace realities while continuing to address 
our core public interest concerns of promoting diversity and 
competition.
    20. We start with a review of the statutory framework from which we 
derive our regulatory authority and under which we implement our radio 
ownership policy. We next consider the traditional goals that have 
supported the local radio ownership rule--diversity and competition--
and possible ways to measure and promote those goals in the modern 
media environment. After discussion of these subjects, we lay out 
possible changes to our radio ownership rules and policies. Our goal 
here is to consider the public interest advantages and disadvantages of 
various potential rule and policy changes as well as questions 
surrounding their implementation. In the final substantive section of 
this NPRM, we adopt an interim policy to provide guidance on the 
processing of radio applications pending completion of this rulemaking.

A. Statutory Framework

    21. Before 1996, Commission regulation of local radio ownership was 
governed primarily by the statutory mandate of sections 309(a) and 
310(d) that the Commission regulate the granting and transfer of radio 
licenses consistent with the public interest, convenience, and 
necessity. This public interest authority has long been held to 
authorize regulations, such as the local radio ownership rule, that are 
designed

[[Page 63989]]

to promote the goals of diversity and competition.
    22. As a result of the 1996 Act, the broad public interest 
standards of Title III are no longer the sole congressional statement 
bearing on the question of local radio ownership. We also must consider 
the impact of section 202(b) and the rule changes it mandated. In 
deciding prior cases, the Commission expressed the view that the 
numerical limits mandated by section 202(b) were important tools for 
promoting our public interest concerns in local radio markets, but that 
competitive analyses were appropriate in particular cases where 
compliance with those limits did not fully address those concerns. 
Because that view developed out of decisions issued in specific cases, 
the Commission never received the benefit of public input that a 
rulemaking proceeding would have afforded. This proceeding will provide 
us with that opportunity. We propose alternative views on the interplay 
between section 202(b) and our public interest mandate. We seek comment 
on these views and invite comment on other possible interpretations of 
the relevant statutory provisions and the impact any such 
interpretation would have on our diversity and competition goals if 
adopted.
    23. Commenters should explain the relevance, if any, of section 
202(h)'s directive that the Commission review its ownership rules 
biennially to determine if they are no longer in the public interest as 
a result of competition. Aside from modifying or eliminating the local 
radio ownership rule if it is no longer in the public interest as a 
result of competition, are we permitted to revise or replace the 
current rule with another framework to address our public interest 
goals?
    24. Commenters also are encouraged to explain how their 
interpretation of the relevant statutory provisions comports with 
traditional principles of statutory construction and the specific rule 
of construction set forth in section 601(c)(1) of the 1996 Act.
    25. Numerical limits are definitive. One interpretation of the 
statutory framework is that Congress conclusively determined that the 
numerical limits specified in section 202(b) establish radio station 
concentration levels that are consistent with the public interest in 
diversity and competition.
    26. Numerical limits address diversity only. Another possible 
interpretation of the statutory framework is that section 202(b) 
addresses the diversity prong of our public interest analysis, while 
leaving competition concerns to be addressed by the general public 
interest standard.
    27. Numerical limits presumptively consistent with public interest. 
A third possible interpretation of the statutory framework is that 
section 202(b) established presumptively permissible levels of radio 
station ownership and that, therefore, the Commission should rely on 
section 202(b)'s numerical limits absent a specific reason to conclude 
that the rule is ineffective in addressing diversity or competition 
issues with respect to a particular proposed combination.

B. Promoting Diversity and Competition

    28. If we determine that section 202(b) permits us to exercise our 
public interest authority to promote diversity and competition in radio 
broadcasting, we seek to explore the contours of these public interest 
goals, which have been the touchstone of our rules and policies on 
local radio ownership. We undertake this analysis to guide us as we 
consider, in accordance with the statutory framework, revisions to 
those rules and policies to reflect the rapidly changing media 
marketplace. In that regard, we are especially interested in receiving 
comments that provide not only the theoretical justifications for 
adopting a particular regulatory framework, but also relevant empirical 
data on the effect that consolidation in the radio industry since 1996 
has had on diversity and competition in local markets.
1. Diversity
    29. Diversity is one of the guiding principles of the Commission's 
local radio ownership rule. This principle is intended to advance the 
values of the First Amendment, which, as the Supreme Court stated, 
``rests on the assumption that the widest possible dissemination of 
information from diverse and antagonistic sources is essential to the 
welfare of the public.''
    30. In this proceeding, we intend to consider how our rules and 
polices concerning local radio ownership affect our goal of promoting 
diversity. To do this, we first must define the types of diversity we 
seek to ensure. Viewpoint diversity ensures that the public has access 
to ``a wide range of diverse and antagonistic opinions and 
interpretations.'' Outlet diversity ensures that the public has access 
to multiple distribution channels (e.g., radio, broadcast television, 
and newspapers) from which it can access information and programming. 
Source diversity ensures that the public has access to information and 
programming from multiple content providers. We seek comment on which 
one or more of these three types of diversity should guide our public 
interest considerations. Are there other aspects of diversity that we 
should consider? Parties commenting on this issue should explain in 
detail how the public will be affected if we decide to emphasize one or 
more of these various aspects of diversity. We especially seek 
empirical data in support of parties' positions.
    31. We also seek comment on how we should measure the success or 
failure of our diversity goal, however that goal is defined. We seek 
comment on the advantages and disadvantages of measuring diversity by 
looking, in whole or in part, to the number of independent station 
owners. What other measures of diversity, quantitative or qualitative, 
should we consider, and what tools do we have that enable us to measure 
diversity with a reasonable degree of accuracy? Are audience 
demographics an appropriate measure of diversity? Is competition an 
appropriate proxy for diversity, such that the presence of a 
competitive local market will assuage our concerns about diversity? 
Should we take a radio owner's market share, audience share, or 
subscribership into account in measuring diversity, and if so, how? In 
considering the various potential ways to measure diversity, we also 
seek comment on how their use comports with the values and principles 
embodied in the First Amendment of the Constitution.
    32. In searching for ways to define and measure diversity, we are 
especially interested in the particular impact of our analysis on the 
radio broadcast industry and radio listeners. We seek comment on 
whether there are attributes of radio broadcasting that should lead us 
to define and measure diversity in radio differently from other media. 
Two attributes of radio broadcasting--its ability to reach mobile users 
and its audio-only programming--may give radio stations singular access 
to the public in certain situations, most notably when listeners are in 
their cars or at their offices or other places of employment. Are those 
or other attributes of radio broadcasting sufficiently unique that we 
should look at radio separately for diversity purposes, or do consumers 
consider other outlets as substitutes for radio? Are there other 
attributes we should consider, and how does any particular attribute 
affect how we define and measure diversity in conducting our public 
interest analysis?
    33. We also must consider the appropriate geographic area over 
which to measure diversity as it relates to radio broadcasting. The 
current local radio

[[Page 63990]]

ownership rule contemplates that diversity in radio will be measured at 
the local level. This appears to be an appropriate result if diversity 
analysis is restricted to radio since radio stations that do not serve 
the local community do not contribute to media diversity in that 
community. Would the appropriate geographic area change if we consider 
other media, in particular Internet-related media such as Internet 
radio, as significant contributors of diversity? Does the appropriate 
geographic area for measuring diversity differ based on the type of 
information or programming involved, for example, local news and sports 
versus nationwide entertainment programming? Even if some aspects of 
diversity are not local in nature, should we nonetheless evaluate 
diversity at the local level in light of the value we traditionally 
have placed on ``localism'' in the broadcasting industry? Should the 
appropriate geographic area for measuring diversity be coextensive with 
the relevant geographic market for competition purposes? We seek 
comment responding to these questions.
    34. We also seek comment on whether the level of diversity that the 
public enjoys varies among different demographic or income groups. Does 
this or other differences between broadcasting and other media reduce 
the level of diversity that certain demographic or income groups enjoy? 
What is the extent of any disparity in access to diversity, and how 
should we factor in that disparity in our diversity analysis? Parties 
commenting on this issue are encouraged to submit empirical data to 
support their positions.
    35. As we have found previously, the current media marketplace 
appears robust in terms of the aggregate number of media outlets. As of 
June 30, 2001, the Commission had licensed 12,932 radio stations, 1,678 
full power television stations, 2,396 low power TV stations, and 232 
Class A TV stations. Today, there are seven national commercial 
television broadcast networks. The nation was served in 2000 by 1,422 
daily newspapers with a total circulation of 55.8 million, and in 1996 
by 7,915 weekly newspapers with a total circulation of approximately 
81.6 million. As of June 2000, cable television systems served 67.4% of 
TV households, or 67.7 million people. These systems offered in the 
aggregate over 200 video programming services. Direct broadcast 
satellite (DBS) providers now serve nearly 13 million subscribers, or 
over 15% of all households served by multichannel video programming 
distributors (MVPDs), and other MVPDs serve another nearly 4 million 
subscribers. As of November 2000, 56% of Americans had access to the 
Internet from their homes. We accordingly seek comment on the 
significance of these figures and any other information about 
marketplace conditions that would inform our analysis.
    36. The Commission has had both local and national ownership limits 
for radio broadcast stations. Pursuant to the 1996 Act, the Commission 
eliminated the national ownership limit on radio stations, in addition 
to relaxing its local radio ownership rules. As a result, significant 
consolidation occurred in the national and local radio markets. At 
approximately the same time that the 1996 Act became law, there were 
approximately 5,100 owners of commercial radio stations nationwide, 
while now there are only approximately 3,800 owners, a decrease of 25%. 
In March 1996, an Arbitron metro market had an average of 13.5 owners; 
in March 2001, the average was 10.3, a decrease of 22%. Other media 
also appear to have undergone similar consolidation. For example, in 
1995 there were 543 entities nationwide that owned commercial TV 
stations, while today there are only 360. Does this consolidation in 
ownership offset the increases in media outlets? What is the relevance 
of this consolidation to our local radio ownership policies and to 
diversity in particular? Commenters are encouraged to submit empirical 
data on the impact of consolidation on diversity.
    37. In examining the impact of greater media outlets and increased 
media consolidation, we note that there is considerable debate 
concerning the relationship between consolidation and viewpoint and 
source diversity. The Commission has noted the contrary theory that 
``the greater the increase in concentration of ownership, the greater 
the opportunity for diversity of content.'' Under that theory, 
competing parties in a market have a commercial incentive to air 
``greatest common denominator'' programming, while a single party that 
owns all stations in a market has a commercial incentive to air more 
diverse programming to appeal to all substantial interests.
    38. We seek comment on these competing theories and on any relevant 
empirical analysis of these theories. Should commonly-owned media 
outlets be considered a single media ``voice'' in evaluating diversity? 
Does the answer depend on the type of programming involved, for 
example, entertainment programming versus news or public affairs 
programming, or on the type of media outlet involved? Does it make 
sense to treat increased media consolidation as contributing to 
diversity if the common owner exercises editorial discretion over news 
and programming? Even if some consolidation of media outlets does lead 
to greater diversity, is there a level of consolidation at which the 
maximum amount of diversity is achieved? How do we determine what that 
level is? In considering these questions, we are particularly 
interested in the actual experience of the radio industry. Has 
consolidation in local radio markets since 1996 lead to greater 
diversity? Commenters responding in the affirmative are encouraged to 
submit empirical data and analysis demonstrating both the increase in 
diversity and the causal link, as opposed to mere correlation, between 
the increase and greater consolidation in local markets. Commenters 
arguing that greater consolidation harms diversity also are encouraged 
to submit empirical data and analysis supporting their view. Evidence 
comparing the levels of diversity in local communities with different 
levels of radio concentration would be especially useful.
2. Competition
    39. Radio station groups compete with each other in two ways: they 
compete to attract listeners, and they compete to attract advertising 
dollars. These two forms of competition are interrelated since 
advertising revenue is used to finance the production of programming, 
which in turn helps attract listeners, which then enables radio 
stations to charge advertisers. Between 1992 and 1996, the local radio 
ownership rule included, along with numerical limits, a presumption 
that a combination that created a station group with a greater than 25% 
audience share resulted in ``excessive concentration'' that was prima 
facie inconsistent with the public interest. As consolidation in local 
radio markets increased as a result of the 1996 Act, the Commission 
began to examine in assignment and transfer cases the potential 
competitive effect of proposed transactions in the local radio 
advertising market. Because advertisers provide the financial support 
for programming on commercial stations and have an incentive to prefer 
programming with widespread appeal, the Commission has considered 
competition in advertising markets to enhance the welfare of consumers.
    40. As Americans increasingly are willing to pay for information 
and programming by subscribing to programming services, like satellite 
radio services, for example, it is incumbent on us to define more 
precisely the goals of our competition

[[Page 63991]]

analysis. Should we be interested in competition for listeners, 
competition for advertisers, or a combination of the two? With respect 
to advertising, does our authority to regulate the radio market justify 
our basing regulation on the level of competition in the radio 
advertising market? Are we interested in competition as a proxy for 
ensuring an appropriate level of diversity in a local community? If we 
conclude that section 202(b) definitively establishes the levels of 
radio station concentration that are consistent with our diversity 
interest, how would this affect the role of our competition analysis, 
if at all? Is one objective of competitive analysis to ensure a healthy 
radio advertising market so that radio stations not affiliated with 
larger station groups in a community will be able to attract sufficient 
advertising dollars to support their operations and their ability to 
provide valuable news and programming services to the public? Is one 
objective to protect radio advertisers from any anticompetitive pricing 
or conduct that could occur if a single party achieved market power or 
monopoly using the public airways? What precisely are the harms 
consumers suffer as advertising prices rise, and what empirical 
evidence of these harms is available? One of the objectives of our 
competition analysis must be to guide our biennial review examination. 
We seek comment on these objectives and on any other objectives that 
should guide the competition aspect of our public interest analysis.
    41. Competition analysis requires us to define the relevant product 
and geographic markets in which radio stations compete, as well as the 
market share of the participants within the relevant market, and then 
weigh the competitive benefits of consolidation (e.g., economies of 
scale and scope that may lead to lower costs and prices or superior 
products) against the harms (e.g., the exercise of market power or 
reduction in output). We seek information that would help us conduct 
our analysis.
    42. We seek comment on the relevant product market. If we look at 
advertising, does radio advertising constitute a separate market from 
other forms of media advertising? First, radio is exclusively sound-
based. Second, radio allows advertisers to focus narrowly on specific 
demographic groups (e.g., women age 18-49). Third, radio allows an 
advertiser to build repetition or frequency by advertising at a 
reasonable price. Fourth, the cost of producing a radio commercial is 
much lower than producing a television commercial. Fifth, radio allows 
for fast turnaround of advertising copy. Sixth, radio can reach people 
driving in their cars. We seek pertinent data that will help us 
determine the relevant product market.
    43. We also seek comment on the relevant geographic market. We 
tentatively conclude that the relevant geographic market is local in 
nature, but we seek comment on the precise parameters of that market. 
What would be the appropriate market if we focused on listenership 
rather than advertising? With respect to advertising, is there a 
distinct regional or national market we also should consider in our 
analysis? If so, what are the relative sizes, in terms of radio station 
revenue and media revenue, of those markets vis-a-vis each other and 
local advertising markets? Do some radio stations rely more on national 
or regional advertising than on local advertising, and, if so, what 
characteristics lead to that result?
    44. Under the Commission's current local radio ownership rule, the 
geographic market is defined based on a system of mutually overlapping 
signal contours, which makes the geographic market endogenous to a 
common owner's particular station holdings. Is this the appropriate 
basis for defining a relevant geographic market for purposes of a 
competition analysis? If so, why, and what are the benefits of this 
market definition? If not, what other geographic market definition 
should we use? Are Arbitron markets the relevant geographic market for 
purposes of our competition analysis? Can Arbitron radio markets be 
manipulated to make a particular market or transaction appear less 
troublesome. If so, how should we deal with this issue? If we adopt the 
Arbitron market as the relevant geographic market, how should we treat 
``below-the-line'' stations that Arbitron reports as having audience 
shares or reportable revenues in the relevant market? Commenters 
advocating use of the Arbitron market should propose a relevant 
geographic market definition for radio stations not located in an 
Arbitron radio market. We also seek comment on any other potential 
geographic market definitions we should consider.
    45. Once we define the relevant product and geographic markets, how 
should we measure the market share of those that compete in the market? 
The Commission has flagged proposed transactions based on market share. 
We seek comment on other sources of available data that we could use to 
determine market share and concentration levels. Although we have 
focused on advertising revenue and audience share as the principal 
potential measures of concentration, there may be other approaches we 
should consider.
    46. Although a large market share in itself does not demonstrate 
market power, market power may be inferred when a party's market share 
is protected by high barriers to entry. We seek comment on barriers to 
entry into the relevant product and geographic markets.
    47. Although we believe that entry by new stations is unlikely, we 
seek comment on whether the mere existence of other stations in the 
market negates market power, even where the current market shares of 
those stations are low. Should we consider the number of other stations 
in the market and their signal strength, either as an alternative to or 
in addition to market share? Is it easier to increase market share in 
the radio industry than it is in other industries? Or do market shares 
tend to remain static, with only small shifts in listening audiences? 
Further, does the amount of concentration in the market have an impact 
on the ability of stations to increase their market share? Is it easier 
for a station with a low audience share to increase its listenership in 
markets with low concentrations than it is in markets where one or two 
owners control a majority of the stations? What has been the experience 
of the radio industry since 1996?
    48. After identifying and defining key market characteristics, we 
next consider the economic benefits and harms of permitting greater 
horizontal consolidation of local radio stations under common 
ownership. What are the benefits of these combinations, not only to the 
radio stations, but also to advertisers, and the public? We seek 
information on the nature and scope of efficiencies combinations might 
realize, and the nature and magnitude of benefits that flow through to 
advertisers and ultimately to consumers. We seek evidence that 
horizontal radio combinations produce efficiencies that flow through to 
advertisers and consumers. What economic harms might radio station 
consolidation bring? We seek additional information on the nature and 
scope of the economic harms that radio station combinations might 
bring. Studies and other evidence showing that advertising rates for 
radio station combinations are significantly higher after a 
consolidation than before a consolidation would be particularly useful. 
We also seek comment on associated harm to consumers. For example, if 
the existence of market power would prevent any efficiencies that 
otherwise would arise out of consolidation from flowing to the

[[Page 63992]]

public, or would harm the incentive of radio stations to produce 
quality programming responsive to community tastes and needs, that may 
be a harm we should consider. Similarly, if a certain level of 
consolidation causes the market to ``tip'' such that independently 
owned radio stations could not obtain sufficient revenue to remain on 
the air or fulfill their public interest obligations, the public 
interest also may be harmed.
    49. We are also concerned about the possibility that coordinated 
behavior would increase as the number of independently owned 
competitors in a local market declines. Three factors could provide 
incentives for coordinated behavior in highly concentrated local radio 
markets: the ability to price discriminate, the ease of monitoring a 
collusive agreement, and the existence of barriers to entry. We seek 
comment on the relationship between radio concentration and coordinated 
behavior, and the adverse effects such behavior would have on listeners 
and advertisers.

C. Specific Case Studies

    50. To assist us in formulating our radio rules and policies, we 
seek not only theoretical arguments but specific interest. We examine 
in detail particular local markets that have empirical data on the 
effect that consolidation will have on the public undergone substantial 
consolidation since 1996. We seek data on the public interest harms, if 
any, that have been caused by this consolidation. Has the public in 
these markets suffered from an unacceptable reduction in diversity? 
Have advertising rates increased? What has been the financial impact on 
independently owned radio stations? We also seek data on the specific 
benefits that consolidation has produced in those markets. Have the 
listeners received better quality radio programming, or greater 
diversity? Have efficiencies produced more radio voices than would 
otherwise have been possible? Has news and local affairs programming 
improved? We seek information that addresses these questions and any 
other public interest factors that we should consider in this 
proceeding.
    51. Parties are encouraged to file information on any local market 
that they feel is relevant or helpful. In addition we would appreciate 
comments on three specific local markets that have experienced 
consolidation. The Arbitron metros that we seek information on are 
Syracuse, New York; Rockford, Illinois; and Florence, South Carolina.
    52. The Syracuse radio metro consists of three New York counties: 
Madison, Onondaga and Oswego. The population of the Syracuse metro is 
estimated to be 650,100. This metro is the 75th largest metropolitan 
area by population and ranks 67th in terms of radio advertising 
revenue. The three Syracuse counties generated $7.2 billion in retail 
sales in 2000. Local advertising accounts for approximately 73 percent 
of station revenues.
    53. The Rockford radio metro consists of two Illinois counties: 
Boone and Winnebago . The population of the Rockford metro is estimated 
to be 308,500. This metro is the 150th largest metropolitan area by 
population and ranks 139th in terms of radio advertising revenue. The 
three Rockford counties generated $3.9 billion in retail sales in 2000. 
Local advertising accounts for approximately 93 percent of station 
revenues.
    54. The Florence radio metro consists of two South Carolina 
counties: Darlington and Florence. The population of the Florence metro 
is estimated to be 192,400. This metro is the 204th largest 
metropolitan area by population and ranks 181st in terms of radio 
advertising revenue. The three Florence counties generated $2.4 billion 
in retail sales in 2000. Local advertising accounts for approximately 
80 percent of station revenues.

D. Options

    55. We explore the potential ways we could use the results of the 
preceding diversity and competition analyses to formulate a concrete 
framework for addressing proposed combinations of radio stations in 
local markets.
1. Bright-line Rules or Case-by-Case Analysis
    56. We first seek comment on the general advantages and 
disadvantages of relying on numerical limits or other bright-line rules 
to guide our public interest determination versus conducting a case-by-
case public interest analysis. We see several advantages to the use of 
bright-line rules rather than case-by-case analysis.
    57. We also see several advantages to conducting case-by-case 
analyses. A case-specific analysis, would allow the Commission to take 
into account the nuances of the particular case, and to adapt more 
readily to changing market (and other regulatory) conditions.
    58. We seek comment on the various trade-offs between bright-line 
rules and case-by-case analysis. We seek comment whether the 
characteristics of the radio industry make it more susceptible to 
bright line strictures or case-by-case review or proposed radio 
combinations. What are the common characteristics of various radio 
combinations, and what differences do they have that would be difficult 
to encapsulate in a rule? Are there other characteristics that weigh in 
favor of relying on either predetermined rules or case-specific review 
in conducting a public interest review of a proposed combination? Are 
diversity concerns more amenable to being encapsulated in a bright-line 
rule than competition concerns?
    59. We also seek comment on whether the advantages of both bright-
line rules and case-by-case analysis be obtained by other regulatory 
tools, such as presumptions, processing guidelines, and screens. To 
what extent has the 50/70 screen been helpful, and what are its 
disadvantages? If appropriate, we could adopt a combination of rules, 
fact-specific analysis, and other formal and informal regulatory tools. 
We seek comment on the appropriate regulatory ``mix'' that would 
provide the greatest benefit to the agency, the industry, and the 
public.
2. Implementation of Radio Rules and Policies
    60. We examine a number of possible frameworks that we could adopt 
to implement our policies on local radio ownership. We discuss several 
and seek comment on their advantages, disadvantages, and possible 
ramifications on our diversity and competition goals. We also invite 
suggestions for other possible frameworks that we should consider.
    61. Rely exclusively on current numerical limits. To the extent we 
have the authority under the statutory framework to consider public 
interest factors other than compliance with the numerical limits of the 
local radio ownership rule, should we nonetheless rely on those limits 
to address our competition and diversity concerns? We seek comment on 
the advantages and disadvantages of relying exclusively on numerical 
limits. If we decide to rely exclusively on numerical limits, should we 
change the market definition we use to apply the rule to reflect more 
accurately the relevant geographic market? We seek any additional 
comments that would be useful in light of the broader policy issues 
raised in this proceeding.
    62. Rely exclusively on modified rule. Another possibility we may 
consider is modifying the local radio ownership rule to revise the 
numerical limits or adopt a new framework entirely. We seek comment on 
whether our authority to tighten or loosen the numerical limits in the 
local radio ownership rule, or

[[Page 63993]]

otherwise to alter the rule, is limited by the statutory framework. To 
the extent we have the authority to make such changes, we seek comment 
on what changes we should make. Aside from revising the numerical 
limits, are there other standards we could adopt? For example, between 
1992 and 1996, the rule provided for consideration of excessive market 
concentration, which was presumed to exist if a proposed radio 
combination would have had an audience share exceeding 25% in the 
Arbitron market. Do we have the authority to adopt an audience share 
limit, and, if so, should we adopt a similar presumption or bright-line 
rule? Should such a limit replace or accompany a numerical limit? Would 
such a rule be beneficial in promoting diversity even if the relevant 
market is competitive, or would numerical limit best meet our concerns 
regarding diversity and a market share limit best meet our concerns 
regarding undue market power?
    63. Commenters who propose a market share limit should discuss the 
following issues: Should we examine audience share, share of the 
advertising revenue, or some other measure? If we adopt a presumption 
instead of a rule, what evidence would be sufficient to overcome the 
presumption? What percentage limit should we adopt, and why should we 
adopt it? For example, we could adopt limits that attempt to ensure the 
presence of at least three competitive firms. Commenters supporting 
this approach should explain how many firms should we seek to ensure 
remain in the market (counting all commonly controlled stations as one 
firm) and what maximum market share limit should we impose. Commenters 
should provide economic, other theoretical, and actual evidentiary 
support for such limits.
    64. Commenters proposing that we modify the local radio ownership 
rule to change the numerical limits or to include new standards or 
presumptions should also propose what action we should take with 
respect to existing combinations that would not comply with the revised 
rule? Should we require divestiture? Should we grandfather those 
station groupings? Should we permit assignment and transfer of 
potentially non-compliant station groups to third parties? What are the 
benefits and harms of adopting these various approaches?
    65. Case-by-case competition analysis. Rather than attempting to 
establish a bright-line rule that would address competition issues, we 
could examine the public interest concerns of any proposed radio 
combination on a case-by-case basis. We could adopt an entirely case-
by-case approach or conduct a case-by-case analysis within the context 
of specific rules or presumptions. We could limit our case-by-case 
approach to competition issues, while using a bright-line rule to 
protect diversity. We seek comment on these alternatives.
    66. To the extent, we are required to conduct a competition 
analysis of a proposed assignment or transfer control of a radio 
broadcast license, we nevertheless may have some latitude to consider 
the actions of the antitrust enforcement agencies.

E. Framework for Possible Case-by-Case Competitive Analysis

    67. We consider what the framework for a case-by-case competitive 
analysis should be if we decide to adopt that approach. We lay out 
certain possible frameworks and competitive factors we could take into 
account in evaluating a proposed radio station combination. We seek 
comment on these factors and on our framework generally.
1. General Framework
    68. In evaluating the competitive impact of a proposed license 
transfer, we could adopt the framework that we have used for assessing 
market power in other contexts, which is also embodied in the antitrust 
laws. We would first analyze each proposed radio combination by 
defining the relevant markets. Next, we would evaluate the effects of 
the transaction on competition in the relevant market. We seek comment 
on this approach.
    69. One alternative of the approach is to develop certain 
assumptions that would apply to all proposed radio station 
combinations. Earlier in this NPRM, we sought comment about the 
relevant product and geographic markets to which radio belongs, 
barriers to entry, and the benefits and costs of consolidation. We seek 
comment concerning the assumptions that we could consistently apply in 
evaluating applications proposing radio station combinations and the 
advantages or disadvantages of those assumptions. If we adopt certain 
assumptions, we propose that the party seeking to demonstrate that an 
assumption is not true in a particular case bears the burden of proof 
as to that fact. We seek comment on this proposal.
    70. Another possible alternative to the basic analytical framework 
is to examine not only whether a proposed transaction could lead to the 
exercise of market power, but to take the additional step of 
considering whether that market power would harm consumers, as opposed 
to advertisers, of radio broadcasting services. Are there certain 
situations in which the exercise of market power would not harm 
consumers? Are there situations in which consumers would affirmatively 
benefit if we permitted a certain degree of market power in the 
relevant market? For example, would permitting some degree of market 
power in smaller geographic markets generate more diverse or better 
quality programming for the people living in those markets? If so, how 
do we draw the line between acceptable levels of market power and 
unacceptable levels of control over local media, and what are the 
relevant considerations we should examine to help us determine on which 
side of the line a particular transaction falls? We seek comment on 
these issues.
2. Specific Factors
    71. We seek comment on the specific factors we should consider 
within our general framework. We seek comment on how we should evaluate 
these factors in the context of a particular case. In addition, are 
there other factors we should consider?
    72. We seek comment on how we should review applications proposing 
to assign or transfer control of existing station groups to a new 
owner.
    73. We invite comment on how to treat under our proposed guidelines 
claims that a station is failing. Highly concentrated radio markets 
often contain stations with small revenue share that are independent of 
the one or two largest radio groups.
    74. In our decision revising the television ownership rules, we 
adopted several criteria to evaluate whether a failing station showing 
would justify waiver of the television duopoly rule in a particular 
case. We stated that we would presume a waiver would serve the public 
interest if each of the following criteria were satisfied:
    (a) One of the merging stations has had low all-day audience share.
    (b) The financial condition of one of the merging stations is poor. 
A waiver is more likely to be granted where one or both of the stations 
has had a negative cash flow for the previous three years. We required 
the applicant to submit data, such as detailed income statements and 
balance sheets, to demonstrate this and stated that the Commission 
staff will assess the reasonableness of the applicant's showing by 
comparing data regarding the station's expenses to industry averages.
    (c) The transaction will produce public interest benefits. A waiver 
will be granted where the applicant

[[Page 63994]]

demonstrates that the tangible and verifiable benefits of the 
transaction outweigh any harm to competition and diversity. At the end 
of the stations' license terms, the owner of the combined stations must 
certify to the Commission that the public interest benefits of the 
transaction are being fulfilled, including a specific, factual showing 
of the program-related benefits that have accrued to the public. Cost 
savings or other efficiencies, standing alone, will not constitute a 
sufficient showing.
    (d) The in-market buyer is the only reasonably available candidate 
willing and able to acquire and operate the station; selling the 
station to an out-of-market buyer would result in an artificially 
depressed price. As with the showing required of failed station waiver 
applicants, one way to satisfy this fourth criterion is to provide an 
affidavit from an independent broker affirming that active and serious 
efforts have been made to sell the station, and that no reasonable 
offer from an entity outside the market has been received.
    We further provided that a combination formed as a result of a 
failing station waiver could be transferred only if the combination met 
the revised duopoly rule or the waiver standards (including the failing 
standard just described) at the time of the transfer.
    75. We invite comment as to whether to use a similar approach in 
our competitive analysis. Third, we seek comment on how we should 
analyze applications proposing the granting of a new license or the 
acquisition of an unbuilt facility or a ``dark'' station. Competitive 
analysis focusing on concentration in the advertising market or 
audience shares would be insufficient to analyze these transactions 
because new licenses, unbuilt stations, and dark stations generally 
will not have an associated radio advertising business or audience 
share. In the absence of this data, what should we consider in 
determining the effect of a proposed transaction on competition? And 
how should we weigh the relevant public interest benefits and harms?
3. Treatment of Brokerage and Sales Agreements
    76. Local Marketing Agreements and Time Brokerage Agreements. A 
local marketing agreement (LMA) and time brokerage agreement (TBA) is 
``a type of contract that generally involves the sale by a licensee of 
discrete blocks of time to a broker that then supplies the programming 
to fill that time and sells the commercial spot announcements to 
support the programming.'' As we consider whether and how to conduct 
case-by-case competitive analyses of radio transactions, we seek 
comment on the appropriate regulatory treatment of LMAs and TBAs.
    77. To the extent we decide to conduct a case-by-case analysis of 
proposed radio transactions, how should we evaluate LMAs or TBAs? 
Should we continue the practice of treating the merging parties as 
independent economic actors regardless of the economic realities of the 
relevant market? If we ignore economic realities, what purpose would 
our competitive analysis serve? On the other hand, if we treat the 
merging parties as a single economic unit because of a pre-existing LMA 
or TBA, what potential competitive harm would our analysis ever 
uncover? We could address this problem by requiring prior Commission 
approval of LMAs and TBAs, in some if not all circumstances. If so, 
what would those circumstances be? What are the costs and benefits of 
these various procedures? If we adopt new policies towards LMAs or 
TBAs, how should we apply those policies towards pre-existing 
agreements? We seek comment on these proposals and on any other 
proposals that we should consider with regard to the regulatory 
treatment of LMAs and TBAs?
    78. Joint Sales Agreement. Joint sales agreements (JSAs) involve 
primarily the sale of advertising time and not decisions concerning 
programming.
    79. We seek comment on the appropriate regulatory treatment of 
JSAs. Even if we adopt a bright line rule, JSAs would not be 
attributable to the sales agent. Should we reconsider this blanket 
exemption to attribution in light of the new local radio ownership 
policy we intend to adopt? If so, what should our new rule be? To the 
extent we decide to conduct a case-by-case analysis of proposed radio 
transactions, how should we evaluate JSAs? Should we distinguish 
between JSAs and LMAs or TBAs in a case-by-case review of proposed 
transactions or in other contexts? What are the reasons for and against 
affording similar treatment to all three types of agreements?

IV. Interim Policy

    80. We set forth in this section the interim policy that the 
Commission will apply to guide its actions on radio assignment and 
transfer of control applications pending a decision in this proceeding. 
We recognize that certain guidelines need to be established both to 
handle currently pending radio assignment and transfer applications and 
to address any future applications filed while this proceeding is 
pending. At the same time, we are mindful of the concern that our 
policy not expressly or implicitly prejudge, or be viewed as 
prejudging, our ultimate decision in this proceeding. In that regard, 
we believe that any fundamental changes we make to our policy and 
procedures governing radio station combinations should be the result of 
the record in this rulemaking proceeding, and should not be implemented 
as an interim measure. We believe that the interim policy we are 
adopting today strikes a fair balance that addresses our statutory 
responsibilities while providing guidance to applicants and the public 
on the process the Commission will use to resolve pending applications 
during this interim period.
    81. Consistent with our precedent and the principles, we will 
continue to examine the potential competitive effects of proposed radio 
station combinations, and, and to that end, we will continue to rely on 
the 50/70 screen to bring to our attention proposed radio transactions 
that may raise competitive concerns. While we are aware that the 
utility and appropriateness of 50/70 screen has been the subject of 
disagreement, we are concerned that adopting another screen or set of 
processing guidelines on an interim basis would create significant 
confusion and uncertainty to applicants and could be seen as prejudging 
the rulemaking proceeding.
    82. We will presume that an application that falls below the screen 
will not raise competition concerns, and the staff will not conduct a 
further competitive analysis of those proposed transactions absent the 
filing of a petition to deny raising competitive issues. We establish 
the following generic categories of information that may be requested 
or received by the staff in conducting its competitive analysis:
    (a) Product market definition. During the interim period, the 
Commission will presume that the relevant product market is radio 
advertising. The staff nevertheless should consider evidence from the 
parties that the relevant product market in a specific case includes 
other forms of media advertising or should be based on listenership 
rather than advertising.
    (b) Geographic market definition. During the interim period, the 
Commission will presume that the relevant geographic market is the 
Arbitron metro market. The staff nevertheless may ask for or receive 
evidence from the parties that the relevant geographic market in a 
specific case is larger, smaller, or otherwise

[[Page 63995]]

different from the Arbitron metro market.
    (c) Market participants. The staff may ask for or receive evidence 
concerning the firms that participate in the relevant product and 
geographic markets. The list of market participants should include 
firms that could enter the relevant product and geographic markets 
within one year without expending significant sunk costs of entry and 
exit in response to a small but significant and non-transitory increase 
in price. If the presumptive product and geographic market definitions 
are used, the list of market participants should include operating 
commercial radio stations and any ``dark'' station that might be 
expected to become operational in response to such an increase in 
price.
    (d) Market shares and market concentration. The staff may ask for 
or receive evidence concerning the market shares of the market 
participants. If the presumptive product and geographic market 
definitions are used, the radio advertising revenues reported in the 
BIA Master Access Database will be presumed to be an accurate 
reflection of actual market shares, absent persuasive evidence that 
another measure of market share should be used.
    (e) Barriers to entry. The staff may ask for or receive evidence 
concerning the barriers to entry into the relevant product and 
geographic markets, including the timeliness, likelihood, and 
sufficiency of entry to counter any potential market power.
    (f) Potential adverse competitive effects. The staff may ask for or 
receive evidence concerning the potential adverse competitive effects 
of a proposed transaction. Relevant evidence may include direct proof 
of adverse competitive effects or facts that demonstrate that 
structural conditions (e.g., a high market share and significant 
barriers to entry) will facilitate the exercise of market power.
    (g) Efficiencies and other public interest benefits. The staff may 
ask for or receive evidence concerning any economic efficiencies that 
the proposed transaction would produce. In addition, the staff may ask 
for or receive evidence concerning other public interest benefits the 
proposed transaction would provide listeners or advertisers, such as 
improvements in the quality, scope, and quantity of community 
responsive programming, improved community service, and the furtherance 
of localism. Parties asserting that a proposed transaction will produce 
efficiencies or other public interest benefits should show both how the 
transaction will produce those benefits and how those benefits will 
flow through to listeners or advertisers.
    83. After completing its preliminary competitive analysis of the 
proposed transaction, the staff may grant any application that is 
consistent with the public interest and that may be granted on 
delegated authority. For applications that the staff cannot grant, we 
establish the following timetable to ensure that they are resolved 
expeditiously. For each application that, as of the date of adoption of 
this NPRM, has been pending for over one year, within 90 days of the 
date of adoption of this NPRM, the staff will distribute to the 
Commission a draft order recommending that the application either be 
granted or designated for hearing. For all other currently pending 
applications, within six months of the date of adoption of this NPRM, 
the staff will distribute to the Commission a draft order recommending 
that the application either be granted or designated for hearing. For 
all applications filed after the date of adoption of this NPRM, within 
six months of the date after such application is filed, the staff will 
distribute to the Commission a draft order recommending that such 
application either be granted or be designated for hearing. In all of 
these cases, the draft order shall include the relevant facts of the 
proposed transaction, and the staff's competitive analysis and 
recommendation, including any issues to be resolved at hearing (if the 
staff recommends a hearing). After receiving the draft order, the 
Commission shall then decide whether the relevant factors support grant 
(with or without conditions) of an application or whether the 
application should be designated for hearing.
    84. For applications that the Commission decides to designate for 
hearing, the hearing designation order shall afford the applicants with 
the opportunity to elect instead to have their applications held 
pending completion of this rulemaking proceeding and having the outcome 
of this proceeding apply to their application. We provide this election 
because we believe it is appropriate to provide applicants with the 
ability to have their applications evaluated under our permanent radio 
rules and policies rather than our interim policy. We caution, however, 
that our provision of this election will not in any way prejudice or 
limit the range of actions we could take in processing pending 
applications, including designation for hearing, upon completion of 
this rulemaking.
    85. The interim policy will apply to currently pending applications 
to assign or transfer control of radio broadcast stations. This interim 
policy also will apply to radio assignment or transfer applications 
filed on or after the date we adopt this NPRM until we adopt a decision 
in this proceeding.

V. Administrative Matters

    86. Comments and Reply Comments. Pursuant to sections 1.415 and 
1.419 of the Commission's rules, interested parties may file comments 
on or before 60 days after publication of the item in the Federal 
Register, and reply comments on or before 90 days after publication of 
the item in the Federal Register. Comments may be filed using the 
Commission's Electronic Comment Filing System (ECFS) or by filing paper 
copies. See Electronic Filing of Documents in Rulemaking Proceedings, 
63 FR 24121, May 1, 1998.
    87. Comments filed through the ECFS can be sent as an electronic 
file via the Internet to http://www.fcc.gov/e-file/ecfs.html. 
Generally, only one copy of an electronic submission must be filed. If 
multiple docket or rulemaking numbers appear in the caption of this 
proceeding, however, commenters must transmit one electronic copy of 
the comments to each docket or rulemaking number referenced in the 
caption. In completing the transmittal screen, commenters should 
include their full name, Postal Service mailing address, and the 
applicable docket or rulemaking number. Parties may also submit an 
electronic comment by Internet e-mail. To get filing instructions for 
e-mail comments, commenters should send an e-mail to [email protected], and 
should include the following words in the body of the message, ``get 
form your e-mail address.'' A sample form and directions will be sent 
in reply. Parties who choose to file by paper must file an original and 
four copies of each filing. If more than one docket or rulemaking 
number appear in the caption of this proceeding, commenters must submit 
two additional copies for each additional docket or rulemaking number. 
All filings must be sent to the Commission's Secretary, Magalie Roman 
Salas, Office of the Secretary, Federal Communications Commission, 445 
Twelfth Street, S.W., TW-A325, Washington, D.C. 20554.
    88. Parties who choose to file by paper should also submit their 
comments on diskette. These diskettes should be submitted to: Wanda 
Hardy, 445 Twelfth Street, S.W., Room, 2-C207, Washington, D.C. 20554. 
Such a submission should be on a 3.5 inch diskette formatted in an IBM 
compatible format using WordPerfect 5.1 for

[[Page 63996]]

Windows or compatible software. The diskette should be accompanied by a 
cover letter and should be submitted in ``read only'' mode. The 
diskette should be clearly labeled with the commenter's name, 
proceeding (including the docket number in this case, MM Docket Nos. 
01-317, 00-244, type of pleading (comment or reply comment), date of 
submission, and the name of the electronic file on the diskette. The 
label should also include the following phrase ``Disk Copy--Not an 
Original.'' Each diskette should contain only one party's pleadings, 
preferably in a single electronic file. In addition, commenters must 
send diskette copies to the Commission's copy contractor, Qualex 
International, Portals II, 445 12th Street, S.W., Room CY-B402, 
Washington, DC 20554.
    89. Comments and reply comments will be available for public 
inspection during regular business hours in the FCC Reference Center, 
Federal Communications Commission, 445 Twelfth Street, S.W., CY-A257, 
Washington, D.C. 20554. Persons with disabilities who need assistance 
in the FCC Reference Center may contact Bill Cline at (202) 418-0270, 
(202) 418-2555 TTY, or [email protected]. Comments and reply comments also 
will be available electronically at the Commission's Disabilities 
Issues Task Force web site: www.fcc.gov/dtf. Comments and reply 
comments are available electronically in ASCII text, Word 97, and Adobe 
Acrobat.
    90. Ex Parte Rules. This is a permit-but-disclose notice and 
comment proceeding. Ex parte presentations are permitted except during 
the Sunshine Agenda period, provided they are disclosed as provided in 
the Commission's Rules. See generally sections 1.1202, 1.1203, and 
1.1206(a).
    91. Initial Regulatory Flexibility Analysis (``IRFA''). As required 
by section 603 of the Regulatory Flexibility Act (``RFA''), the 
Commission has prepared an IRFA of the possible significant economic 
impact on small entities of the proposals contained in this NPRM. 
Written public comments are requested on the IRFA. In order to fulfill 
the mandate of the Contract with America Advancement Act of 1996 
regarding the Final Regulatory Flexibility Analysis, we ask a number of 
questions in our IRFA regarding the prevalence of small businesses in 
the radio broadcasting industry. Comments on the IRFA must be filed in 
accordance with the same filing deadlines as comments on the NPRM, but 
they must have a distinct heading designating them as responses to the 
IRFA. The Secretary shall send a copy of this NPRM, including the IRFA, 
to the Chief Counsel for Advocacy of the Small Business Administration 
(``SBA'') in accordance with section 603(a) of the RFA, Public Law 96-
354, 94 Stat. 1164, 5 U.S.C. 601 et seq. (1981), as amended.
    92. Authority. This NPRM is issued pursuant to authority contained 
in sections 4(i), 303, and 307 of the Communications Act of 1934, as 
amended, 47 U.S.C. 154(i), 303, and 307.

VI. Ordering Clauses

    93. Pursuant to the authority contained in sections 1, 2(a), 4(i), 
303, 307, 309, and 310 of the Communications Act, as amended, 47 U.S.C. 
151, 152(a), 154(i), 303, 307, 309, and 310 this NPRM are adopted.
    94. The Interim Policy set forth herein is adopted.
    95. The Commission's Consumer Information Bureau, Reference 
Information Center, shall send a copy of this NPRM , including the 
IRFA, to the Chief Counsel for Advocacy of the SBA.

VII. Initial Regulatory Flexibility Analysis

    96. As required by the Regulatory Flexibility Act of 1980, as 
amended, the Commission has prepared this present IRFA of the possible 
significant economic impact on a substantial number of small entities 
by the policies and rules proposed in this NPRM . Written public 
comments are requested on this IRFA. Comments must be identified as 
responses to the IRFA and must be filed by the deadlines for comments 
on the NPRM. The Commission will send a copy of the NPRM, including 
this IRFA, to the Chief Counsel for Advocacy of SBA. See 5 U.S.C. 
603(a). In addition, the NPRM and IRFA (or summaries thereof) will be 
published in the Federal Register.

Need for, and Objectives of, the Proposed Rules

    97. Application to and consent by the Commission are required under 
section 310 of the Communications Act before the sale of any licensed 
radio broadcast station may be consummated. The Commission may grant 
its consent only if it determines that ``the public interest, 
convenience and necessity will be served thereby.'' 47 U.S.C. 310(d). 
The effects of a proposed transaction on the diversity of voices and 
economic competition in a given market have long been core 
considerations in making this public interest determination. The 
Commission's concern for diversity and competition in broadcast markets 
has prompted us to adopt and maintain structural ownership rules 
intended to vindicate these interests. Until recently, these ownership 
rules have been sufficiently strict that we have not been presented 
with proposed transactions that comply with the ownership rules but 
nonetheless present economic concentration issues. The 
Telecommunications Act of 1996, however, substantially relaxed the 
Commission's local radio ownership rules. Heretofore, the Commission's 
radio ownership rules have been based strictly on the number of 
stations proposed for common ownership, without regard to the power or 
dominance of the stations that are being combined. This was not a 
problem under the former Commission rules which strictly circumscribed 
the number of radio stations that could be commonly owned in a local 
market. Now, however, under the new rules, which allow greater numbers 
of radio stations to be commonly owned in local markets, the Commission 
has encountered sales applications that propose transactions which 
comply with the numerical station limits but which result in 
substantial economic concentration in the relevant economic markets. In 
such cases, the Commission ``has an independent obligation to consider 
whether a proposed pattern of radio ownership that complies with the 
local ownership limits would otherwise have an adverse competitive 
effect in a particular radio market and thus, would be inconsistent 
with the public interest. 47 U.S.C. 309(a) (requiring the Commission to 
make a determination that the transfer or assignment of a broadcast 
license would be in the public interest).'' Accordingly, we are 
adopting this NPRM to consider possible changes to our local radio 
ownership rules and policies.

Legal Basis

    98. This NPRM is adopted pursuant to sections 1, 2(a), 4(i), 303, 
307, 309, and 310, of the Communications Act, 47 U.S.C. 151, 152(a), 
154(i), 303, 307, 309, and 310.

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

    99. The RFA directs agencies to provide a description of, and, 
where feasible, an estimate of the number of small entities that may be 
affected by the proposed rules, if adopted. The RFA defines the term 
``small entity'' as having the same meaning as the terms ``small 
business,'' ``small organization,'' and ``small governmental 
jurisdiction. In addition, the term ``small business'' has the same 
meaning as the term ``small business concern'' under the

[[Page 63997]]

Small Business Act. A small business concern is one which: (1) Is 
independently owned and operated; (2) is not dominant in its field of 
operation; and (3) satisfies any additional criteria established by the 
SBA.
    100. Pursuant to 5 U.S.C. 601(3), the statutory definition of a 
small business applies ``unless an agency after consultation with the 
Office of Advocacy of the SBA and after opportunity for public comment, 
establishes one or more definitions of such term which are appropriate 
to the activities of the agency and publishes such definition(s) in the 
Federal Register.'' A ``small organization'' is generally ``any not-
for-profit enterprise which is independently owned and operated and is 
not dominant in its field.'' Nationwide, as of 1992, there were 
approximately 275,801 small organizations. ``Small governmental 
jurisdiction'' generally means ``governments of cities, counties, 
towns, townships, villages, school districts, or special districts with 
a population of less than 50,000.'' As of 1992, there were 
approximately 85,006 such jurisdictions in the United States. This 
number includes 38,978 counties, cities, and towns; of these, 37,566, 
or 96 percent, have populations of fewer than 50,000. Thus, of the 
85,006 governmental entities, we estimate that 81,600 (91 percent) are 
small entities.
    101. The SBA defines a radio broadcasting station that has $5 
million or less in annual receipts as a small business. A radio 
broadcasting station is an establishment primarily engaged in 
broadcasting aural programs by radio to the public. Included in this 
industry are commercial, religious, educational, and other radio 
stations. Radio broadcasting stations, which primarily are engaged in 
radio broadcasting and which produce radio program materials, are 
similarly included. However, radio stations which are separate 
establishments and are primarily engaged in producing radio program 
material are classified under another NAICS code. The 1992 Census 
indicates that 96 percent (5,861 of 6,127) of radio station 
establishments produced less than $5 million in revenue in 1992. 
Official Commission records indicate that 11,334 individual radio 
stations were operating in 1992. As of June 30, 2001, Commission 
records indicate that 12,932 radio stations (both commercial and 
noncommercial) were operating of which 2,216 were noncommercial 
educational FM radio stations. Applying the 1992 percentage of station 
establishments producing less than $5 million in revenue (i.e., 96 
percent) to the number of commercial radio stations in operation, 
(i.e., 10,716) indicates that 10,287 of these radio stations would be 
considered ``small businesses'' or ``small organizations.'' These 
estimates may overstate the number of small entities because the 
revenue figures on which they are based do not include or aggregate 
revenues from non-radio affiliated companies.

Description of Projected Reporting, Recordkeeping, and Other Compliance 
Requirements

    102. The NPRM proposes no new recordkeeping or other compliance 
requirements associated with the subject rules and policies. These 
rules amend the Commission's procedures and review processes and do not 
change existing documentation and application requirements.

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

    103. The RFA requires an agency to describe any significant, 
specifically small business, alternatives that it has considered in 
reaching its proposed approach, which may include the following four 
alternatives (among others): (1) The establishment of differing 
compliance or reporting requirements or timetables that take into 
account the resources available to small entities; (2) the 
clarification, consolidation, or simplification of compliance or 
reporting requirements under the rule for small entities; (3) the use 
of performance, rather than design, standards; and (4) an exemption 
from coverage of the rule, or any part thereof, for small entities.
    104. In this NPRM, the Commission explores the underpinnings of two 
principles underlying the regulation of the radio broadcast industry, 
namely diversity and competition. The principles of diversity and 
competition are of particular import to small entities. Thus we seek 
comment on the general advantages and disadvantages of relying on 
numerical limits or other bright-line rules to guide our public 
interest determination versus conducting a case-by-case competitive 
analysis. The framework minimizes the impact on small entities by not 
subjecting to further competitive analysis transactions below a 
threshold level.
    105. This NPRM invites comment on a number of alternative 
interpretations of the relationship between the revision of local radio 
ownership rules, embodied in section 202(b) of the Telecommunications 
Act of 1996 and the Commission's public interest mandate. Specifically, 
we propose alternative views on that relationship in the NPRM seek 
comment on these proposals, and invite additional possible 
interpretations of the relevant statutory provisions. Further, the NPRM 
seeks comment on how the Commission's rules and policies concerning 
local radio ownership affect our goal of promoting diversity. In light 
of the fact that a majority of the radio broadcasting stations likely 
to be affected are small, we seek comment on the impact of industry 
consolidation on both viewpoint and source diversity.
    106. In addition to the principle of diversity, this NPRM seeks 
comment on the principle of competition in the radio broadcast 
industry, with regard to the definitions of the marketplace and 
measurement of market share.

Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rules

    107. None.

List of Subjects in 47 CFR Part 73.

    Radio broadcasting.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.
[FR Doc. 01-30526 Filed 12-10-01; 8:45 am]
BILLING CODE 6712-01-P